The Tribune

By Neil Hartnell

Tribune Business Editor

nhartnell@tribunemedia.net

Insurers are warning Bahamian businesses and homeowners that there are unlikely “to be meaningful reductions” in property coverage costs in 2026 after the multi-billion dollar damages inflicted on Jamaica by Hurricane Melissa gave their key partners pause for though.

Several local property and casualty underwriters told Tribune Business that reinsurance treaty renewal negotiations have extended into Christmas week after the impact of the Category Five storm on the southern Caribbean nation prompted that sector to take a second look at the pricing and capacity it is willing to make available to The Bahamas and the region for next year.

Timothy Ingraham, chief executive of Summit Insurance Company, through which Insurance Management places much of its property and casualty business, said that while “the picture will become clearer in the coming days” reinsurers are focused on maintaining the prices his and other carriers must pay for the industry’s continued risk support at current levels. Reinsurance availability, though, “does not appear to be an issue”.

“This reinsurance treaty renewal season is running a bit late as we are just now seeing reinsurers starting to commit for 2026. While The Bahamas escaped the main fury of Melissa, the storm appears to have reminded reinsurers of the risk of providing protection in this area and focused them on ensuring that rates are maintained as near to current levels as possible,” Mr Ingraham told this newspaper.

“From our perspective we are not seeing what we would consider to be meaningful reductions in reinsurance rates. The picture will become clearer in the coming days as markets work to complete placements prior to the holidays and end of year. Capacity does not appear to be an issue for the market, and so I suspect that regional insurers will be able to secure the level of capacity they require, though at rates dictated by reinsurers.”

Anton Saunders, RoyalStar Assurance’s managing director, while agreeing that there will be no increase in all-perils catastrophe coverage premium prices for Bahamian property owners next year, differed from Mr Ingraham by suggesting that capacity - the availability of sufficient reinsurance support to underwrite all risks in this nation - is “the challenge” at present.

“The negotiations are not complete,” he told Tribune Business. “We’re still in negotiations, back and forth, with the reinsurance market. We should have a firm idea [this week]. The rates are not going to increase for sure. Whether they are going to decrease or not, we are hoping we are going to get the capacity we want. That’s the challenge right now.

“Some reinsurers are more [reluctant] after Melissa. We’re going through that negotiation process now. Hopefully, by December 22 [today], we should have some firm news on where we are going.”

Foreign reinsurers largely dictate Bahamian insurance premium costs due to the domestic industry’s heavy dependence on them to help fully underwrite risks domiciled in this nation. Melissa, a Category Five storm when it devastated Jamaica, emerged just as local carriers had begun negotiating their reinsurance treaties for 2026.

Jamaica is still calculating the total losses and damage from Melissa, with the initial estimates placing the latter as high as $8bn. Projections for insured losses were as high as $4bn, with payouts for onshore property damage pegged at between $2.4bn and $4.2bn.

Bahamian property and casualty insurers, due to their relatively thin capital bases, have to purchase huge quantities of reinsurance annually to enable them to underwrite the multi-billion risks present in this nation. This means that the premium prices Bahamian households and businesses pay for coverage are largely determined by what reinsurers charge.

Stung by previous multi-billion dollar losses from major hurricanes hitting the US and Caribbean, as well as other catastrophic event payouts, many reinsurers had either pulled out of the region altogether or reduced the capacity and availability of coverage here. The reduction in reinsurance supply resulted in Bahamian insurance premiums increasing in cost by as much as 20 percent since 2022.

This resulted in escalating affordability concerns, and fears that growing numbers of Bahamian homeowners and businesses were being increasingly priced out of the insurance market and unable to afford the necessary protection for arguably their most important asset - their real estate. However, they have been warned that cutting, or dropping, property coverage will be “a false economy”.

Tom Duff, who retired as Insurance Company of The Bahamas (ICB) general manager in 2023 after 26 years in the post, warned clients in the company’s 2022 annual report that while they may save premium dollars they run a huge risk of becoming “financially crippled” if their property assets are devastated by a Hurricane Dorian-style storm.

Acknowledging that the affordability of insurance is becoming an increasing concern, with reinsurance costs at their highest-ever level during ICB’s existence, Mr Duff wrote: “The cost of catastrophe reinsurance has risen quite dramatically for 2023 and, as a result, customers will be faced with an unwelcome increase in their renewal premiums.

“Although some may be tempted to cancel or reduce cover, doing so may prove to be a false economy as uninsured losses from a major storm can be financially crippling...... The recent phenomenon of the ‘super storm’ is unfortunately a reality that the region can no longer deny. Scientists are predicting that, because of global warming, the region will likely experience an increase in the frequency of these destructive storms.

“This probability represents a major threat to the well-being of The Bahamas and the population at large. It is therefore vitally important that homeowners and businesses take every measure they can to mitigate their risk of incurring serious financial loss from a major hurricane. I encourage all of our policyholders to consider the vulnerabilities of their individual properties and take steps to make them more secure against the risk of hurricane and any other perils.”