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Real estate boom propels property insurance market despite reinsurance worries

The property insurance portfolios of nearly a dozen general insurers grew markedly last year, on average, a newly released report from industry regulator Financial Services Commission, FSC, shows.

But one of its knock-on effects was a diminution of NPE or net premiums earned, which is a core metric for general insurers.

The FSC reported that net premiums for the general insurance sector fell 10 per cent to $19.2 billion in 2022, saying it was “primarily due to a 28 per cent increase in reinsurance ceded, as there was a growth in the property class of business”.

In a response to Financial Gleaner queries, the regulator said that, in relation to property insurance, gross premiums written were valued at $33.8 billion, while the reinsurance ceded, or fees paid to reinsurers against that business, amounted to $33.1 billion.

Net premiums from property portfolios were therefore $704.22 million.

Comparative data for 2021 was not immediately available, but, in prior years to 2022, complaints within the industry of slow growth in the property portfolio, compared to motor and other classes, are on record.

Industry sources cite increased property developments as the reason for the spike in insurance demand for the segment.

But Peter Levy, managing director of British Caribbean Insurance Company Limited, BCIC, says that while property insurance is a segment which normally grows at a fairly slow place in Jamaica, the segment has been fuelled by an increased number of home completions.

However, the capacity to provide coverage has been severely constrained by the higher reinsurance costs, he said.

In 2022, the Real Estate Board of Jamaica reported that 98 developments encompassing 5,000 residential units were approved, adding to dozens of others approved in the prior two years.

Insurance is a prerequisite for mortgage financing, the means through which homes are paid for.

“The construction activity in Jamaica over the last few years has seen an increase in the number of buildings needing insurance. And higher building costs driven largely by inflation also increased the insurance needs for existing buildings, stock, and other contents. Those are the drivers of the increased property portfolios,” said Levy.

However: “The reinsurance capacity available to Jamaica is severely constrained relative to previous years, and the price has gone up considerably. Reinsurers are requiring around 50 per cent increases for commercial property business, and 30-40 per cent for residential. There is also less capacity available to Jamaica this year than there was last year, and some insurers are currently not able to take on new business, having to reserve capacity for existing customers,” he said.

BCIC is one of 11 general insurance companies that are in the business of providing coverage for accident, liability, marine, aviation and transport, motor vehicle, pecuniary loss and property.

The sector as of December was valued at nearly $114 billion by assets, reflecting one-tenth growth last year. Liabilities climbed by 13 per cent to $83.6 billion.

The FSC said the main contributing factors to the spike in liabilities included amounts owing to reinsurers and unearned premiums.

Revenue earned by the sector, inclusive of flows from net insurance premiums and investments, fell from $25 billion to $22 billion. That, in turn, led to a spike in underwriting losses, that is, the firms’ core business, from $195 million to $433 million for the reporting period.

General insurance companies:

o Advantage General Insurance Company Limited

o American Home Assurance Company Limited

o British Caribbean Insurance Company Limited

o CG United Insurance Limited

o GK General Insurance Company Limited

o General Accident Insurance Company Jamaica Limited

o Guardian General Insurance Jamaica Limited.

o Insurance Company of the West Indies Limited

o IronRock Insurance Company Limited

o JN General Insurance Company Limited

o Key Insurance Company Limited

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