Created: Sep 06, 2022 07:54
Caribbean P&C insurers reported an 8% increase in net profit in 2021 to over $70 million, highlighting carriers’ risk management practices, but the region remains highly vulnerable to a number of risks , top of which is climate risk, according to a new report says.
In AM Best’s market segment report, Climate, reinsurance and cybersecurity remain elevated in the Caribbean risk landscapethe ratings agency said that although carriers have generally overcome a number of obstacles created by Covid-19, the pandemic has highlighted the region’s vulnerabilities.
This was particularly evident in its heavy 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. base.
Climate risk adds an additional layer of uncertainty as it remains the biggest threat to the Caribbean, AM Best said.
Despite the low level of catastrophe claims activity in 2021 and so far in 2022, reinsurance pricing continues to reflect increased tightening as insurers and reinsurers feel the effects of inflation.
“The increasing frequency and severity of global catastrophic events has forced reinsurers to take a more circumspect approach to climate risk,” said Ricardo Longchallon, senior financial analyst.
“In some cases, this has resulted in double risk for Caribbean insurers in the form of higher reinsurance rates, in some cases over 15%, and less capacity.”
Despite the ongoing recovery, tourism’s contribution to GDP remains below pre-Covid levels and it will likely take years to return to pre-pandemic levels, the rating agency said.
He added that despite an improvement in 2021, tourism’s contribution to GDP is still much lower than in 2019.
Consolidated gross premiums for rated Caribbean P&C insurers increased by 10.6% in 2021, reflecting continued price firming in some territories, while net premiums increased by 5.3%, despite larger cessions of some companies.
The overall combined ratio deteriorated slightly, to 95.3 from 94.8 in 2020, which had improved by 4.1 percentage points compared to 2019.
Consolidated surplus increased 3.2% from 2020 to $853.9 billion, reflecting the group’s favorable earnings in 2021.
Caribbean life/health companies saw a slight improvement in top line growth after emerging from the pandemic-related disruptions, with total top line up slightly.
Life and health insurance premiums stabilized, with insurers no longer having to offer premium relief to policyholders as economic conditions improved, home care restrictions eased are attenuated and that tourism has been reversed.
AM Best: Climate risk is the biggest threat to the Caribbean