A fire that tore through a long-standing Paget clothing shop last month has drawn fresh attention to a quieter but persistent risk facing Bermuda’s business community: underinsured and uninsured commercial properties.

The blaze at Hose’s Fashions & Accessories on South Road destroyed most of the store’s stock just as the holiday shopping season was beginning. Owner Gerald Sims, who has run the business for 28 years, said the loss was devastating.

“It’s like I have lost a family member,” Mr Sims told The Royal Gazette at the time. He estimated the fire destroyed between $40,000 and $60,000 worth of merchandise and confirmed that the business was uninsured.

While cases of uninsured motorcycle riders often make court headlines, insurance professionals say gaps in both residential and commercial property coverage are far less visible — until disaster strikes.

Larenzo Ratteray, the group head of property and casualty claims and product development at Allshores, said under-insurance was not tied to a single event but reflected long-term cost pressures and owner behaviour.

“All things being equal, the cost to rebuild a home will increase incrementally almost every year,” he said. “When you look at the historic cost of construction locally, the trend is clear.”

Mr Ratteray said rebuilding costs in Bermuda were now typically north of $500 per square foot, depending on finishes, location and storeys. He added that post-Covid supply chain disruption and labour shortages led to construction and reconstruction costs rising by more than 30 per cent over the past few years.

His assessment is conservative compared with those given toThe Royal Gazette 14 months ago.

However, he said: “People often set a replacement value when they first insure a property and never revisit it. After Covid, those values were quickly overtaken by reality.”

Property managers said the issue was increasingly showing up across the commercial sector. Paul Matthews, the professional services manager at Coldwell Banker Bermuda Realty, said underinsurance had become a material risk, particularly for commercial and condominium developments.

“We are increasingly seeing underinsurance emerge across the property sector,” Mr Matthews said. “Declared values tend to remain unchanged for long periods despite rising reinstatement costs.”

He said insurance adequacy should be treated as a core governance issue, reviewed annually alongside reserve funds and service charge budgeting, rather than addressed after a loss occurs.

From a banking perspective, however, the risk is largely contained. Neville Grant, chief executive of the Bermuda Bankers Association, said lenders required full replacement value insurance for any mortgaged property, residential or commercial.

Mr Grant added. “Because of those safeguards, underinsurance is not a major financial risk for banks.”

However, he noted that properties without mortgages were more exposed because insurance in those cases was primarily about protecting the asset, which meant the entire responsibility fell on the owner, potentially leaving the property unprotected.

Insurance professionals said payment plans, index-linked policies and regular valuation reviews could help reduce the risk. Without them, a single fire such as the one in Paget could leave business owners facing losses they could not recover from, or afford to rebuild.