Wednesday, April 2, 2025
By NEIL HARTNELL
Tribune Business Editor
A Bahamian insurer says 95 percent of its clients will suffer no increase in their property coverage premiums for 2025 amid hopes prices may reduce finally reduce next year if global losses stay below $110bn.
Anton Saunders, RoyalStar Assurance’s managing director, told Tribune Business that just 5 percent of customers spread across the six Caribbean territories in which it operates will experience an increase in their all-perils catastrophe costs this year due to the need to bring them up to “book rate” - the premiums it typically charges for the sum insured.
“We have made an assessment that we are not increasing our rates that are our book rates,” he explained. “Once they are at book rates we are not increasing any premiums. The normal rates charged in 2024 will be the same rates charged in 2025 except there are some people in our portfolio not at that rate.
“So some people will be adjusted to book rate. That’s like 5 percent of the properties on our books, and it’s a very minimal number of people. That’s in all territories for Royal Star. There will be no increase rate increases except for those persons.
“Unfortunately, we were not able to decrease rates because reinsurance prices are still high, but we think if nothing else happens in the world and we stay below $110bn in catastrophic losses in 2025, then we believe there will be some reduction in 2026.”
Bahamian property and casualty insurers, due to their relatively thin capital bases, have to purchase huge quantities of reinsurance annually to enable them to underwrite the multi-billion risks present in this nation. This means that the premium prices Bahamian households and businesses pay for coverage are largely determined by what reinsurers charge.
Stung by recent multi-billion dollar losses from major hurricanes hitting the US and Caribbean, as well as other catastrophic event payouts, many reinsurers have either pulled out of the region altogether or reduced the capacity and availability of coverage here. The reduction in reinsurance supply has resulted in Bahamian insurance premiums increasing in cost by as much as 20 percent since 2022.
However, Mr Saunders said he and RoyalStar are “cautiously optimistic” that reinsurance rates will start to ease next year - and more capacity will return to the Bahamian and Caribbean market - if major loss payouts are avoided this year. If that occurs, then the peak premium rates encountered by Bahamian businesses and households may start to ease in 2026 - but only slightly.
“For us, we were more relieved that we didn’t go through the hectic reinsurance programme we did for 2023 and 2024,” the RoyalStar chief told this newspaper. “In 2025, it was more stable, more predictable. yes, we wanted a decrease, but understood where the reinsurers were coming from, so we were satisfied.....
“If nothing happens, if everything is at the normal reinsurance catastrophe and loss cycle, then we think [rates will ease in 2026]. What we will see is a bit more capacity coming back to the region which will put pressure on demand and supply so prices will stabilise more or start coming off-peak.
“If nothing significant happens, then traditional reinsurers will start coming back to the market. I’m cautiously optimistic, and we hope - we all hope - that is the result. If this year’s catastrophe losses are the same as last year’s this will give reinsurers more confidence to come back to the market.”
RoyalStar operates in the Cayman Islands, Turks and Caicos Islands, British Virgin Islands, United States Virgin Islands and Anguilla as well as The Bahamas. Mr Saunders told Tribune Business that all Bahamian property and casualty insurance underwriters would be “bankrupt” without reinsurance support, comparing their estimated $300m-$350m equity capital base to the industry’s collective $2.5bn Dorian payout.
But, acknowledging the affordability issues, and fears increasing numbers of Bahamian home and business owners are being priced out of the property insurance market, the RoyalStar chief said: “We are all concerned if the clients cannot afford our product because then we will be out of business.
“At the end of the day, we have to understand that with the protection the client needs there’s a certain degree of reinsurance protection we must buy. The protection comes at a cost, but if you go without insurance and there’s a loss it’s more expensive for you. We emphasise that to our clients. And in 2024 we absorbed some of the increased reinsurance costs.
“This year is more stable, so we didn’t have to eat that margin that we did in 2024. Hopefully we can produce and return more equity for our shareholder,” Mr Saunders continued. “We’d be foolish as an industry not to believe there’s a financial strain on our customers trying to keep up with insurance premiums.
“The agents have done a good job in giving customers installment arrangements, but at the end of the day we’re running a business and reinsurance costs are reinsurance protection.... The simple fact is that if you take all the general insurance companies in The Bahamas, and you add up all their equity, it probably comes up to $300m-$350m.
“We have $84m of that, so if you take that and say the industry has $300m worth of capital, Dorian was $2.5bn worth of losses. You do the math. Without reinsurance protection we would all have been bankrupt and paying out cents on the dollar. That would not be good for the economy and industry customers.”
However, Timothy Ingraham, chief executive of Summit Insurance Company, was less optimistic about the prospects for any reinsurance price easing in the near future. Somewhat contradicting Mr Saunders, he said: “The reinsurance market is still quite difficult with capacity in short supply.
“This means that rates have remained elevated into 2025. As a result of this I don’t expect to see any downward movement on local rates this year. There may still be some increases filtering through for persons that did not get any last year.
“How long we remain in this cycle is anyone’s guess. That will likely depend on the level of catastrophe activity we see this year as well as whether or not any new capital enters the reinsurance market. New capital has been slow to enter compared to previous hard cycles as investors are able to obtain low risk returns in the bond markets,” Mr Ingraham added.
“Of course, we have already seen the wild fires in California lead to significant losses with estimates ranging from $30bn on the low side to $75bn on the high side. It will likely be late in the third quarter or early in the fourth quarter before we have any meaningful insight into where rates are headed in short to medium-term.”
Log in to comment