A year after Hurricanes Irma and Maria dealt a severe blow to the region, leaving behind hundreds of millions of dollars in damage and driving up insurance premiums, homeowners are facing the possibility of a second increase in as many years.
However, one industry expert said the pending increase, which could take effect early next year, should not be significant.
It was following the hurricanes in September 2017, that hundreds of millions of dollars had to be paid out in insurance claims to homeowners across the region.
And while Barbados escaped the brunt of the storms, which left a trail of destruction in Anguilla, Barbuda, the British Virgin Islands, the US Virgin Islands, Dominica and the Franco-Dutch islands of Saint Martin last year, the country still experienced some rate increases early this year.
These increases were between 10 and 15 per cent due to ongoing competition and excess capacity, according to industry officials.
Barbados TODAY understands that reinsurers wanted Barbados and other Caribbean islands to increase their premiums even higher.
However, a senior member of the General Insurance Association of Barbados (GIAB) Anton Lovell told Barbados TODAY why the local prices could not go higher.
“The reinsurers wanted us to take the rates much higher but competition did not allow for that,” he said.
“Reinsurers are concerned with the rates in Barbados being too low, but it is because of the competition they are not higher,” added Lovell.
Ratings agency A.M Best recently reported that primary property and casualty insurers in the Caribbean remained mired in a protracted soft market cycle, but rising reinsurance costs could force companies to introduce some much-needed rate increases early 2019.
Reinsurers play a key role in the pricing of property risks in the Caribbean, as most of the properties insured in these territories are heavily reinsured.
With competition still stiff in the Barbados market, industry experts told Barbados TODAY they expected prices to increase by as much as 10 per cent at the beginning of next year despite a not-so-active 2018 hurricane season this year.
The hurricane season is scheduled to end on November 30.
“There would be no major increase because we had a quiet year in terms of disasters, although we have until the end of November. But so far for the year since we had no major catastrophes coming through I don’t expect to see any major increases in property insurance,” said Lovell.
At the end of last year regional insurance company Massy United Insurance said it paid out an estimated US$250 million to hundreds of customers affected by storms last year September, after receiving in excess of 1,000 claims.
Another leading insurance company here, Sagicor General, had reported in its 2017 financial report, that it expected insurance premiums to rise in 2018 as a result of price increases for reinsurance protection “due to the market losses” experienced in 2017.
According to an A.M. Best survey of chief executive officers of various insurance companies in the Caribbean, more than half the respondents (53 per cent) said their companies had maintained retentions and limits at existing levels, versus 20 per cent that increased limits based on the 2017 storm losses.
The A.M. Best survey found that 93 per cent of insurance companies in the Caribbean felt uncertain about when regional markets would harden, with the prevailing view being that there was still too much excess capacity in the market.
Taking a look at the major obstacles their companies would face over the short-term (12 to 18 months), 53 per cent of the respondents said irresponsible underwriting practices would result in a continuation of inadequate rates, while 40 per cent were concerned about growing frequency and severity of catastrophic events.
About 27 per cent cited rising compliance and regulatory costs, 20 per cent thought the lack of foreign currency in some countries with banking restrictions was an issue, while another 20 per cent cited the continued soft economic conditions throughout the region.
For the longer term, 40 per cent of the respondents said they believed the biggest hurdle would be new legislation and higher compliance and regulatory costs, while 20 per cent said a potential lack of technically-qualified insurance professionals would pose a challenge.
Another 27 per cent of those surveyed predicted there would be increased catastrophic activity over the longer term due to climate change.
The CEOs also expected capital requirements under new regulations and rising compliance and regulatory costs to create a favourable environment for an increase in mergers and acquisitions in the short to medium-term.
In 2010 Barbados’ brush with Tropical Storm Tomas, which resulted in just over 1,700 property claims and a payout of about $28 million from the insurance industry, resulted in a small adjustment in premiums.