An analysis of A.M. Best-rated property/casualty insurers based in the Caribbean reveals that hurricanes Irma and Maria were mainly earnings events, and that the responsiveness of reinsurers allowed these insurers to quickly resolve a high volume of claims.
A new Best’s report titled, “Caribbean Insurers Well-Capitalized Despite 2017 Hurricane Losses,” notes how the responsiveness of reinsurers was a demonstration of how these programs were intended to work. Consequently, despite the magnitude of the 2017 catastrophe losses, rated P/C insurers were well-capitalized and able to withstand the record-setting impact of the hurricanes, A.M. Best analysts found.
The report also notes that the 2017 hurricanes highlighted the lack of insurance penetration in the Caribbean, since the disparity between economic and insured losses was much wider than that seen in North America. The storms also underscored the region’s acute economic exposure to climate change and the need to build resilience structurally and financially.
According to the report, the Caribbean is highly exposed to perils such as rising sea levels, flooding, erosion and warming sea temperatures, which could result in stronger storms in the future. Persistently low insurance penetration rates could compound the economic costs of future storms, warn the analysts.
A.M. Best-rated P/C insurers saw consolidated net income decline 99.7 percent in 2017 year over year, primarily due to the losses associated with hurricanes Irma and Maria. The combined ratio deteriorated by 11.8 points to 106.6. Consolidated gross premiums increased 1.8 percent, while net premiums decreased by approximately 1 perecent.
The top line revenues of the region’s life/health companies showed some momentum in 2017, as revenues rose by nearly 10 percent and consolidated earnings grew by 4 percent. Although not subject to the volatility of their P/C counterparts, the life/health companies are more impacted by economic conditions such as GDP, monetary policy and unemployment.
A.M. Best said the reinsurance industry’s capital position has helped Caribbean insurers renew their reinsurance contracts with price increases that were consistent with loss experience. Reinsurance capacity is still available, though some loss-affected areas in the Caribbean have seen rate increases of as much as 50 percent, while pricing in non-affected areas has increased by around 10 percent.
A.M. Best said it believes the reinsurance partnerships in the Caribbean region are essential, and that the 2017 catastrophes demonstrated that the region’s rated insurers must rely on reinsurers to remain viable.
Source: A.M. Best
*This story ran previously in our sister publication Insurance Journal.