OLDWICK, N.J.--(BUSINESS WIRE)--Property/casualty insurance companies in the Caribbean experienced increased reinsurance costs in 2018 following previous-year hurricane losses, with 60% indicating sharper increases in loss-affected territories than those territories that were unaffected, according to an A.M. Best survey of its rated entities in the region.
The survey results are discussed in a Best’s Market Segment Report, titled, “A.M. Best Survey Takes Pulse of Rated Caribbean Property/Casualty Insurers,” in which responses from all but three chief executive officers of rated property/casualty Caribbean insurers on subjects ranging from reinsurance, the market environment and cyber risk were aggregated. On the higher reinsurance costs, the level of rate increases varied by company and renewal date and ranged from 5% to 50%, according to respondents. The report also notes that another increase in reinsurance costs resulting from hurricane losses in 2018 could lead to greater resolve among primary insurers to adjust pricing to offset the additional costs. Despite the rising reinsurance costs, this population of Caribbean insurers remains adequately capitalized, and they continue to protect their balance sheets by maintaining conservative reinsurance programs.
Competitive pricing pressures in various local Caribbean markets continues in 2018 and shows minimal signs of improving. A.M. Best’s survey found that 93% of all respondents remain uncertain as to when regional markets will harden. The prevailing view among rated insurers is that in spite of the catastrophe losses incurred by global reinsurers in 2017, too much excess capacity remains.
In assessing the major obstacles these companies expect to face over the next 12-18 months, 53% of respondents believe that a continuation of irresponsible underwriting by some insurers will result in business being written at inadequate rates. Many respondents (40%) are concerned with hyper-aggressive weather patterns that could lead to increased frequency and severity of cat events. Approximately one in four (27%) cited potential increased compliance and regulatory costs associated with pending legislation.
With innovation increasingly becoming a top concern, a notable 20% of respondents believe the unavailability of technically qualified insurance professionals could be a problem over time. Nine in 10 respondents expect merger and acquisition (M&A) activity to gain momentum in the near-to-medium term, as increased capital requirements under new and pending regulations, as well as the increasing compliance and regulatory costs of doing business in the region, is likely to create a favorable M&A environment.
Although there have been no major cyber-attacks or related losses in the region, 33% of respondents said they believe it is an emerging threat and 27% said it is currently an issue However, two-thirds of respondents have not purchased a cyber insurance policy.
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