According to AM Best, insured losses from Category 5 Hurricane Melissa in Jamaica are anticipated to remain modest, however, the bulk of these losses is expected to fall on reinsurers, reflecting the high reinsurance dependence of Caribbean-based carriers.
Hurricane Melissa made landfall yesterday in Jamaica, becoming the first storm of Category 5 strength for the 2025 hurricane season, and the first to make landfall in Jamaica since Category 4 Hurricane Gilbert in 1988. As noted by AM Best, the last Category 5 to hit a Caribbean island was Hurricane Dorian, which struck the northwestern Bahamas on September 19th, 2019.
According to AM Best, overall economic losses are likely to be in the billions, although it will take some time to understand the full extent of the damage caused by this extremely powerful storm.
The report highlights low insurance penetration of less than 5% in Jamaica, with only a small portion of property insured on the island.
AM Best expects several local insurers to be impacted by this storm, but as is the norm for the Caribbean islands, insurers there rely heavily on reinsurers.
Losses from hurricanes, flooding, and earthquakes are the biggest risk to property insurers in the region, so the main mitigation tool against these exposures for carriers in the region is the significant use of reinsurance.
Bridget Maehr, Director, AM Best, commented, “Reinsurance partnerships are the cornerstone that provides the capacity for insurers to write property business in the Caribbean. It remains to be seen how this event will affect reinsurance pricing going forward.”
Sridhar Manyem, Senior Director, Industry Research and Analytics, added, “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. Models need to consider the correlation of events between geographies in the region, as catastrophe risk can potentially be spread across the entirety of the Caribbean.”
It is also likely that this storm will trigger the $150 million Jamaican parametric cat bond—IBRD CAR Jamaica 2024, which is part of the World Bank’s catastrophe risk insurance program for the region.
AM Best continues to monitor Hurricane Melissa’s impact on Jamaica and other Caribbean islands, including the eastern Bahamas and Turks & Caicos islands.
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