Caribbean insurers are being told to brace for more claims this year as predictions for an active Atlantic hurricane season persist.

Last year was dubbed the most costly season on record by the National Oceanic and Atmospheric Administration (NOAA) and that was only the third-most active season on record.

“We’re just getting into the peak months of August through October for hurricane development, and we anticipate that more storms are on the way,” said NOAA administrator Rick Spinrad.

Globally, it’s estimated that uninsured damage from disasters add up to over US$160 billion per year, with 96 per cent of this protection gap affecting emerging economies.

Already Caribbean and Central American governments have renewed their coverage under the Caribbean Catastrophe Risk Insurance Facility (CCRIF) by $1.2 billion, expanding their risk pool by 10 per cent on an annual basis.

The renewed coverage includes: Earthquake, tropical cyclone and excess rainfall policies.

CCRIF said 13 member governments increased their coverage compared with the 2021/22 policy year.

Historically, the Atlantic hurricane season has been forcing individuals and governments to make more claims as disasters become more intense.

According to data from Risk Management Solutions, between 2016 and 2020, hurricane insurance claims in the Caribbean soared to $44.5 billion — up from just $1 billion during the previous four years,

The 2020 Atlantic hurricane season has been the most active hurricane season on record and CCRIF has made six pay-outs totalling US$21.9 million — all within 14 days of the event.

Following the 2020 season, Ryan Barber, managing director of Marsh, a global insurance company, disclosed that hurricane insurance premiums across the Caribbean were 50 per cent higher than the preceding two years and 100 per cent higher if the insured recently suffered significant damage.

In an effort to maintain a strong position as claims become larger and more frequent the Organization of American States in collaboration with the World Bank gave this recommendation:

“In recent years the Caribbean area has seen its share of natural disasters, and its insurance markets have been through one of their most difficult periods. As a result, Caribbean insurers need to evaluate their portfolio risks with greater precision so that they can prove to reinsurers their true exposures and thereby maintain reinsurance protection at reasonable cost.”

According to Investopedia.com reinsurance is the practice whereby insurers transfer portions of their risk portfolios to other parties by some form of agreement to reduce the likelihood of paying a large obligation resulting from an insurance claim.

The NOAA notes that of the US$310 billion weather disasters between 1980 and 2021, tropical cyclones (or hurricanes) have caused the most damage, with an average cost of $20.5 billion per event.

So far, the season has seen three named storms and no hurricanes in the Atlantic Basin. An average hurricane season produces 14 named storms, of which seven become hurricanes, including three major hurricanes.

This outlook is for overall seasonal activity, and is not a landfall forecast. Landfalls are largely governed by short-term weather patterns that are currently only predictable within about one week of a storm potentially reaching a coastline.

FEMA administrator Deanne Criswell said, “The next Ida or Sandy could still be lying in wait. That’s why everyone should take proactive steps to get ready.”