fail to cover their homes, insurers claim By David Fox As Bermudians digest forecasts for increased and more severe Atlantic Ocean hurricanes over the next two decades, insurers are warning that some residents and commercial entities are under-insured.

The warning comes even though local property insurance rates are at least half of those in the Caribbean.

General insurance manager at Kitson Insurance Services Ltd., David Goodman, conceded: "Most of the significant commercial properties here recognise the importance of insurance against hurricanes.'' But he noted, "I do believe there are some areas where there is under-insurance and in some cases, severe under-insurance. Some people remain under the illusion that it couldn't happen to them. Some people figure they can take the risk.

"Those who are nearer the waterfront or the harbour probably pay more attention than those who are hidden away in the city or in valleys.'' Insurers agree they do their best to make sure that property is surveyed to ensure required coverage.

But underwriting manager at Colonial Insurance, Peter Oliver, said, "There are still quite a number of people who don't have any insurance at all for their homes.

"It should be rare to find commercial premises that have no cover at all. But a large number of people have no contents insurance. They may insure their buildings because they have a mortgage or feel that the roof may be damaged.

"But they forget about the contents within, which can quite easily be damaged if a window or patio door is blown in. Carpeting and furniture can be damaged even by flooding.

"People often do extensive alterations and additions to their property -- $50,000 to $100,000 worth of work -- and then overlook telling their insurance company about it.'' This week, US insurance officials said more than 37,500 North Carolinians had filed claims totalling $256 million to pay for damage to homes, cars and business caused by Hurricane Bonnie.

The value of the claims was twice that from Hurricane Bertha, which struck in July 1996, but only one-sixth of the total caused by Fran, which hit in September 1996 and caused $1.3 billion in insurance losses. Bertha caused $100 million in insured losses.

CEO of Argus Insurance Gerald Simons said, "The storms in the Caribbean and the US over the last ten years have caused so much damage that they really forced world rates up.'' Mr. Oliver pointed out: "The lack of capacity and competition makes rates in the Caribbean much higher. So we are quite well off as regards the rates.'' And Mr. Goodman said, "Insurance companies here have been fairly liberal -- in world terms -- in adapting the `average clause', when claims occur.

Householders `under-insured' "It still is recognised, certainly. But there seems to be a fairly liberal attitude in applying the average clause -- the clause where you are penalised should you be under-insured. It is not applied here as strictly as it could be. The element of under-insurance comes from people who don't realise the damage that can happen, and the effect of the average clause that can apply for under-insurance.'' Argus' Larry Osborne was more confident that Bermudians were well insured, because of industry efforts to persuade clients the need for proper cover.

But he did observe, "It certainly causes me concern for the future, if the forecasts are true, the potential for the two or three foot rise in the sea level around Bermuda for the next 30 or 40 years, combined with more severe storms. It could have a big effect because the water often can do as much damage as the wind.'' The last significant hurricane affecting Bermuda was Hurricane Emily in 1987.

But it was only a category one hurricane with peak sustained winds of 75 knots and overall peak gusts of 101 knots. It was the tornadoes within it that caused real damage. If Emily had hung around, the potential for more serious damage would have risen.

Already this summer, we have seen category three and category two hurricanes in the Atlantic, packing a more sustained punch.

Said Mr. Goodman, "Bermuda hasn't really been tested by a `major major' hurricane within living memory.

"Certainly construction has improved since the old days, but there are also higher buildings. We really don't know what will happen if there was a really big blow that lasted for some time.'' Added Mr. Oliver, "We would hate to be here for a category three or four hurricane. We haven't seen a direct hit from a major hurricane. Who would know what kind of damage would arise from that. It is difficult for insurers to decide what their reinsurance coverage should be. But since Emily, Dean and a few other scares more people have bought insurance. Ten years ago, a lot of people didn't have buildings insured at all.'' Gerald Simons