Many people believe that insurers impacted by the Front Street fire will automatically raise their premiums to recoup their losses — but that is not the case, according to the head of the company that covered the gutted building.

Fire ripped through 77 Front Street, the home of retailer Onion Jack’s and several other businesses, in the early hours of July 21 and later that day BF&M revealed to this newspaper that it was on the hook for the damage.

Other insurers may also face claims from neighbouring businesses whose premises suffered fire or smoke damage, or business interruption.

The likely cost of the claims has not been revealed, but Onion Jack’s has said that about $300,000 worth of goods alone may have gone up in flames.

Since then, some have raised concerns on social media that the cost of insurance would now inevitably go up, as a consequence of the claims.

But John Wight, chief executive officer of BF&M, said this was an inaccurate assumption and explained how his business manages its risks.

“BF&M has well over 100 years of experience of planning for events such as this one, and we expect to have losses,” Mr Wight said.

“As part of our continually monitored risk-management process, we assess how much capital the company needs, in respect of major events such as these or paying out a claim on a life insurance policy years from now.

“We have risk managers and actuarial experts assisting our team in quantifying how much money to put aside, or reserve for, so that we are confident in our ability to pay a customer who has a policy with us in times of crisis.”

On the issue of how losses may impact what BF&M’s clients pay for insurance in the aftermath, he said: “Regarding the rise or fall of premiums, property premiums are based on a pool of risks and are not specifically tied to an individual property.

“Certainly, we make every effort to evaluate individual risks based on their specifications such as type of construction, age of building, and type of protection.

“However, the very nature of insurance is that it protects property owners from unpredictable losses and events, and BF&M has demonstrated historically that it does not arbitrarily seek to recoup its claims expense via an

increase in individual premiums.

“Increases in premiums can occur after a major catastrophic event impacting a great number of policyholders, once research and learnings from that event refine the industry’s understanding of the risk.

“That said, there were no discernible increases in premiums after Hurricanes Fay and Gonzalo and BF&M, as well as the other local insurers, paid out a significant amount in claims costs.

“The driver that impacts premium price is evaluating a risk properly before it happens. If an insurance company is to be trusted, it must charge enough to be able to cover the risk it is insuring.”

Mr Wight added that on learning of the blaze, BF&M’s first concern was about the safety of people and that the firm was “extremely relieved” to hear that there were no casualties.

“We were also extremely impressed and grateful for the work of the fire and rescue services. Once we ascertain the safety of people, we set about doing what we are in business to do — support our customers when they need us most and begin the process of helping them to rebuild.”

The firm’s staff had responded with “calm, purposeful action”, mobilising a team to assess and quantify the damage, he added.

“This is a process that takes time,” Mr Wight said. “A fire as devastating as the one on Front Street can evolve over several days, but it’s important not to waste time and to be at the customer’s side at the earliest opportunity.”