Addressing avalanche of Puerto Rico claims, insurers assure solvency
SAN JUAN – Insurers in Puerto Rico are solvent and have the financial capacity to make disbursements for claims filed after the disaster left by Hurricane Maria, said Iraelia Pernas, director of the Puerto Rico Insurance Companies Association (Acodese by its Spanish acronym), in an interview Thursday with Caribbean Business.
Pernas explained that despite the impression that claims are stalled, the reality is that the 90-day period after the first claims were filed is coming up. Three months is the period stipulated in the Insurance Code of Puerto Rico–with which the Insurance Commissioner’s Office (ICO) governs the industry locally–for insurers to evaluate and make the due disbursements for claims.
“Claims had not really begun to be filed until nearly a month after the event, and that’s when we started working, opening the offices to start receiving the insured, both businesses and individuals,” the executive director said. The claims, she added, “began to arrive in different ways, but initially slowly because, due to the hurricane, the state of communications was critical in the first few weeks and people also had mobility problems, thus all this stopped the process.”
Pernas said the volume of claims began to arrive between November and December, which puts January and February in the of 90-day period stipulated by the insurance code. In addition, Pernas mentioned that the event and the crisis unleashed after it are unprecedented on the island, and this also affected the typical claims process.
“We already know this hurricane was such a big disaster that it has been the largest in the entire United States and exceeds the losses from [hurricanes] Georges [in 1998] and Hugo [in 1989] combined. In Puerto Rico, there had never been anything of this magnitude,” Pernas said.
However, she stressed that together with efforts of the OCS, the insurance industry was able to disburse $859 million as of December to its insured, under OCS guidelines to prioritize claims related to essential services such as healthcare.
This figure, she said, includes cases of advancements, even though business interruption endorsement does not force insurers to pay an amount in advance. Pernas said this position was assumed for the benefit of the insured and the island’s economy.
“Another thing to consider is that what we are talking about are the numbers that have to do with the hurricane only, but after the hurricane, life continued. The insurers continued to cover risks that have nothing to do with Maria,” she said.
Pernas added that the industry had to resort to hiring additional help to work with the volume of cases submitted, including the OCS having to issue 41 public adjuster emergency licenses.
“There may be a few cases still pending, but in reality the code provides 90 days to resolve the claim and disburse, except in extraordinary cases where there is a just cause, and those have to be seen one by one. Most of those should have already been resolved,” she said while acknowledging there are still many claims to address but categorically assuring each would be resolved.
“A lot of hard work is going into finishing these claims as soon as possible to pay what corresponds and the reasonable compensation within their coverage,” she said.
“All claims will be addressed and, even more importantly, it is important to emphasize that this is an industry that is highly regulated and with great public interest. And not only is the [insurance] commissioner aware of how these claims are processed, but the public must be assured that despite the magnitude of the disaster, the industry is adequately capitalized because a reserve of catastrophic capital is required; no matter how big this has been, insurers are solvent and will respond to the extent that corresponds to them,” she said.
Pernas said, however, that more claims are expected as electric power continues to be restored around the island.
Insurance Commissioner Javier Rivera concurred with the information provided by Acodese and said it is now, between January and February, that the 90-day term begins for the first claims submitted in November.
“Starting from the premise that the [Insurance] Code itself establishes that it be resolved in 90 days or less, I believe we are within reasonable time because the volume [of claims] did not come on the day of the event but 25 days later. Now is when the volume begins to meet the 90 days,” he explained.
“It doesn’t mean we are at the percentage wanted, but I hope the months of January and February will be months when the impact will be the same as was seen from November to December,” he said.
Rivera also indicated that as a result of the meetings held between OCS and several of the island’s main insurers, the amount of funds disbursed to the insured was doubled in December from $460 million to $843 million.