JAMAICAN manufacturers are being warned that traditional approaches to insurance are no longer enough as climate-related disasters become more complex and costly.

Many businesses continue to view insurance through lens heavily focused on physical assets while overlooking wider operational risks such as business interruption, supply chain disruptions, and cyber vulnerabilities which could threaten long-term business continuity following a major disaster. It was one of the issues raised during the Jamaica Manufacturing and Exporters Associations’ (JMEA) Manufacturing 360 conference, held at the AC Hotel Kingston recently.

“We often see businesses insuring their buildings and physical assets but not much consideration is given to loss of income and extra operating costs following a disaster,” noted Ryan Fearon, underwriting and technical insurance manager at Advantage General Insurance Company Limited.

The concern comes as insurers increasingly warn that climate events are no longer isolated risks. Instead, a single hurricane or flood can now trigger multiple layers of disruption, including utility outages, supply chain failures, equipment breakdowns, cyber vulnerabilities and reduced employee productivity.

“Historically, risks were viewed more independently; now we are seeing cascading impact so modelling is now taken into consideration. When you modelled in the past, you used to model for per risk, for hurricane, and for earthquake, but a part of risk modelling now is to look at the cascading and compounding effects of events,” he added.

The discussions further revealed that historical models alone are becoming insufficient as insurers increasingly combine past disaster data with climate projections, forward-looking scenario analysis, geospatial analytics, and real-time environmental information when assessing risk exposure. The shift, industry players say, is also changing how commercial insurance policies are priced. Rather than applying one broad premium rate across an industry, insurers are increasingly differentiating businesses based on their individual risk-mitigation strategies and resilience planning. Manufacturers are being warned that the differentiation will not only show up in premium rates; it will also show up in capacity, in deductibles, limits and overall coverages that one can get. Companies that maintain updated valuation, have proof of strong enterprise management procedures incorporated in their business plan models, and show visible risk-mitigation strategies will be able to differentiate themselves to insurers.

“Once you invest in resilience, once you invest in providing adequate flood mitigation and fire mitigation, when you are able to show underwriters that risk management and mitigation are a vital part of your business then ultimately you will be looked at more favourably,” Fearon noted.

For now there is a tougher pricing environment — which insurance experts explained is being driven by overseas reinsurers — which continues to influence the terms and rates applied within the local insurance market as global storm activity intensifies.

“The reinsurers are not backing down, and that’s a fact [so] I’m afraid I don’t have good news for you,” said Gabrielle Alexander, executive consultant for general insurance at Spectrum Insurance Brokers. “The rate is going to be close to one per cent for this year and next year, and if we have hurricanes in the short term again it’s going to be a problem.”

Both Alexander and Fearon explained that while broad rate increases are not immediately expected for all properties, businesses with previous claims histories or operations located within highly vulnerable areas could still face higher premiums, increased deductibles, and tighter policy conditions. Reinsurers, they added, are also pushing for higher deductibles on beachfront and high-risk properties, with some requesting increases from the traditional two per cent range to as high as five per cent in certain cases. Against that backdrop, manufacturers are also being urged to take a more proactive approach to risk management, which includes fully understanding the details of their insurance policies. Fearon encouraged companies to work closely with brokers and insurers to identify potential coverage gaps before a disaster occurs. Manufacturers are also being advised to maintain emergency reserves, properly segregate warehouse inventory, and ensure that the most vulnerable areas of operations are adequately insured.