LOCAL INSURANCE COMPANIES PREPARE FOR A TOUGH 2023

In 2022, 3 major hurricanes wreaked havoc in the US, and some countries of the Caribbean, creating significant losses. These losses, on top of the results of some other extreme weather events like winter storms and tornadoes in the US, tropical cyclones and floods in the Far East, and wildfires in Australia have created major issues in the insurance market that will mean increased prices for the people of the Caribbean.

International reinsurers were already signalling that there may have been increases prior to the 2022 season, but that recent volume of catastrophic losses has indicated that the people of the Caribbean must brace themselves for the increases which are sure to come.

There are several other issues that are also anticipated to affect Caribbean people and the price that they will have to pay not only for insurance but for several other commodities. These include the volatility of the global market some of which is caused by the Russia /Ukraine war, presently ongoing and with no end in sight, and the effect it continues to have on the global supply chain; the long-term effects of the pandemic – and the challenges and additional costs which this poses to our health systems.

In addition, increasing energy prices and the impact of climate change also complicate the concern for small island states which have beachfront properties that are being eroded by invading rising sea levels.  All of these have taken a toll on availability of reinsurance and add to the complexity with which reinsurers and insurers are faced.

President of the General Insurance Association of Barbados (GIAB) Randy Graham explained “The basic tenet of insurance and reinsurance is the combining of resources to pay for the claims of those who suffer losses. Even though Barbados was spared in 2022 from the ravages of the hurricane season, the island is a part of the Caribbean/eastern seaboard of the US reinsurance pool and will face the challenges that the entire region will face come next year.

Barbadian companies have historically tried to shield their clients from the high costs, and this will also be a consideration for the reinsurers who themselves are looking for a return on investment. However, with the expected increases, we know that we will not be able to absorb all of the extra costs that are resulting from the present world events” he added.

The immediate future of the insurance industry looks challenging, as it is expected that 2023 increases, which will affect policies that cover catastrophes such as hurricanes, storms and earthquakes, could range anywhere between 10% and 30% depending on the type of insurance required and how the local companies can negotiate with their reinsurers.  It is expected that there will be some changes to the industry because of the limited ability of some companies in the industry to absorb any more costs.

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