Prominent German reinsurer, Munich Re, is stressing the importance and urgency for the Caribbean to prioritise building resiliency to mitigate the devastating impacts of extreme weather conditions that threaten the Caribbean and its economy.
“Climate change is increasing the frequency and severity of hurricanes. This means that we are going to see more extreme hurricanes that probably will bring more water and additional wind speed,” said Frank Buchsteiner, senior executive, client management, Munich Re.
He made the comment during a JN General Insurance Company (JNGI) Cocktail Reception at the Insurance Association of the Caribbean Conference held at the Hyatt Zilara Hotel in Rose Hall, Montego Bay recently.
Mr Buchsteiner maintained that a collaborative effort is required to address the impact of climate change in the region.
“The first step is having conversations with regulators, commissioners, rating agencies, allowing different means of ensuring protection,” he said, adding that Caribbean countries can take further steps to build resiliency by placing special emphasis on establishing infrastructure that meet building codes requirements and the production of energy.”
“There needs to be a worldwide pledge that includes the Caribbean as a region for a more sustainable approach on how we deal with the environment, and this is especially important for the Caribbean people who live on islands with a very low sea level,” he advised.
Mr Buchsteiner also pointed out that climate change is having an adverse effect on reinsurers who have been facing a low return on equity resulting in some investors pulling out.
Munich Re estimates that the overall losses from the 2022 North Atlantic hurricane season amounted to around US$110 billion, with insured losses of approximately US$65 billion, which made the season the third most costly in history.
Insurance companies in the region rely on overseas reinsurance companies for up to 90 per cent of every risk that is undertaken.
Joseph Holness, Assistant General Manager, Reinsurance and Underwriting, JNGI, corroborated the dynamic nature of the insurance industry.
“The landscape in which we operate is continuously evolving. Climate change, global economic issues and geo-political tensions have presented us with immense challenges. In this context, our ability to adapt, to embrace new ideas, and to foster collaboration become even more critical,” he said.
“We firmly believe that every challenge presents an opportunity. Therefore, we embrace change, commit to adapting swiftly to emerging trends, and remain steadfast in our commitment to prudent financial management of our clients.”
Mr Holness pointed out that the many disasters in recent years have created challenges for the insurance industry in the Caribbean.
“The impact of climate change on insurance has been significant as the region is highly vulnerable. Due to the frequency and severity of natural disasters, insurance companies have been forced to raise premiums to cover increasing risks,” he explained.
In recent years, there have been three category five hurricanes: Hurricane Irma and Maria, in 2017 and Hurricane Dorian in 2019. Hurricane Dorian, the category 5 storm which battered the Bahamas, was the strongest recorded Atlantic hurricane ever to make landfall, with winds that reached 300 kph. It was also one of the most expensive storms in history.
“Hurricane Dorian demonstrated that one major storm can result in tremendous financial losses for the insurance industry,” Mr Holness emphasised.
Other disastrous outcomes of climate change in the region have been extensive droughts and excessive rainfall, rising temperatures and rise in sea level.
Mr Holness underscores that insurance companies and governments in the region cooperate to develop creative solutions to the problems to safeguard citizens and businesses.
Experts have predicted a slightly below-normal hurricane season this year, in comparison to previous years. The forecast provided by Colorado State University indicated that there will be 13 named storms, six hurricanes and two major hurricanes (categories 3–5). Last year’s season recorded 14 named storms, eight hurricanes and two major hurricanes. There were 21 storms in 2021 and 30 in 2020, making that year the most active hurricane season on record.
