Fire is now Guyana's major disaster threat, making insurance a high-risk investment for companies which were recently forced to increase their rates to match higher underwriting costs by international insurers.

Bish Panday of P&P Insurance Brokers estimates that the insurance sector in the last 12 months must have faced claims in excess of $1.2 billion.

"That is a lot of money for the insurance industry to pay out without it affecting their balance sheets," Panday told Stabroek News.

Hans Barrow of Insurance Brokers Guyana Limited also feels that the recent spate of fires, including those following the general elections this year, has seen the profit margins of the insurance companies narrowing sharply because of the large payouts.

"What the recent fires have done is it has caused a hardening of fire rates by all the companies...rates were fairly cheap because of the cut throat competition but these rates would have now made it difficult for the companies to secure adequate reinsurance," Barrow told Stabroek News.

He said rates have been increased in some cases by up to 25% and in other cases insurance companies are asking for as much as 75% more to insure properties in high risk areas such as Regent, Water and Robb streets.

Peter Abdool of Abdool & Abdool, says he has had no problems on Robb and Water streets but has not been able to secure new or additional cover for businesses from Bourda to the Avenue of the Republic.

However, Regent Street, he told Stabroek News, is not closed to London-based reinsurers as rates are available between US$6 to US$7 dollars per $1000 but this is considered too high for Guyanese businesses which benefited from low insurance rates in the past.

Abdool said the Guyanese insurance market is a little spoilt and clients have a difficulty coping with rates which are not bad but which appear tremendous because of the unreasonably low rates charged in the past by the insurance companies competing for market share.

Abdool said that whilst the Regent Street inferno which gutted several businesses in April of this year is responsible for the hands off approach by local insurance companies in this area, the rest of the country is suffering from shrinking insurance coverage globally.

He noted that the local insurance companies only retain between 10-20% of the coverage extended to companies locally and the rest is reinsured with overseas insurance companies to spread the risk.

However, Abdool said the global insurance industry is shrinking and he said that the recent explosions which destroyed the World Trade Center and damaged the Pentagon will see a further hardening in rates in the world market,

He said the local insurance companies are now not able to secure underwriting at low rates and rates across the board have gone up by at least 25%.

But Abdool, like Barrow, referred to the state of the domestic economy where cash flow is a major problem in allowing companies to meet their insurance obligations. Abdool said insurance companies have been bending over backward to facilitate clients but Barrow noted the difficulty clients have in meeting insurance premiums when the cash flow is not there to allow the businesses to continue successfully, much less cover insurance.

Abdool indicated that the rates available overseas to all areas of Guyana is as much as 200% over what prevails currently.