OLDWICK, N.J.--(BUSINESS WIRE)--AM Best-rated Caribbean property/casualty insurers posted an 8% increase in net income in 2021 to more than $70 million, highlighting carriers’ risk management practices, although the region remains highly vulnerable to a number of risks, led by climate risk.
In a new Best’s Market Segment Report, “Climate, Reinsurance, and Cyber Remain High in the Caribbean Risk Landscape,” AM Best states that although carriers generally cleared a number of hurdles created by COVID-19, the pandemic highlighted vulnerabilities in the region. This was particularly apparent in its high reliance on external demand to fuel economic growth and the undiversified nature of many economies, which depend on foreign exchange activities such as tourism, financial services and commodity exports.
Climate risk adds an additional layer of uncertainty as it remains the biggest threat to the Caribbean. Despite the low level of claims activity related to catastrophes in 2021 and thus far in 2022, reinsurance pricing continues to reflect increased hardening as insurers and reinsurers are feeling the effects of inflation.
“The growing frequency and severity of global catastrophic events have forced reinsurers to adopt a more circumspect approach to climate risk,” said Ricardo Longchallon, senior financial analyst. “In some instances, this has resulted in double jeopardy for Caribbean insurers in the form of higher reinsurance rates, in some cases more than 15%, and less capacity.”
Despite ongoing recovery, tourism’s contribution to GDP remains below pre-COVID levels and likely will take years to return to pre-pandemic levels. Despite improving in 2021, tourism’s contribution to GDP is still well below that of 2019.
Consolidated gross premiums among rated Caribbean property/casualty insurers rose by 10.6% in 2021, reflecting continued price firming in certain territories, while net premiums rose by 5.3%, despite higher cessions by some companies. The overall combined ratio deteriorated slightly, to 95.3 from 94.8 in 2020, which had improved by 4.1 percentage points over 2019. Consolidated surplus increased by 3.2% over 2020 to USD 853.9 billion, reflecting the group’s favorable earnings in 2021.
Caribbean life/health companies experienced a slight improvement in top-line growth after emerging from the pandemic-related disruptions, as total revenue was up slightly. Life and health premiums stabilized as insurers no longer had to provide premium relief to policyholders as economic conditions improved, stay-at-home restrictions abated and tourism reversed from its bottom.
To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=323204.
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