OLDWICK, N.J.--(BUSINESS WIRE)--AM Best’s annual survey of the Caribbean Association of Insurance Regulators (CAIR) member countries found that the region’s performance in 2017 was solid with insurers posting positive after-tax income despite a dramatic rise in net losses by more than 30%. However, economic contractions pose a threat to the Caribbean’s growth potential, and enhanced regulation in certain markets adds new layers of complexity.
The Best’s Special Report, titled, “Caribbean Insurers Resilient in the Face of Natural Disasters,” states that the economic damages from the 2017 hurricanes have been estimated at USD 32 billion, and impacted many of the territories surveyed. Insurance penetration historically has been relatively low in some of the affected areas, leading to a wide disparity between economic and insured losses. At the same time, declining productivity, high unemployment and rising deficits due to catastrophe-related reconstruction costs are playing a role in limiting growth in the Caribbean. These factors have resulted in larger borrowing. As a result, many countries have undertaken measures to lower their debt levels or strengthen their financial frameworks.
The region remains vulnerable to external demand conditions and global economic shocks, owing to significant trade and financial linkages, particularly with the United States. Nevertheless, AM Best expects the economic outlook for the Caribbean to improve slightly in 2019. In addition, many jurisdictions continue to update and enhance their current insurance regulations owing to the industry’s growing sophistication and development. In particular, Trinidad and Tobago is proposing higher capital requirements, which may spur merger and acquisition activity.
Survey highlights include the following:
- After-tax income was USD 527 million in 2017, down slightly from 2016. Anguilla, Dominica, Montserrat, and Turks and Caicos all reported after-tax losses for the year;
- Direct premiums written essentially remained flat at USD 4.2 billion in 2017, with Anguilla seeing the largest year-over-year increase, by 37%, and Cayman Islands seeing the largest decline, by 13%;
- The average combined ratio for the region deteriorated to 117.8%, although partially mitigating this was a USD 2.5 billion increase in reported total investments, which rose to USD 12.6 billion;
- For 2017, the average retention rate for the region was 64.3%. Suriname retained the most business, at 91.3%, with Turks and Caicos ceding the most business, retaining just 29.3%; and
- Reinsurance recoverables increased significantly to USD 1.9 billion in 2017—a by-product of the hurricane events.
Sixteen of the 22 CAIR member countries participated in this year’s annual survey. As the countries in the region are widely diverse with varying reporting requirements, accounting standards and regulatory requirements, the results vary from country to country on some levels.
To access a copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=286734.
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