The Insurance Association of Jamaica (IAJ) is anticipating a gradual decline in property insurance premiums as reinsurance costs begin to moderate and global reinsurers show renewed interest in the Caribbean market.

After years of volatility driven by adverse market conditions largely brought about by global economic shocks, the local industry is said to be welcoming early signs of stabilisation. Peter Levy, past president and executive director of the IAJ, speaking at a recent
Jamaica Observer Business Forum, shared the view that the sharp increases in reinsurance rates seen in recent years may finally be reversing course.

“There have been movements up and down during the period, though people mostly only remember the increases, but it does go both ways. Recently it’s been up, but I do suspect that will change direction or at least flatten out, as the conditions that led to the increase are changing,” he told journalists.

The biggest shock which came for commercial clients, Levy, who is also the managing director for insurer BCIC Limited, said he saw larger percentage increases when compared to that for residential property premiums, which went up by about 40 to 50 per cent.

The hardening of the reinsurance market since 2022 was primarily due to a global contraction in reinsurers’ capital. This, as rising inflation, weaker home currencies, and falling bond values significantly eroded balance sheets across the industry which ultimately pushed many reinsurers to either scale back or pull out of less profitable markets — including the Caribbean. Those that opted to remain, Levy said, were forced to raise prices significantly in a bid to to manage their exposure.

“Since then the reinsurance industry has been producing better results with balance sheets being relatively higher than what it was prior to now,” Levy noted.

He said that while many are not necessarily running back to the Caribbean as yet, the local industry “has been seeing more appetite and where there was a fall-off, have now started to show gradual signs of increase”.

Reinsurance contracts are typically negotiated on a calendar-year basis, meaning insurers must secure sufficient capacity annually. Without it, they risk being unable to renew or write certain policies. Locally, reinsurers must meet strict standards set by the Financial Services Commission (FSC), which requires that companies be rated at least ‘BBB’. Prominent reinsurers in the local market include Munich Re, Transatlantic Re, and Everest Re, among others.

“The easing will likely be more gradual and I’m not sure we’ll get back to where we are before when prices were at an historic low for property insurance… but we’re now seeing some ease and as the profits of reinsurers grow I think they will become more inclined to again expand their business,” Levy said.

“I’m not going to predict any direction or change, as it’s hard to tell how much appetite reinsurers have, but they have clawed back some of the capital they lost even though they may not necessarily be looking to Jamaica or the Caribbean first to deploy it,” he continued.

Amid improving market conditions, the IAJ has launched a national campaign encouraging homeowners to reassess their insurance coverage. This comes in response to recent data indicating that only 20 per cent of residential properties in Jamaica are insured — and of those, approximately 95 per cent are underinsured. The IAJ attributes this to a general lack of awareness that older policies may no longer reflect the true replacement value of homes due to inflation, construction costs, and rising property values.

With reinsurance markets stabilising, the IAJ remains hopeful that local insurance costs will adjust downward, making coverage more accessible to both homeowners and businesses.

Executive director of the IAJ Everton McFarlane said that contrary to popular belief, there is no large pool of accumulated funds existing somewhere. He instead pointed to heavy expenditure for property damages which in 2024 continued to incur net losses of $2.4 billion, up from $1.6 billion in the year prior.

“Aside from claims payouts, insurers must also cover operating costs, integrate new systems, and pay staff. There’s a misconception that insurance companies collect premiums and do nothing with them — that somehow there’s a fund like the NHT from which everyone is entitled to benefit. But insurance doesn’t work that way. Every year, claims are paid, and part of the premiums goes toward keeping companies operational and functioning effectively. Insurance is a business that comes with significant risks, not just to the insured but to the underwriters who are carrying that risk,” he said.

“There continue to be losses in the insurance pool. You may not benefit today, but you could tomorrow,” added Chaluk Richards, vice-president for the general insurance segment of the IAJ.

Richards, also stressing the need for greater financial literacy concerning home insurance, cited it as a critical component in forging higher levels of understanding between the insurer and the insured.

“We’re now working company by company, alongside our national campaign, to educate more Jamaicans about underinsurance and its risks. Continued financial literacy efforts are vital as insurance is a big component in ensuring that people won’t have to start again from scratch,” he said.

From left: Everton McFarlane, executive director of the IAJ; Chaluk Richards, vice-president for general insurance at the IAJ; and Peter Levy, past president and executive member at the IAJ, speaking at a recent Jamaica Observer Business Forum.