Insurance sector expects to ration costly cover
(CNS): The Cayman Islands Insurance Association (CIIA) has confirmed that customers in the Cayman Islands can expect their property insurance premiums to go up this year by as much as 30% and that cover will likely be rationed as a result of the decline in the availability of insurance cover. The association issued a warning at the end of November that rates would soar in 2023, stirring up significant concern among CNS commenters. But now they are also raising the alarm about reduced capacity.
“Many local Insurers have now gone through their reinsurance renewal process,” the CIIA said in its latest release. “Insurers will need to increase rates to cover the increased cost of reinsurance. Along with these increases many insurers will effectively be rationing the coverage offered as less insurance capacity is available. All local insurers will be in the same situation – increased rates and reduced capacity.”
Premiums on all types of insurance will be going up, and given the reduced coverage availability, the CIIA said customers should speak with their local representatives to discuss increasing deductibles and ensuring access to any available discounts. Depending on the type of construction, property protections, property location and elevation, rate hikes will vary between 15% and 30%, the association said.
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I got my home insurance through PACT, doesn’t cost me a penny.
I too am a fellow “new roof or no wote” enthusiast.
The elephant in the room regarding insurance costs in Cayman is the fact that a LARGE portion of homes are completely under insured by many homeowners, canal side properties are just a symptom of a much larger looming problem which is systematic under insurance of properties here.
When you look into the details of some offerings on the market you will find out that many properties are under insured even regarding the value of the land the place is built on.
When you ask if there a home inspection has been done in the last 10 years, you hear crickets! Not even to mention if you dare ask for actual geological studies and hydrology studies for new constructions!
Why is that the case? Well the root cause are pretty easy to dig.
1) No builders on island is forced to offer any professional warranty as to the construction past the first 12 month after delivery.
2) The architects commissioned on new projects are supposed to present projects according to the Florida Building code right? Yes, they are but 90 percent of the projects submitted here are from architects that not only aren’t licensed in Florida which entails the architect has to make sure the proposed projects is warrantied for a period of a minimum of 3 years. Builders here will not employ them but hire out of state architects.Therefore the warranty does not translate from the project to the responsability of the builder!
Some would say that some areas of Cayman and projects have improved elevations etc,having lived and worked extensively in Hong-Kong island I have seen the systemic use of piles to reinforce ground to allow for new construction there, I yet haven’t seen pile machines able to go further than a few feet.
What is the solution to the issue you say ?
First, force builders to offer a 10 year warranty period for all new projects! Only accept submissions from architects that are licensed to operate under the Florida building code or better, have the architect produce a proof of insurance for the state of Florida as any other proof of insurance in another state will taint any claims against the Florida building code which we are using on island.
Second, make a requirement to any listing of a property on island to produce proper documentation as to the state of the insurance of the property for any home older than 10 years from its date of construction.
Third, force inclusion of the proper studies for any financing application as a must to be provided to the financing financial institution by the seller.
This isn’t by far an absolution of the insurance companies on island that let for over a decade now let such situations continue and fester and are now resorting to predatory practices as to deny effective coverage for some properties.
The affected areas are pretty obvious, South Sound, Crystal Harbor (artificial elevation without any ground reinforcement, lack of geological and hydrology studies for new construction projects), Yatch Club, and the list goes on.
Should the Government intervene on the matter and put into place AND enforce consumer protection laws effective immediately and force brokers and real estate agents to “truth in advertising standards similar to the ones existing in the EU (The laws established int the US for that matter being woefully inadequate?) I think this would be time well spent and it is high time this is done so!
Should Class A insurance company provide full reinsurance coverage on a 1 to 5 basis in terms of catastrophic risk?
The present framework only imposes for Class A insurance companies (companies that have capability to offer coverage on island a 1 to 10 coverage ratio as per the document here below.
https://www.cima.ky/upimages/lawsregulations/1499345758InsuranceCapitalandSolvencyClassAInsurersRegulations2012_1599480744.pdf
As a result it becomes obvious that the sector is heavily under capitalized and that some guard rails need to be put into place to protect consumers and homeowners at multiple levels, the changes required a broad due to the lack of action that took place for now several decades but all of the above IMHO deserve some scrutiny.
Bang on 11:25. You have said it all correctly and have identified the situation and solutions thoroughly.
The under capitalization of the Cayman Islands insurance industry is immense. If we ever have another Hurricane Ivan we will have a massive problem on our hands. A financial disaster for property owners.
The CIG needs to take immediate action this year to prevent a catastrophe.
You have been warned.
The post is not accurate. Reinsurance is one method to provide the required solvency. So there is no need to post 100% collateral. All insurance companies globally are reinsured.
10:12, So perhaps you can tell me why so many home insurance companies have gone bankrupt in Florida the past 2 years? After the last big hurricane 5 more home insurance companies announced they were leaving the state.
Did they all have reinsurance? Guess some were not solvent.
Insurance companies in Cayman are raping the public, with official protection! Some statutes require one to have insurance.
Meanwhile, come are a scam. Grabbing our money but failing to honour their responsibilities.
Banks and insurance companies have licenses to steal, and both believe they have a God-given right to always make a profit (and never take a loss).
But too many people under insure their property.
Please read the CNS article again. Reinsurance rates have risen globally….nothing any Cayman legislation can do to regulate the global reinsurance market.
Why can’t we all just come together for our own stratas, covenances, or neighbourhoods and start our own captive insurance?
I mean, the companies and corporations do this exclusively and save millions and earn money on top.
Why not employ what they are doing and bypass these insurance companies who are shareholder focused?
I’m not saying that companies aren’t allowed or shouldn’t make a profit but at what point are we allowed to make a profit ourselves? If companies can’t live without making a profit and getting value for money, how can they expect households to pay more for less and just continue like its business as usual?
That is a good idea, can an ordinary resident company be a captive – will CIMA even allow it?
no it’s a terrible idea. if you need insurance then you can’t afford to be insuring yourself!
lol. risk concentration? you’re all going to be claiming at the same time from yourselves!
The Caribbean has to pay for full replacement payouts for red state Americans, but any loss claim we might file is a negotiation starting at >20% of insured risk value. The industry is inherently biased.
You could put your money in your own rebuilding fund instead of the Ponzi scheme that is insurance who’s time has now come due to Global warming. But you are not programed for this. Just pay up and keep complaining. This your programed for.
Does rationing coverage mean forcing home owners to be under insured which would further penalize those who have a claim?
Or do we increase our replacement cost estimate to avoid being under insured?
Anyone know what rationing looks like? This is concerning…
It’s not that they will only provide partial cover. It’s that they may not insure you at all.
has anyone had there cover refused? what are the criteria? Looking to buy a house and dont want to get caught with no cover.
Is it me that has to worry?
Or the bank that has my mortgage that requires insurance on the property?
If i cant get insurance coz there is none, what happens to my mortgage then?
The bank is will take possession of your home, sell it to a real estate agent for only what is needed to pay off the mortgage and the agent will sell if to make more $$$$$ and commission.
these companies spread the entire risk across all the Caribbean markets. our rates go up to cover other islands getting hit, just as theirs went up after Ivan. Do I like it? No. Do I understand it? Yes. Could something be done about it… probably.
Lack of reinsurance capacity globally means higher costs for reinsurance. Your local insurer is required by CIMA to purchase reinsurance.
Also EU reinsurance companies has restrictions placed on dealing with insurers located in EU Blacklisted companies. Lucky for us Cayman is not on the EU Blacklist but a number of our neighbouring countries are.
don’t worry no-plan-pact will just start writing more checks for locals…..
Yaay, where do I sign up?
it’s an impossible circle to square.
one solution would be to allow 50% insurance coverage (or under insurance). 100% loss is extremaly rare.
cig would have to go gurantor for the insurance companies though in some way….
Yes. It would be great to be able to take out a policy for $X amount of insurance. They can still keep their deductible (keep their payout probability the same) but not have to charge/insure me for the full rebuild cost since I chose not to insure for that.
double whammy…huge construction inflation for re-build rates and then huge increase in premiums.
bad news for many already struggling locals….
but as our media-trusted realtors say…its always a good time to buy!
Another hurricane Ivan impact ( which was not a worst case scenario) could deliver a +$10 Bn insurance claim for insurers . Ivan was estimated at $3.2 billion in claims and damage. But that was in 2004 dollars.
Here we are now with daily runaway inflation and costs for building at all levels, which as we learnt in 2004 start out at estimated costs and then overrun by 20%.
$10 billion could be a gross underestimation under the current pricing regime.
Want to add to the terror of all this: It provides additional justification for Govt. to extend CINICO into home insurance.
If I thought that CINICO could be a market competitor and keep the private industry ‘honest’ I’d be OK with it. But CINICO is currently a boondogle relying on the idea of a CIG bailout whenever the costs go too high. (Compounded by HSA charges to CIG to keep the costs artificially low.) Which will just collapse even sooner if they add house insurance.
When National Insurance is triggered in Cayman (health & home; with pension & social care/housing as an added cost) the private companies will have only themselves to blame. Not that the financial backers will worry about the fallout from the small companies/dealers themselves having to close.
There is of course one way to square this circle. Rising pay rates. Which is why England is on strike now. Cost of living has to spiral higher so that everyone can afford to live.
The PACT government needs to intervene on behalf of consumers/mortgage holding banks and require insurance market participants to provide full necessary cover, at a reasonable rate, for our territory’s claim risks. If insurance isn’t covering the claim risks or is too high in cost, there isn’t any point. 30% in one year is several times inflation rate on a year of zero calamity claims in the jurisdiction.
Yes! And since we are telling private companies what to do, I want $2 off every gallon of gasoline, 25% off my grocery bill, cinema tickets the same price they were 20 years ago and free condoms everywhere. How dare these greedy businesses want to be profitable!
I think that providing free condoms everywhere would represent an excellent societal investment, as opposed to the current farce where they are kept behind the counter to try and ensure that as few teenagers as possible use them.
Parents don’t want to know that Magnums are being bought for their daughters.
Boot is bad for your diet, stop licking it.
Let them upcharge the Air B&B gang instead for using their housing as a business.
Can everyone get a free unicorn and Bentley convertible too?
I knew this would eventually happen, bunch of leeches!
Ultimately, they will likely refuse to insure properties completely. this would be a big problem for banks and their lending policies.
If the companies need more money, go after the Air B&B cartel and leave be homeowners, apartment owners, and condo owners who don’t use their properties as commercial income generators.
The Air B&B bunch hates being exposed for what they are. Commercial business owners skirting the same laws and regulations that other business owners can’t.
11:44, Shutting down AirBnb and VBRO would certainly bring down the prices of condo’s on Seven Mile Beach. Especially luxury ones such as Watercolours.
Our 2022-23 policy has a rider that excluded sea inundation from adjacent canal. The first floor amounts to over a third of our $25mln property without hurricane insurance in a washout situation. Thank God Ian steered offshore. CI Gov’t needs to put some consumer-centric guardrails in place to cover all insured risks, or these insurance companies and their local underwriters can pack up and leave the territory. We can’t continue to accept that regular Florida carnage skews our local black-swan event risk. We aren’t in the same development cone of risk as Florida.
Getting a rider excluding sea inundation from adjacent canals is becoming the new norm here.
When you renew your policy this year, read the policy carefully so you have no surprises.
If you only saw those canal homes after Ivan…
I did? Which is why it should be there. Black swan 100 year events are rare, but the insurance industry sees the Caribbean and Florida as one location and wants us to pay for other events and those routinely getting clobbered year after year. We are already paying 100% loss value over 20 or less years. We need a more sophisticated insurance market.
4:16, Yeah, and if you saw the South Sound area after Ivan one would never buy there. The water there was incredible for a month after Ivan. With all the new developments there I would really pray there is never another Ivan in our lifetime. The water from the sea has no place to go and the new construction is at too low a level and too close to the open water.
“We need more of your money so we can offer you less”
You can’t make this sh!t up.
This will always be the case dealing with a corporation. These are the demands of infinite growth expectations.
Buid on the Brac Bluff edge, can still see the sea/ocean, but dont have to worry about hurricane seas coming there. So the insurances will be lots and lots cheaper.