NASSAU, BAHAMAS — The Bahamas Insurance Association (BIA) is warning of a sharp increase in property insurance rates this year.
The BIA in a statement noted that increased losses and the potential of increased catastrophe losses in the future have resulted in many reinsurers who provide protection to insurance companies withdrawing from the region, therefore, leading to a shortage in available reinsurance capacity.
“For the last several years, global insured losses from catastrophes have risen dramatically,” the statement read.
“During 2022, the global reinsurance industry experienced losses of over $120 billion, well above the historical 10-year average of $81 billion. Hurricane Ian, which made landfall in Florida in September of last year, is the second most expensive storm on record, costing between $50 billion – $60 billion, second only to 2005’s Hurricane Katrina. In 2019, insurers in The Bahamas paid in excess of $2 billion to settle losses arising from Hurricane Dorian (a Cat 5 storm).
“These increased losses and the potential of increased Catastrophe losses in the future have resulted in many reinsurers who provide protection to insurance companies withdrawing from the region, therefore, leading to a shortage in available reinsurance capacity,” the BIA noted.
According to the BIA, those reinsurers who have remained in the region have applied significant rate increases for the protection they provide to cover the risk of catastrophes.
The statement continued: “Insurance companies in The Bahamas cannot operate without substantial amounts of reinsurance and, therefore, are highly sensitive to the movement in the price of reinsurance. Given the recent catastrophe losses and withdrawal of reinsurance capacity from The Bahamas, it is no surprise that Bahamian property and casualty insurers have seen a dramatic increase in their reinsurance costs of 20 percent to 30 percent for 2023.
“In view of this, buyers of property and casualty insurance in The Bahamas will see increases in their premiums during 2023, and some persons may find that they may have difficulty obtaining catastrophe insurance protection, due to the shortage in capacity.
“While customers will experience an increase in premiums, they should rest assured that every effort has been made to minimize these increases. Unfortunately, the increase in premiums is due to the current reinsurance market conditions, of which local insurance companies have minimal control.”
The BIA noted: “In fact, some international observers warn that unless regional companies can substantially increase rates, the reinsurance cover needed to protect companies from natural catastrophes will become increasingly difficult to obtain. Local companies must now balance the demand for higher prices by their reinsurance partners in order to continue to support this market with the objective of providing their policyholders with the best available insurance protection.”