NASSAU, BAHAMAS — Local insurers are doing their best to fight to keep costs down for customers amidst reinsurance cost hikes, according to Richard Darville, Deputy Chairman of the Bahamas Insurance Association (BIA), who noted that catastrophe premiums have increased by 30-40 percent over the past three to five years.
Darville explained: “Going into 2022/2023, the primary insurance market in the Caribbean and Florida experienced what we referred to as a capacity crunch. The reinsurance market became a bit tighter in terms of the ability for reinsurance. In addition to the increase in pricing, there was a decrease in availability of specialty catastrophic insurance availability. What drove this was a lot of primary reinsurers started to look at their returns and decided that they were best suited to stick within the prescribed guidelines by their boards. There was a huge exposure in The Bahamas and Florida.”
He added: “Going into 2023, there was an extremely difficult reinsurance market. I think most of the local companies experienced that when they saw rates increase and the unavailability of catastrophic coverage. Going into 2023 and into 2024, we have seen relaxation by the reinsurance community in terms of offering capacity, however, that came with conditions. There was still a rate increase anywhere from 5-10 percent depending on where the properties are located. There was capacity provided on an inflationary basis. Most entities saw between 7-10 percent additional capacity made available to them. So, we did see the reinsurance market start to respond a bit favorably, though it came at a higher cost. We are hoping that going into 2025 capital injection comes back and there becomes the availability of reinsurance.”
Darville noted that reinsurance costs will likely continue to increase. “Is reinsurance going up? I would say yes, we are probably going to see some escalation in the pricing. The local markets are doing their best to manage that increase. We have been impressing upon the reinsurers that there needs to be a balanced and controlled increase. Dorian was a big event for a lot of the reinsurers and while the intent is not to recover their monies immediately, when we look at the impact of climate change and the frequency of losses and the increased severity, they are beginning to have a much more cautious appetite. While we feel we will be able to provide insurance, it will come at some pricing fluctuation.”
