IF Jamaica were to suffer a direct hit from a major hurricane this season, only around 8,000 households would receive full insurance payouts to rebuild their lives.

This alarming figure, revealed by the Insurance Association of Jamaica (IAJ) at a recent Jamaica Observer Business Forum, underscores a twin crisis: families facing financial ruin from underinsured properties, and a systemic threat to the nation’s economic stability. While part of an IAJ campaign to boost policy uptake, the data exposes a far graver reality — one where even those with insurance face catastrophic gaps in coverage.

Chaluk Richards, IAJ vice-president for general insurance and general manager of GK General Insurance, framed the stakes bluntly, noting that while around 20 per cent of houses in Jamaica are insured, “around 95 per cent [of those]…are under-insured.”

His colleague Peter Levy, the CEO of British Caribbean Insurance Company (BCIC) — and a former IAJ president now serving as a director — notes a simple litmus test: “If you haven’t looked at your policy in three, four years, you’re probably below [the insurance] threshold.”

Richards underscores Levy’s warning, adding: “The persons who are more at risk are the persons who bought their houses five years and more…as time progresses, the gap widens and widens and widens.”

That gap — defined by Richards as “a negative variance” between a property’s current value and its insured sum — leaves homeowners exposed. “A percentage of your asset is not insured”, he stresses, creating critical coverage shortfalls where the insured sum falls short of the asset’s true worth.

The Anatomy of a Crisis

The maths is brutal in its simplicity: Jamaica’s 800,000 households include just 160,000 with property insurance — primarily mortgage-mandated. Of these, only a mere 1 per cent or 8,000 houses are adequately covered, according to IAJ data. The remaining 152,000 face what Richards calls a “negative variance”— policies covering fractions of today’s rebuilding costs due to inflation, renovations, or neglect.

“Ultimately, the crisis is this,” Richards added. “When disaster strikes — especially let’s say hurricanes — you become your own insurer for any uninsured portion that you did not insure.”

This self-insurance gap creates devastating shortfalls: homeowners receive only partial payouts for rebuilding costs, leaving properties irrecoverable. The fallout radiates beyond individual hardship. With Jamaica’s banking system holding hundreds of billions in mortgages secured against underinsured assets, a major catastrophe could destabilise the entire financial sector.

Levy is unequivocal: “Those banks’ security is at risk — the loans’ collateral. Their balance sheets are threatened by a significant event.

“I don’t want to create alarmism, but this is something that the society and the economy, and the Government should be thinking about as an existential risk to the financial health of the economy as a whole. It’s not just about the homeowners or us…It’s about, as an economy and as a nation, are we okay with this risk? That’s really our question that I think we want to put out there,” Levy added.

Echoing this concern, McFarlane stressed that other stakeholders must act: “As Peter was saying, there are industries that should be interested in whether or not assets are properly protected, including lenders, including the Government who has a responsibility for macro financial stability.”

Levy warned that mortgage lenders cannot afford complacency on under-insurance, as the threat to their balance sheets is both immediate and systemic.

“Their risk management exercises need to be putting this down as a risk and figuring out what the threat to them is and not just saying, ‘Well, we have insurance.’”

Inflation’s Silent Sabotage

The heart of under-insurance lies in inflation’s stealthy toll. Properties bought decades ago whose valuation are out of date, leave owners exposed.

Levy’s analysis is stark: “Twenty years ago…rebuilding costs might have been $5,000–6,000 per square foot. Now it’s $15,000. So if you bought your house 20 years ago, [your sum insured is] a third of what it should be. So your under-insurance is 67 per cent.”

Everton McFarlane, executive director of the IAJ, crystallises the peril. “Imagine a house bought for $2 million 15 years ago…now worth $15 million. A hurricane blows off the roof. You know how expensive a roof is? That roof alone in today’s value for a house you bought 15 years ago could be perhaps one-third of that value [$5 million]. Without insurance, the average person would be severely challenged to replace the roof.”

Richards added: “Given the fact that you’re only insured for one-third of that property. If you submit a claim for $5 million, you’re only going to get one-third (about $1.7 million) less whatever the deductible would have been. And then is when you’re going to feel short, and you feel like, ‘But the insurance company did not treat us fairly.’ And that is why I want persons to understand and appreciate how all of these things work, because these are terms that are in your policy.”

McFarlane warns that even partial damage—like a roof loss—cripples quality of life, stressing: “It’s not just about whether your house [is] written off or not…For average, middle income, low income, and for a lot of other persons, the value of a damage relative to your income [is] extremely high.”

Beryl’s Warning Shot

Hurricane Beryl — though sparing Jamaica’s urban core — offered a grim preview. Richards reveals that “nine out of every 10 claims” showed under-insurance. “We saw gaps of 80-90 per cent,” he added showing the level of underinsurance among the claims. The hurricane’s impact was felt mostly in St Elizabeth, one of the areas in the island with low insurance coverage. St Andrew, St Catherine and St James, the parishes with the largest urban areas, account for 70 per cent of all insured houses in the island, according to the IAJ. Richards stresses the near-miss: “Now imagine, God forbid, that that was Kingston or Montego Bay, or somewhere else where we have a lot more density. The impact is significant. So, that is why we are believing that it’s absolutely necessary for us to raise the alarm so that persons can take the necessary actions, before it’s too late.”

Solutions: A Multi-Stakeholder Mandate

McFarlane frames the solution as a collaborative effort: “The path forward demands a multi-stakeholder effort with specific responsibilities for each kind of stakeholder.” He identifies homeowners as the primary focus, urging “market discipline” through the IAJ’s campaign mantra: “Check it, value it, insure it.” Market discipline requires customers to actively safeguard their assets through adequate insurance protection. Insurers, he adds, must enhance public education “utilising all different kinds of media, especially digitally,” while lenders and government should safeguard “macro financial stability” given their vested interest in asset protection.

Regulators, McFarlane stresses, must accelerate practical reforms like “pushing through micro insurance” and refining “market conduct rules that allow better understanding between the insured and the insurer.” He dismisses quick fixes, noting: “I don’t think there’s a magic bullet.” Instead, he advocates scaling existing efforts —”widening the network of persons who can provide input in educating people.” Crucially, he ties bank stability to under-insurance:

“The quality of the asset on a bank’s balance sheet, especially as it relates to property financed by mortgages, is dependent on the quality of the insurance coverage on those assets, and of course, the health of banks or lenders is important for the macro financial health.”

Government, McFarlane asserts, must catalyse a “strategic and deliberate effort between financial institutions, insurers, and the state.” The goal? Establishing a “framework of responsibilities that helps ensure asset protection is maintained at a level where the system isn’t overly exposed.” Published standards, he concludes, would drive “desired behaviour” across all stakeholders — turning systemic risk into shared resilience.

Richards warns of catastrophic fallout: “If there’s a catastrophe right now, and if it’s uninsured, then it will be something that between government and the taxpayers that will end up having to step in…or if it is the homeowner that was underinsured, then they would have to pay for it.” He calls for joint action: “How do we, together, create a mechanism that identify and make clear what the protection gap really is, and, address that protection gap to ensure…we have a mechanism in place to protect us.”

The Road Ahead

Levy wants to see less friction from the transacting of insurance business. He urges simplification in getting valuations for insurance purposes: “You don’t need to engage a professional valuator…if you know a contractor, he can give you a guide…And [insurers] would accept that.” He said most insurers offer payment options for premiums. “Avail yourself of [monthly payments]. That’s a way to make it more palatable,” he said.

Richards’ parting plea taps into national pride: “Jamaicans expand homes, renovate — but forget to insure that work. Take stock. Protect what you’ve laboured for.” McFarlane broadens the stakes: “At the foundation of Jamaica’s economy is property value. Check it, value it, insure it — this applies to every stakeholder.” For Levy, the time to act is now: “Under-insurance is chronic. But if a storm hits, it becomes an acute crisis overnight.”

RICHARDS…of the 20 per cent of properties insured, 95 per cent are underinsured. You’re essentially your own insurer for the gap.

From left: Everton McFarlane, executive director of Insurance Association of Jamaica; Chaluk Richards, vice-president for general insurance at the Insurance Association of Jamaica, and Peter Levy, past president and executive member at Insurance Association of Jamaica.