Best’s Market Segment Report: Rated Caribbean Insurers’ Net Income Rebounds From Catastrophic Hurricane Seasons

An analysis of AM Best-rated property/casualty (P/C) 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.

A new Best’s Market Segment Report, titled, “Caribbean Insurers
Rebound After Two Catastrophic Hurricane Seasons,” states that after
losses in 2016 and 2017, insurers experienced some respite in 2018 with
very little or no major operational impact from weather-related events.
The report also notes 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. As a result, consolidated gross premiums increased 9.7% and
net premiums increased by 18.8% in 2018. The combined ratio decreased by
10.4 points to 96.2% from 106.6%. 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 notes 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. Hurricanes and
earthquakes are a major concern to property writers, but they are also a
concern to life/health writers. 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 and new challenges arise.

For the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=286686.

AM Best will present a webinar, “State of the Caribbean Insurance
Markets,” on Monday, June 17, 2019, at 2 p.m. (EDT). During the event,
AM Best analysts and market experts will explore trends in the Caribbean
property/casualty and life/health markets, as well as insurers’ 2018
financial results. To register for the complementary webinar, please
visit http://www.ambest.com/webinars/caribbean19.

AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
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