CONSUMERS trying to get new insurance policies are facing hurdles as insurers face challenges buying reinsurance coverage.

“We can’t really write new business. We’ve had a few increases on existing policies and we have to watch those carefully because we don’t want to run out of capacity. In terms of availability on additional capacity, we’re still looking for it and it hasn’t shown up yet. I spoke to a reinsurer in the last week who said there is a possibility that they might have something. So, we’re checking that out,” said managing director of the British Caribbean Insurance Company Limited (BCIC) Peter Levy, in an interview with the Jamaica Observer.

Consumers have even complained that their property insurance has gone up 60 per cent with some stratas deciding not to renew insurance for their complexes due to the higher cost.

“It’s a difficult and challenging year because selling the same product at increased cost to any prospective insured is not welcomed news. So, we need to deliver and package that information to the purchaser of the insurance to let them know that to a large extent, the entire world insurance market is in crisis. The frequency of world losses will impact insurance throughout the world,” added managing director of General Insurance Accident Insurance Company Jamaica Limited Sharon Donaldson on the increased prices faced by consumers.

Several insurance companies went down to the wire on December 30 attempting to negotiate with reinsurance companies for sufficient capacity of their insurance books. An article in The Insurance Journal titled ‘January renewals see hardest property catastrophe reinsurance rates in generation’ described the convergence of global events which made the January renewal season quite complex and gruelling.

According to Investopedia, reinsurance is also known as insurance for insurers or top-loss insurance. 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.

“It’s likely that people will be selective about the coverages that they buy, and I think that’s inevitable with the prices in the market right now,” Levy added on the concern some consumers have with elevated premiums.

A financial executive explained that while the motor market is more competitive and price increases would be harder to pass on, he noted that the industry is stuck between a rock and a hard place and that underwriting ratios are surpassing 100 per cent will not be sustainable for many who would be forced to cull their books or increase prices to balance losses.

Underwriting ratios are metrics used by insurance companies to measure their underwriting profit/loss compared to premiums earned. If the underwriting ratio is less than 100 per cent, the insurance company is making a profit from its general insurance operations while anything over 100 per cent would equate to a loss.

Data from the Financial Services Commission (FSC) showed that the year-to-date underwriting ratio was 109.9 per cent for the industry up to June 2022. With 11 general insurance companies in the first half of 2022, they generated a combined net loss of $400 million for the period despite earning $15.7 billion in revenue.

Although strata as a collective can decide not to insure the property or just not insure the common area, this is not the case for regular homeowners with a mortgage since peril and general insurance is required as part of the loan agreement.

“We do anticipate that our retention will still be very good especially based on our portfolio. The rate increases started from last quarter and we have not seen a falloff in terms of our retention. So, we continue to have a very robust outlook on our retention,” said President of Guardian General Insurance Company Jamaica Limited Karen Bhoorasingh on Thursday.

Levy express similar sentiments as his front-line members haven’t mentioned any immediate retention issues with customers who are paying the increased premiums now.

“We’re getting renewals. It had limited effect in January because we would have sent out renewal notices for January from December. We didn’t have the full increase in the calculations as yet. February was really the first month that you’re seeing the full effect,” stated Levy.

Guardian Holdings Limited is currently negotiating its reinsurance agreements ahead of their April deadline. Chief Executive Officer Ian Chinapoo noted that the regional insurer has not found any additional capacity as yet, but the feedback so far has been good with his team.

“In terms of our capacity, those are the things that Dean Romanay is dealing with on his visit. So, when our program is finalised, we will understand fully the impact of that, but we’re not in a position yet to know what that is,” Bhoorasingh added on capacity for Guardian General’s operations.

While the banks have not spoken about any potential impact to their loan growth ambitions with mortgages, an executive pointed out that any excess capacity that does come in will be reserved for the mortgage book of lenders. He also expressed concern that the negotiation at the end of this year is expected to go south again due to recent events like the numerous earthquakes in Turkiye and other climactic events.

“I think there probably will be some additional capacity at some point. I don’t think it’s going to be likely to result in price reductions or any mitigation of increases because one of the things that’s making them want to make their capital available is price levels that we’re currently being offered. In the short term, it will be a solution to the capacity problem, hopefully, but not to the price. That’s going to take a little bit longer,” Levy closed.