THE STAR BUSINESSWEEK
OCTOBER 21, 2017
WWW.STLUCIASTAR.COM
© The Financial Times Limited [2017]. All Rights Reserved. Not to be redistributed, copied or modified in anyway. Star Publishing Company is solely responsible for providing this translated content and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation
The neighbourhood of Cojimar was destroyed by Hurricane Irma in Havana, Cuba (source: Yamil Lage / AFP – Getty Images)
LLOYD’S OF LONDON PAYS OUT US$750M IN CLAIMS FROM SUMMER OF STORMS BY FT CORRESPONDENT
Lloyd’s of London said it had paid out almost US$750m on claims from hurricanes Harvey, Irma and Maria, which devastated parts of the Caribbean and the US in August and September. The London insurance market is facing about $4.5bn of payouts in total from the
three storms. Jon Hancock, performance director, said: “When you get three catastrophic weather events as well as earthquakes in Mexico and flooding in Asia all happening so close to each other, it’s essential to make sure the market’s claims response moves as quickly as possible
to help people rebuild their lives.” He added: “We have made advance payments on a range of reinsurance programmes for local insurers to make sure they have the funds to pay claims locally — both in Texas and the Caribbean.” But concerns are growing about the impact that the payouts will have on the market. Last Thursday Standard & Poor’s Global Ratings revised its outlook on Lloyd’s to negative from stable, although it left its A+ credit rating intact. “These losses are significant relative to peers and Lloyd’s annual earnings, and emphasise the market’s exposure to catastrophe risk,” S&P said in a statement. It added that the market could restore its capital position after the payouts, but there was still the chance of further significant losses and uncertainty about the potential for insurance premiums to rise because of the storms. Last Friday S&P said that it expected the credit ratings of US property and casualty insurers to be “resilient” after the hurricanes but it was not so confident about the global reinsurance industry. It said that the storms, together with the Mexican earthquake: “will likely wipe out the industry’s annual earnings and ultimately become a capital event for the global reinsurance sector.” The wider impact of the losses on the industry is becoming clearer as insurers have
updated investors on their exposure in recent weeks. This week Scor, the Francebased reinsurer, put its exposure at €430m. Analysts said the company had managed to almost halve its potential losses because of retrocession, which is the insurance that reinsurers buy. In the US, AIG said it expected a $3bn hit from the three hurricanes, along with the earthquakes in Mexico. It is not expected to get protection from reinsurance because each event cost it less than $1.5bn, the level at which the cover kicks in. Analysts at Barclays said that the impact of the storms on the US property and casualty insurance industry should be “manageable”. “Although [third quarter] US P&C industry underwriting results are expected to be among the worst ever, it should result in break-even US industry earnings for the year including the benefit of recurring investment income,” they wrote last week. Not everyone is so sanguine, however. In a blog post, Dominick Hoare, the chief underwriting officer of Munich Re’s syndicate at Lloyd’s, predicted that “there will be a material number of (re)insurer failures, and, in addition, many (re)insurers will have to retract their underwriting due to capital constraints”.
FINANCIALLY SPEAKING Financial Literacy 101 presented by Bank of Saint Lucia
ACCESSING CREDIT & THE IMPORTANCE OF BUSINESS PLANS Accessing credit has been for the most part one of the most salient issues for small and medium sized businesses in Saint Lucia. The hard truth is that Banks are less likely to finance startup businesses. Bankers differ from investors, in that depositors’ funds are lent to those who need it with the expectation that these funds are paid back. Banks will not loan money because you “believe” in your business plan. After all, ideas do not pay loans. Banks and financial institutions have an obligation to protect depositors’ money, and will not risk these funds solely on speculation. On the path to accessing credit, it is important to know the basics even before you approach your financial institution for funds. Knowing who you are and what you bring to the table are essential. If your business is relatively new or if your relationship with the bank is new, you will be required to provide further information. The more information provided, the easier it is for the bank or financial institution to thoroughly assess the eligibility of the applicant. Banks and financial institutions require key documents to determine if a business qualifies for a loan, and having a solid business plan is critical in this regard. Here is a brief guide on what is typically expected:
The most important questions to address: Introduction & Overview/Executive Summary – What is it about? Management Structure – Who are you? Operating/Strategic/Marketing Plans – What do you plan to do? Who is your intended market? Financial Statements/Requirements – What do you need? How do you intend to repay? What are the Banks’ Expectations? Clear Indication of Business Background Your Experience/Qualification in the given field Introduction of Management of your business Financial Projections Three Critical Statements: Income & Expenditure Balance Sheet Cash Flows Projected monthly for first year and annually thereafter A comparison of your projections to similar industry averages if available
Alignment of Financials The credit sought should be in line with the financials outlined in your plan Ensure that your cash flows are realistic and explain How much cash is required and why it is needed A manageable business plan with realistic projections will assist considerably in approaching your financial institution.
“Banks and financial institutions have an obligation to protect depositors’ money, and will not risk these funds solely on speculation.”
1 Bridge Street • P.O. Box 1860 • Castries LC04101 Saint Lucia • Email: info@bankofsaintlucia.com
LIKE US ON: FACEBOOK.COM/BANKOFSAINTLUCIA WWW.BANKOFSAINTLUCIA.COM
7