AM Best-rated Caribbean property/casualty insurers posted an 8 percent increase in net income in 2021 to more than $70 million, highlighting carriers’ risk management practices, although the region remains highly vulnerable to a number of risks, led by climate risk.

A new Best’s Market Segment Report, “Climate, Reinsurance, and Cyber Remain High in the Caribbean Risk Landscape” published on August 23, states that although carriers generally cleared a number of hurdles created by COVID-19, the pandemic highlighted vulnerabilities in the region. This was particularly apparent in its high reliance on external demand to fuel economic growth and the undiversified nature of many economies, which depend on foreign exchange activities such as tourism, financial services and commodity exports.

Climate risk adds an additional layer of uncertainty as it remains the biggest threat to the Caribbean. Despite the low level of claims activity related to catastrophes in 2021 and thus far in 2022, reinsurance pricing continues to reflect increased hardening as insurers and reinsurers are feeling the effects of inflation.

“The growing frequency and severity of global catastrophic events have forced reinsurers to adopt a more circumspect approach to climate risk,” said Ricardo Longchallon, senior financial analyst. “In some instances, this has resulted in double jeopardy for Caribbean insurers in the form of higher reinsurance rates, in some cases more than 15 percent, and less capacity.”