AM Best reports that while insured losses in Jamaica from Hurricane Melissa are expected to be low, reinsurers will likely assume most of the total due to the reliance of Caribbean-based carriers on reinsurance.
Insurance penetration in Jamaica remains below 5%, with only a small portion of property insured, which will limit the scale of insured losses. However, economic losses are projected to reach into the billions, and the Category 5 hurricane poses a significant threat to lives on the island.
Hurricane Melissa, one of the strongest storms ever recorded in the Atlantic, brought sustained winds of 185 mph as it moved across Jamaica. The storm flattened homes, uprooted trees, and caused widespread power outages. Its slow movement amplified the damage, with meteorologists describing the event as a “catastrophic combination” of wind and flooding that could take days to fully assess.
Jamaica’s economy is heavily dependent on tourism, which accounts for about 35% of its GDP. The hurricane could cause long-term damage to infrastructure, leading to severe disruptions in the tourism sector and broader economic challenges.
Local insurers are expected to be impacted, but as is typical in the Caribbean, these companies rely extensively on reinsurance to manage catastrophe risks.
“Reinsurance partnerships are the cornerstone that provides the capacity for insurers to write property business in the Caribbean,” said Bridget Maehr, director at AM Best. She added that it remains uncertain how this event will affect reinsurance pricing in the future.
According to Jamaica’s Financial Services Commission, there were 17 registered general and life insurance companies at the end of 2024. AM Best currently rates two insurers domiciled in Jamaica. The US$150 million Jamaican parametric catastrophe bond – IBRD CAR Jamaica 2024 – may also be triggered as part of the World Bank’s catastrophe risk insurance program for the region.
The 2025 Atlantic hurricane season was forecast to be more active than usual, with nine meteorological research organizations predicting above-average storm activity. This heightened risk environment has increased concerns among insurers and reinsurers about the frequency and severity of losses in the region.
The commentary from AM Best notes that while entities such as the Caribbean Catastrophe Risk Insurance Facility have provided some economic relief to governments in the region, a combination of macro-initiatives and microinsurance could offer greater potential to narrow the protection gap in Jamaica and across the Caribbean.
Catastrophe models in the region are generally less robust than those used for U.S. hurricanes, presenting challenges due to varying building codes, data quality, and the proximity and vulnerability to catastrophic events.
“Modeling in the Caribbean region presents greater challenges, owing to disparate building codes and data quality, as well as their proximity and vulnerability to catastrophic events,” said Sridhar Manyem, senior director, Industry Research and Analytics. He noted that models must account for the correlation of events across the region, as catastrophe risk can be distributed throughout the Caribbean.
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