Premium hike

Property owners and motorists in Barbados will pay approximately 10 per cent more in insurance premiums next year.

President of the General Insurance Association of Barbados (GIAB) Randy Graham revealed on Tuesday that from next year, insurance companies in Barbados and other Caribbean countries will have to pay between 15 per cent and 30 per cent more when they buy reinsurance, as a result of the US$55 billion in claims paid out by reinsurance companies for damage caused by hurricanes in the Caribbean this year.

And he said while the full cost will not be passed on to local policyholders, they will have to pay more.

“Unfortunately, we are hearing these types of responses from the reinsurers all through the Caribbean. As far up as the Bahamas in the north, right back down to Guyana in the south, the reinsurers are giving us the same type of stories. It is a difficult environment. They are complaining about…you know, we had four hurricanes that made landfall in the Caribbean. But the real issue is that they didn’t just make landfall in the Caribbean, two of them flew up into Florida and caused millions of dollars in damage,” Graham said in an interview with Barbados TODAY.

“So what the reinsurers are saying to us is that they have had to pay out over US$55 billion in claims from these hurricanes and so some of their inputs have to go up. For insurance companies in the Caribbean, the biggest part of our expenses is buying reinsurance. So if the reinsurance costs are going up by 15 to 30 per cent in the Caribbean, then a lot of that is going to be a direct expense onto the insurance companies,” he added.

The spokesman for the local general insurance industry sought to assure existing and prospective clients that companies here will try to absorb as much of the costs.

However, the full extent of the costs will not be known until January 2023.

“Given the issues of the cost of living in the Caribbean now being so high, we can’t pass on all of that to the clients. We are trying to find ways that are creative to balance it…,” Graham explained.

“A lot of the insurance companies wouldn’t know for sure what the reinsurance costs would be until December 31… A lot of us are in the process of trying to renegotiate the contracts now, but a lot of people are talking about 20 to 30 per cent in reinsurance costs. We can’t pass on that to the client so we are going to have to find ways to absorb 50 to 60 per cent of that. So you could still see rates going up 10 per cent or so in the Barbados market even if we try to absorb 50 per cent of the reinsurance costs at the insurance companies.”

The GIAB head explained that the approach to absorbing costs will vary from company to company.

“Everybody wouldn’t have to deal with it in the same way, but we could be in a place to receive 10 per cent increases in costs even if we shield the reinsurance costs. You are dealing with that and, at the same time, we had to pay the Pandemic Levy, we had to deal with the stock market really taking a tank and we have now the hurricane losses, and with more people being on the road we are also seeing a lot more motor vehicle accidents,” the insurance executive pointed out.

Graham said insurance companies “would really have preferred not to have to pass on any ridiculous amount of costs to the client in this environment with the high cost of living”.

“But the insurance companies are trying to find ways to manage it so we don’t have to pass on all, but there are going to have to be some increases in the rates if we are going to be able to continue insuring houses in Barbados,” he reiterated.

Asked about the impact the Pandemic Levy – introduced to help meet the costs of dealing with the COVID-19 pandemic – was having on local insurance companies, Graham said having to pay it was not an issue for them.

“We all understand the country went through a real difficult time. We see what happened in the northern isolation facilities, we knew what had to happen with the vaccine…. We were fortunate Bajans didn’t have to pay for it, so if we had to dig up $10 million to go toward a Pandemic Levy to cover some of those costs, it’s not the worst thing in the world for us. We were happy to pay that Pandemic Levy under the circumstances that the country had faced,” he said.

Meanwhile, the Association of Trinidad and Tobago Insurance Companies (ATTIC) has said that companies in Trinidad are bracing for a hardening reinsurance market, which will result in double-digit increases in their reinsurance costs next year.

It explained many insurers are in discussions with their brokers and reinsurers to negotiate renewal terms and capacity for their 2023 programmes.

ATTIC said initial feedback is that many Caribbean insurers are facing the combined possibilities of their current programmes not being fully supported, hardening of the renewal terms and increases in their costs in excess of 15 per cent above that incurred in 2022.

“This will undoubtedly have an adverse impact on the future sustainability and survival of some insurers if they are unable to recover those increased costs,” ATTIC said.

emmanueljoseph@barbadostoday.bb