Insurance is about protecting people and businesses against risk. To carry out this mission, the insurance market needs to understand and be prepared to adapt to the volatilities and uncertainties spurred by global challenges, government regulations, and economic forces that make the risks increasingly difficult to navigate.

The health and economic aftereffects of the pandemic have quickly spiraled into compounding crises. Food and energy have become weaponized by the war in Ukraine, sending inflation soaring to levels not seen in decades, globalizing a cost-of-living crisis and fueling social unrest.

Insurers find themselves at a reflection point as they face a continuing cycle of economic uncertainties, including inflation, geopolitical headwinds, environmental challenges, and capital constraints. This gradual acceleration of macroeconomic trends across multiple events pressuring the insurance industry differs from previous shocks.

Inflationary pressures impact motor, property and casualty insurers, considering the claims costs rise. For instance, in property, we are seeing massive delivery delays, higher costs for labor, building materials, replacement parts, etc. These put pressure on margins.

For Nat Cats risks, extreme weather events, have increased in frequency and severity, leading to ever-higher levels of loss and damage and these are affecting a growing number of geographies. To ensure their viability Insurers need to recoup these higher costs through increased premium rates. For years certainly up to the 2017, the Caribbean’s “disastrous” Cat 5 hurricane activity (IRMA, HARVEY & MARIA), the Pre Loss market conditions were very healthy, and this spurred the unusual continued downward spiral of rates. The rates being charged were completely inadequate to sustain large losses.

This volatility for the catastrophe reinsurer results in imply more challenging reinsurance treaty renewals, and insurer and reinsurer concerns over property cat exposures and their cost of capital which are driving current Jamaican market conditions, especially in 2023. In short, the rates hardening continues, in many cases accompanied by restrictive capacity impacting in a substantial tightening of capacity, in both traditional reinsurance capital and alternative capital markets.

Another evolving risk for 2023 is cyber. Although not a completely new threat, we are seeing the frequency and severity of ransomware attacks escalating all over the world during the last years, directly impacting the increase in insurance premium and capacity reduction. As cyberattacks have become more sophisticated and frequent, it became apparent that neither insurers nor the insureds were appropriately prepared to handle claims and attacks respectively. This increase in claim volume has forced the insurance industry to harden its defenses to manage losses, and insurance carriers have now shifted towards micro-level assessments of organizations. Good news coming from all of this is that the cyber insurance market is expected to expand during the next few years.

The global insurance markets are highly complex and interconnected, and definitily living a hard market.

As brokers we study the global insurance market to provide the best risk management solutions to the clients including product development, technology tools, and claims management. At FFK we believe the broker’s role is multifaceted, securing the most competitive terms for the premium spend, ensuring the most appropriate scope of coverage to address the risk exposures and to advocate and secure best claim settlements for our clients.

At times of great market turbulence, as now being experienced, the Broker’s professionalism, experience and market knowledge are key ingredients in navigating market demands to meet our clients’ needs, providing optimal risks transfer solutions at best available terms. We have an obligation to justify the solution presented in such a way that it is the best possible risk transfer scenario.