Resort owners are calling on government to step up and support them, as the impact of climate change and the past years’ spate of burglaries and arsons burn into their bottom line.
Some say they are paying the price in increased insurance premiums; others say they are paying directly to repair damage caused by fire and flooding.
The broad-based Tourism Industry Council says its executive members have not experienced any significant premium increases – but some of the bigger operators say resorts are being hard hit by hikes in premium.
Resort owner Tata Crocombe has been hit by king tides flooding rooms at The Rarotongan, and by a massive fire caused by an electrical fault at Aitutaki Lagoon Private Island Resort.
He is backing a proposal to government this year by insurance brokers Willis Towers Watson, that government set up its own insurance scheme to help Cook Islanders, as the premiums charged by overseas companies soar out of reach.
Another resort operator said that apart from the inundation and flooding, the other key reason for premium rises had been the spate of the fires on the island.
And a third big resort operator, Iaveta Short who owns the Moana Sands hotel and villas, said they’d reported several hotel burglaries to police – but nobody had ever been charged.
He echoed the call for a government-underwritten insurance scheme, and added that government should reinvest its increasing tourism revenues in better police and fire services.
Moana Sands had a good working relationship with its insurer, Short said, and he was satisfied their increases were necessary and minimal.
“We have budgeted into our business an increase in our premiums, which is largely due to climate change and crime. We’re going through difficult times, that’s for sure,” he added.
“But on the plus side, the increase in tourist numbers generates an increase to government revenues – so they should reinvest that in protecting the industry.
“There’s no other industry that is going to save this country.”
Crocombe said the world’s insurance industry had factored in the increased risks caused by climate change, particularly the risks to coastal properties like beach resorts.
“Climate change is real,” he warned. “The premiums have increased substantially. My business is paying $350,000 more than we were a few years ago for less insurance coverage because of the increased risk caused by climate change.
“Some insurers have pulled out of Cook Islands, and those that are left have raised their premiums, reduced their coverage and introduced additional terms and conditions.”
Two arsonists have been jailed in the past few months: David Tonorio, who torched Raro Mart and two smaller stores, and Australian deportee Iovane Paerau, who has been convicted or arsons and burglaries. Police believe he is responsible for many more.
“Related to one problem individual deported to the Cook Islands, there’s been an increase in the perceived fire risk to the Cook Islands,” Crocombe said.
“I would be surprised if this has not cost the country an additional $1 million-plus a year in insurance premiums, extrapolated from the additional costs my business has incurred.
“Arson has always been a problem in the Cook Islands but every business owner, every home-owner, now accepts that there is a higher risk of arson with Australia deporting criminals back to the Cook Islands.”
He said New India, which underwrote a number of Cook Islands businesses until recently, pulled out of the Cook Islands market this year – the latest of a number of international insurers to withdraw.
Insurance companies are on the front line in battling the climate crisis, as they are almost as exposed to extreme weather and the impact of climate change as any low-lying atoll.
“Cook Islands has got very few insurance companies willing to underwrite us, we’ve lost a couple of insurance companies willing to underwrite risks in the Cook Islands in recent times,” Crocombe said.
“That means higher premiums and lower coverage and the Cook Islands faces the real prospect of not being able to get adequate insurance coverage at any reasonable price for major risks such as storm surge from hurricanes, tsunami and cyclones.”
Given the gradual withdrawal of international insurers from the Cook Islands market, he said, government would be wise to investigate the feasibility of setting up its own insurance company in conjunction with the private sector to provide insurance coverage to home owners, business owners and government organisations.
“Otherwise, the country, which is already grossly under-insured, could end up in an even worse position which could be a disaster in the event of a major hurricane, cyclone or tsunami, if there is insufficient funds available to rebuild the country after a natural disaster or even man-made disaster such as a major arson.”
Tourism Industry Council president Sue Fletcher-Vea said the council’s executive members had not experienced recent increases. “Unfortunately it might be a different for those operators that have made recent claims though,” she added.
“Personally we have just had our meeting for renewal and our premiums are not going to rise, and we are beachfront Arorangi.”
Already, Cook Islands has signed up to the Pacific Catastrophe Risk Insurance Company, a World Bank-led initiative that is financially backed by Japan, Germany, the UK and US. The company paid out $4.84 million to help Tonga with response for Cyclone Gita.
And earlier this year, Cook Islands finance minister Mark Brown said the country’s Natural Disaster Response Fund had built up to about $2 million, “a significant pool of money to allow us to respond immediately to events of disaster”.
“The World Bank tells us that for every dollar we put into building resilience, we save $8 in reconstruction and recovery. So it makes sound financial sense to look at putting more money into resilience.”