Oman: Cyclone-related losses could top $1 billion

MUSCAT - Losses arising out of super-cyclone Gonu"s destructive sweep through Oman last week could top a whopping $1 billion, with insurance firms likely to end up paying as much as half of this amount in insurance claims, say analysts. Gonu inflicted horrendous damage during its daylong rampage through Sharqiya, Muscat Governorate and the Gulf and Oman coast, ravaging roads, public facilities, homes and businesses, while also temporarily shutting down a number of key energy and port terminals along the coast. Hundreds of cars were also wrecked or swept away in floodwaters.

Much of the damage is concentrated in the capital region, an area that also provides a significant proportion of the insurers" business. Consequently, insurers across-the-board are liable to pay out hefty claims, with bigger firms likely to the worse off than the smaller ones. But with reinsurers picking up much of the tab, the net loss to local insurance firms is not expected to be considerable, analysts point out.

Yesterday, the Capital Market Authority (CMA), which is the market regulator for the insurance industry, convened a meeting of CEOs of insurance companies in the Sultanate. A number of insurance firms were represented at the meeting at which CMA officials stressed the need for insurers to expeditiously process Gonu-related claims.

Already, insurance firms have begun to receive a flood of claims from all manner of insured parties. AXA Oman said it received over 150 claims during the course of business yesterday. "We have already started receiving claims - mainly motor and home insurance, as well as a few claims from large corporate clients. We expect a total of 300-400 motor insurance claims, and a further 100 other claims arising out of Gonu," Deepak Kamath, Country Manager - AXA Oman, said.

Describing the damage caused by Gonu as "catastrophic and unprecedented", he said: "No country in the Gulf region has ever anticipated or expected to suffer damage on this scale from a natural disaster." AXA, says Kamath, is committed to discharging its obligations to its customers. "We had meeting of our senior staff yesterday to discuss Gonu claims.

AXA is very strong financially with adequate funs to settle claims as quickly as possible. Special teams are in place to handle claims expeditiously, and we have also brought in staff from our branch offices to support this effort. At the same time, we would request our customers to show some patience particularly with regard to motor claims, in view of the fact that automotive workshops are not equipped to handle the large volumes of cars damaged by the floods. Nevertheless, we assure all our customers that their claims will be dealt with speedily."

According to Dr J Retnakumar, Resident Manager (Oman Operations) of the New India Assurance Co Ltd (NIA), owners of flood-damaged cars without insurance cover for Storm, Tempest and Flood (STF) perils, will not be able to recoup costs from their insurers. Cars with third-party coverage are not STF insured and thus not eligible to submit claims for flood damage. Neither can owners with comprehensive coverage who did not include additional STF coverage in their policy.

Dr Retnakumar believes that STF coverage should be made compulsory, given the increasing frequency of destructive floods in the Sultanate. During the past six months alone, there have been at least three other major flooding events in Muscat, notably on December 3, December 14 and March 18, all of which have left cars and other properties damaged. Yet, only about 60 per cent of cars with comprehensive insurance are covered for STF perils, he says.

The enormity of the damage caused by Gonu, the worst in nearly 50-100 years, promises to change the "underwriting philosophy" of the insurance industry in Oman, says Dr Retnakumar. The burden on insurance firms is also likely to be high, with each company expected to pay out huge sums in claims. But with proper assessment and salvage measures, the losses of insurers can be reduced, he notes.

NIA received 77 flood-related claims from businesses on Saturday alone, even before the official resumption of work after the four-day break.

The company has appointed independent surveyors licensed by the CMA to survey flood-hit properties insured by NIA. "Such calamities are an opportunity for insurance companies to prove that they are at the service of their customers," Dr Retnakumar commented.

Royal & SunAlliance (RASA) is also giving priority attention to Gonu-related claims, having mobilised staff towards this goal in the immediate aftermath of the storm. The company has already completed more than 40 surveys, with interim claims payments ready to be paid out to some of the worst affected clients, RASA said in a statement.

"The RASA team has been working ceaselessly since the cyclone in ensuring that they are now ready to service their clients who have suffered the unfortunate destructive force of Gonu. Besides setting up special helpline numbers and creating a web-based claim intimation process, RASA has created a special help desk at the office to specifically handle all claims with respect to Gonu.

We have reassigned internal resources to provide additional staff to service customers. Also done is a syndication of additional loss adjusters on an exclusive basis. RASA has also flown in loss adjusters from other parts of the world (UK, UAE) to help conduct speedy loss surveys," the statement added.