Homeowners can expect increased premiums this year, as the region loses reinsurers as a result of increased catastrophe payouts from losses that totaled $120 billion last year, the Bahamas Insurance Association (BIA) explained in a press statement, adding that reinsurance costs have already increased between 20 and 30 percent this year.
The statement also explained that for some homeowners, finding coverage at all could prove difficult because of the fall-off in reinsurance options.
According to the statement, Hurricane Ian, which hit Florida in September, was the second most expensive storm on record, costing between $50 billion and $60 billion.
It added that $2 billion in losses were paid out in The Bahamas as a result of Hurricane Dorian.
Bahamas Insurance Association (BIA) representative Charles Johnson said in June of last year that catastrophic coverage prices will likely be the highest ever seen in the industry this year.
He said reinsurers have now lost the “appetite” for risk in this region.
The BIA now confirms that Johnson’s foresight was correct and that agencies have left the region with few reinsurance options and much more in costs.
“… 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 statement said.
“Those reinsurers who have remained in the region have applied significant rate increases for the protection they provide to cover the risk of catastrophes.
“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%-30% 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.”
The BIA said while increases are coming, they, as a group, are making efforts to ensure that the increases are minimized.
They added that if rates are not increased they may not be able to obtain the coverage needed to protect properties.
“… 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,” the statement said.
“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.
“The BIA encourages persons purchasing insurance to discuss your insurance needs with your agent or broker to learn of the options which may be available to you.”