The knock-on effect of several catastrophic events around the world has led to increased insurance costs for property owners in Trinidad and Tobago.
For much of the past year, property owners would have noticed that their insurance premiums would have risen, as outlined in the Business Guardian lead story of November 23.
Ava Dhanoosingh, the general manager of CIC Insurance Brokers, explained to Sunday Business Guardian that this was occurring globally and affected all property owners.
“It relates to all property be it commercial and or house owners because it still falls under the same treaties,” said Dhanoosingh, adding: “The long and short of it is that we are going through what we call a hardening of the market and we are impacted locally here also by international activity and international reinsurers. So while we may think we are being singled out as a nation, we are not. Our insurance, which is reinsurance internationally, come from the same companies that other countries purchase insurance from.”
Explaining the increased premiums, Dhanoosingh said there have been many catastrophes worldwide, while floods have wreaked havoc on properties in T&T in the recent past.
“The cost of reinsurance globally, filtering down to insurance locally would have been increased as a result of those catastrophes. As well, there has been a shrinking of the market because there would have had lessening of capacity available for the property risks. So in a nutshell, that is what has happened in the property market, which has led to the increases locally,” she said.
Dhanoosingh however stopped short of giving a range for the increases, as she noted that different agencies would have different factors impacting their services.
“What happened is that everyone is different in the sense that every company here has their own reinsurance treaties and arrangements and for some of them the rates or the increases may not have been significant. So with that said, it ranges between companies. It’s really, not a specific amount for all across the board,” said the insurance executive.
However, the Guardian General Group was able to provide a range for the increases faced by its customers.
“On average, commercial property premiums in the market are being increased by between 10 and 20 per cent, depending on risk quality, loss record, and/or the amount of reinsurance required from foreign markets,” said Ayesha Boucaud-Claxton, the head of group branding and communications at the Guardian Group.
Like Dhanoosingh, she explained that much of the increase was due to international insurance firms adjusting their pricing based on global events.
“Over the past few years, we have experienced reinsurance cost increases. However in 2023, reinsurance costs increased significantly due to many reasons, notably: Increasing inflation and its impact on the cost of claims eg steel and other building costs have risen sharply, car parts cost increases of between 25 and 40 per cent; Escalating severity of natural-catastrophe losses globally (eg Hurricane Ian in 2022 caused estimated losses of US$50 billion); Climate change increasing the frequency and severity of claims world-wide; Stock market volatility, which has negatively impacted reinsurer’s return on their investment portfolios.
Boucaud-Claxton said the above factors taken together, caused reinsurers to report financial losses and/or low rates of returns.
“Some have decided to exit reinsurance for the Caribbean market, which reduced the amount of reinsurance available for purchase by regional insurance companies. In fact, some forms of reinsurance coverage saw cost increases ranging from 15 to 35 per cent,” she said.
She noted that these increased costs could potentially be passed on to the public in various ways, but largely T&T still enjoyed favourable rates especially compared to other countries in the Caribbean.
She explained: “Firstly, contractors and suppliers will seek to pass on their increased costs to their clients in their pricing of goods and services and we must wait to observe developments over the short-to-medium term.
“Secondly, these may have varying negative impacts on discretionary incomes and possibly on the demand for property insurance in general, and homeowners coverages in particular, a scenario documented by AM Best in its review of the T&T insurance sector, and the broader Caribbean market, who remarked: ‘Insurable risks have increased dramatically over the past decade due to additional property development, greater car ownership and inflation raising the repair and replacement costs of these assets. However, the total values insured have not grown proportionally with the increase in exposure in many jurisdictions, indicating that many property owners are underinsured or uninsured’.”
While T&T had seen severe flooding over the years, this country’s placement outside of the main hurricane belt had largely worked in its favour with regard to insurance costs.
“Rates generally reflect the risk exposure. For territories where the exposure is mainly hurricane, the rates are higher. The Northern Caribbean would generate much higher rates. For example, property rates in the North, on average, range between 1.5 per cent to 2 per cent whereas in the Eastern Caribbean it is lower at between 0.7 per cent to 1 per cent compared to Trinidad and Barbados where rates are around 0.35 per cent to 0.5 per cent,” said Boucaud-Claxton.
Despite these issues, Dhanoosingh said it was unlikely that customers would take the chance to do without insurance.
She said: “The thing about it, the reality of the situation is that we all need insurance, for whatever reason, and I mean, as you will appreciate, many people have mortgages, so there are legal requirements, that people have to meet and so on.
“So, to say that if they tried to get out, I would say no, that has not been the experience. At least on our end and I cannot speak for the entire industry. But I think it’s safe to say I don’t believe it will.”
More likely, she said, is customers shopping around for better deals at other companies.
“The reality is that you can shop around Yes, but I think one of the things that people are going to find is that for the most part, no, there’s going to be very little difference across the board, basically, in terms of rating structures and stuff.
“There could be slight differences, but again, or there could be bigger differences. I’m not saying no and again, everything goes back to the individual insurance treaties,” said Dhanoosingh.
Boucaud-Claxton confirmed that there had been very little drop off at Guardian Group, despite increased rates first being noticed as far back as February.
“We have been monitoring the impact of our increases and have indeed seen some switching as a result of the changes. We continue to improve our service quality to ensure that our pricing reflects the value that our customers have come to expect.
“The above notwithstanding, our retention ratios (which measure our policyholders staying with Guardian General) remain in the high 90s,” said Boucaud-Claxton.
