AM Best: Caribbean Insurers’ Reinsurance Costs, Capacity Constraints Moderate, Climate Vulnerability

Why It Matters

Moderating reinsurance costs and stronger pricing improve insurers’ near-term capital resilience and profitability, but ongoing hurricane risk and tourism-linked economic sensitivity mean underwriting discipline and reinsurance capacity remain pivotal for financial stability. Changes in global demand and currency dynamics could quickly alter claims exposure and market performance for Caribbean insurers.

Summary

AM Best reports that reinsurance costs and capacity constraints for Caribbean insurers have moderated amid an accelerated softening in property reinsurance pricing and modest easing of some terms and conditions. Favorable insurer results through 2024 reflect a low catastrophe year and significant rate increases—particularly in motor and property lines—while proper underwriting and reinsurance remain critical given hurricane exposure. AM Best notes that regional economies are chiefly driven by tourism and a few commodity exporters, with IMF-based projections seeing tourism-dependent economies slowing modestly to about 2% growth and commodity exporters’ aggregate growth skewed higher by Guyana. The report underscores that indirect global economic shifts and currency moves can influence tourism demand and import costs across the region.

Original Description

AM Best Directors Bridget Maehr and Ann Modica discuss a new Best's Market Segment Report that finds Caribbean insurers are highly reliant on reinsurance to manage capital, risk retention, and to expand their book of business.

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