An analysis of AM Best-rated property/casualty insurers based in the Caribbean found that overall net income rebounded significantly following the 2016-2017 hurricanes to $32.2 million in 2018 compared with a $4.3 million loss in the previous year.
After losses in 2016 and 2017, insurers experienced some respite in 2018 with very little or no major operational impact from weather-related events, said a new Best’s Market Segment Report, titled, “Caribbean Insurers Rebound After Two Catastrophic Hurricane Seasons.”
The report noted that rated Caribbean insurers have benefited from longstanding relationships with reinsurers, which have proven to be extremely resourceful in the context of prudent catastrophe risk management and have enabled the insurers to write property business profitably, especially in catastrophe-affected years.
While soft markets generally persisted throughout the Caribbean in 2018, insurers endured reinsurance rate increases in jurisdictions affected by the 2017 storms, but were able to increase rates in those territories accordingly, said the ratings agency.
As a result, consolidated gross premiums increased 9.7%, net premiums increased by 18.8% in 2018 and the combined ratio decreased by 10.4 points to 96.2% from 106.6%, said AM Best. Consolidated surplus decreased by 1.4% compared with 2017, primarily as a result of the investment write-downs related to Barbados sovereign debt.
Rated life/health insurers in the region experienced slower growth in top-line, year-over-year revenues in 2018 in the face of persistent economic headwinds in the region. Revenues grew by 5.2% in 2018, and while most life companies saw modest premium growth, a few experienced declines. However, investment results were favorable, as some companies made adjustments in their portfolios, generating realized gains in the process. These gains benefited consolidated net earnings, which increased by nearly 13% in 2018.
The report also noted that the recent hurricanes highlighted the region’s exposure to extreme weather events, and the lack of insurance penetration in the Caribbean.
Persistently low insurance penetration rates compound the economic loss associated with catastrophic events and recent storms have highlighted the need for the region to establish financial buffers and build structural resilience, said AM Best.
Hurricanes and earthquakes are a major concern to property writers, but they are also a concern to life/health writers, the report said, explaining that these devastating events can cause significant loss of life and create health issues, especially in developing countries whose infrastructures are fragile or there is limited access to medical care.
Although rated Caribbean insurers recognize the importance of innovation, most companies are still in the early stages of development. Although innovation may be a relatively new concept to some companies, AM Best expects it to become a key focus across the industry for Caribbean insurers in the coming years as technologies continue to develop.
Source: AM Best
Photo credit: AP Photo/Collin Reid
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