A recent report from AM Best shows that cost and capacity constraints for Caribbean insurers have begun to ease as property reinsurance pricing softens at an accelerated pace and some terms and conditions are moderately relaxed.
For regional insurers, this shift, combined with aggressive rate adjustments, paves the way for continued profitability.
The report notes that this is the result of tight pricing and a quiet 2025 hurricane season. Insurers have adjusted rates over the past two years to adjust to inflationary pressures on reinsurance costs and repair costs in real estate and automotive businesses.
Storm activity has been erratic and can quickly change market dynamics, requiring insurers to remain vigilant about their risk appetite and growth objectives.
Fortunately, there will be less such activity in the Caribbean in 2025 compared to the previous year, with many storms leaving land and continuing into the ocean.
“Single-island insurers are most at risk from taking too high a share of the real estate business,” said AM Best director Bridget Maehr. “Some are considering geographic expansion to balance risk profiles, particularly on islands with lower risk of catastrophic events.”
The report said Caribbean insurers have reported good collective operating and net profits over the past three years, with the majority having successfully transitioned to IFRS 17 since 2022.
This shift will result in a substantial 12.0% increase in AM’s top-rated non-life insurance companies’ insurance services revenue to $2.7 billion in 2024, and an 11.3% increase in net insurance services revenue to nearly $1.4 billion.
The report also noted that operating expenses are putting pressure on Caribbean Insurance’s earnings; net operating expenses and other expenses also continue to rise.
While internal insurance dynamics look positive, the broader economic picture in the region remains tied to global volatility.
AM Best said the Caribbean’s heavy reliance on tourism and commodity exports makes it extremely sensitive to external shocks to major markets.
“As a result of these factors, ongoing external shocks and changes in international trade and immigration policies have led to continued global uncertainty, with implications for commodity markets, remittances and tourism flows in key source markets in the United States, Canada and Europe, creating downside risks,” said AM Best director Ann Modica. “This is reflected in increased uncertainty and subdued regional economic performance.”