Analysis: 77 percent of small firms in Puerto Rico suffered hurricane losses

An overwhelming majority of small businesses in Puerto Rico suffered quantifiable losses as a result of Hurricanes Maria and Irma last year, according to a new report by the Federal Reserve Bank of New York.

In its annual survey of Puerto Rico small businesses, the New York Fed found that 77 percent of businesses reported losses directly related to the 2017 hurricanes, and insurance coverage was insufficient in addressing those damages.

{mosads}The New York Fed surveyed 407 companies, each with fewer than 500 employees, between March and May and found that only 4 percent of firms with insurance had their damages fully covered. Twenty three percent had their losses partially covered.

Lawmakers in Washington said Thursday that accelerating insurance payments for Puerto Rico could be beyond their capacity.

“Unfortunately, any kind of discussion with that would have to be a shared jurisdiction with other committees, so I haven’t seen that directly,” said Rep. Rob Bishop (R-Utah), chairman of the Natural Resources Committee, which has jurisdiction over U.S. territories like Puerto Rico.

“If there’s something we can do to try and push that along, change that number, I’d be happy to try and do that,” he added.

Rep. Ruben Gallego (Ariz.), the top Democrat on the Natural Resources Subcommittee on Indian, Insular and Alaska Native Affairs, said Congress’s purview into insurance matters is limited.

“It certainly worries me, I don’t know if we can do much about it,” he said. “It has to do with contract law, and it’s very difficult for us to get involved.”

“I think we can certainly put pressure on the insurance companies to be good stewards,” Gallego added.

The delays in insurance payments slowed the re-opening of most firms surveyed by the New York Fed.

Seventy-three percent of firms with hurricane-related losses had fully resumed operations, 25 percent had temporarily closed and 2 percent were permanently shuttered.

The report authors, however, noted that the visibility of firms that had disappeared was relatively low, which could have led to an undercount of shuttered companies.

The top reason for permanent and temporary closures, according to the report, was lack of access to power, water or transportation.

Those infrastructure deficiencies played a role in 71 percent of closures, while structural damage to the actual businesses was a factor in 42 percent, and a lack of customers in 38 percent of cases.

Lack of access to proper financing played a role in 24 percent of small business closures, according to the survey.

The survey results published by the Fed match the findings of lawmakers who’ve investigated the hurricane-related damage.

“You had power generation that was unstable for months and any type of small producers, or anything that requires any type of refrigeration, is going to be negatively impacted,” said Gallego.

Despite the delays in insurance payments, 22 percent of firms in Puerto Rico resorted to financing to keep operating. A large majority of those — 84 percent — applied for financing from government entities, rather than banks or other financial institutions.

Most of the firms that applied for financing, according to the report, had been in business for more than 11 years, and had 10 or fewer employees. Between financing and insurance claims, 6 percent of Puerto Rico’s small firms had their hurricane losses fully funded.

Another 17 percent of firms were partially funded, 21 percent were not funded at all, 19 percent are awaiting funding and 37 percent did not apply for funding or insurance payments.

Still, most small firms surveyed expressed confidence that the would stay open through 2018.

Seventy-five percent said it’s very likely they’ll remain open, 19 percent said it’s somewhat likely, and 6 percent said it’s somewhat likely or very likely they’ll close this year.