Puerto Rico Devastated; Insurers and Banks Mostly Bystanders as FEMA Leads Recovery

Maria’s 155 mph, Category 4 winds have thankfully moved on from Puerto Rico. But the rebuilding process has only just begun — and it will take months, if not years, to complete.

The entire island’s infrastructure was devastated, including roads, power facilities, schools, hospitals, banks, and grocery stores. Virtually every home or business, including farms, was affected in one way or another — and the government will need large amounts of assistance to help return the island to normal.

But as we reported last week , private insurers are not in a great position to take on the burden of repairing most of the damage for two reasons. First, our figures suggest the island is under-insured, and second, the companies doing business there are not mega-insurers with billions of dollars in funding behind them. It’s entirely possible that one or more insurers will struggle to recover from the expected deluge of claims.

Take a look at the tables below, which include all the individual insurers with at least $100,000 in home, commercial, and farm premiums in Puerto Rico. The first table shows firms that have publicly traded parent companies, while the second shows the ones that don’t.

You can see that several of the companies with public parents earned higher ratings in the “B” range. Meanwhile, many local firms fell into the “C” zone (with a couple of “Bs” and “Ds” mixed in).

Insurers with Publicly Traded Parent Companies

Insurers with Parent Companies That Are Not Publicly Traded

When it comes to the banking industry, local challenges such as potential funds shortages could occur in the short term because the credit and debit card infrastructure depends on power.

Out of the top ten largest U.S. banks, Citibank, N.A. (Rated “B”) is the only institution with a branch in Puerto Rico. But there are other banks and credit unions based on the island that we issue Weiss Safety Ratings for. As you can see, most of these banks were already in the middle-to-lower rating tiers before the storm:

Weiss Rated Banks Based in Puerto Rico

Credit Unions Based in Puerto Rico

So, is there hope for Puerto Rico and how can it recover?

The answers lie in a complicated, drawn out recovery process. It will be spearheaded by the Puerto Rican government, but supported by FEMA and the U.S. government. Of course, banks and insurers have a vital role to play. But given the extent of the damage and the overwhelming challenges faced, they will barely scratch the surface of the island’s recovery needs.

Here is how the FEMA-led effort will work: FEMA Region II, which is located in New York City, has the island of Puerto Rico and the U.S. Virgin Islands as part of its geographic responsibility.

Alejandro De La Campa – Director for the FEMA Caribbean Area Division

Fortunately, FEMA has a Caribbean Distribution Center located in Puerto Rico. It is one of eight in the nation and, according to a FEMA spokesperson, it has a self-sustaining facility with a redundant infrastructure that maintains commodities readily available for Puerto Rico and the U.S. Virgin Islands.

Among the commodities that FEMA already has on hand are 250,000 Meals Ready to Eat (MRE), 388,000 other emergency meals, water, cots, blankets, plastic sheeting, and generators. More than 6.5 Million additional MREs are en route, and resources can be replenished as additional needs are identified.

Overt time, FEMA will also coordinate the integrated response activities of several federal agencies. They include the Department of Health and Human Services, the U.S. Army Corps of Engineers, the Department of Energy, the Department of Transportation, and others. This support will be critical, given that the entire island lost power as the hurricane struck.

Clearly, Maria was a powerful natural disaster that simply cannot be addressed appropriately by just private insurers and banks or credit unions. They will play a role in helping the island regain some form of normalcy in the coming months. But initially, whether insured or not, the residents of Puerto Rico will find it extremely difficult to go about their daily lives.

Our thoughts are with the people of Puerto Rico and those that are helping bring relief.

Think Safety,

Gavin Magor

Insurance Insights Edition, By Gavin Magor, Senior Financial Analyst Gavin has more than 30 years of international experience in credit-risk management, commercial lending and insurance, banking and stock analysis and holds an MBA. Gavin oversees the Weiss ratings process, developing the methodology for Weiss’ Sovereign Debt and Global Bank Ratings. Gavin has appeared on both radio and television, including ABC and NBC as an expert in insurance, bank and stock ratings and has been quoted by CNBC, The New York Times, Los Angeles Times, and Reuters as well as several regional newspapers and trade media.