Insurance ratings agency AM Best is of the view that the reinsurers will assume a majority of the costs resulting from Hurricane Melissa’s devastating impact in the Caribbean.

The US-based company said that despite insurance claims from Jamaica due to Hurricane Melissa being low, reinsurers will possibly assume most of the costs associated with payout, as Caribbean-domiciled insurers depend heavily on reinsurance. It takes into account Jamaica’s insurance penetration, the impact of Category 5 Hurricane Melissa, and local insurers’ dependence on reinsurance.

Hurricane Melissa made landfall on Jamaica’s southwestern parish of St Elizabeth and ravaged its way through to the northern parish of Trelawny on October 28, 2025. The winds from the cyclone, reaching a maximum 185 miles per hour, uprooted trees, downed powerlines and tore off the roofs of hundreds of houses and business establishments. The weather system also caused flooding and landslides across the island.

According to an AM Best commentary titled Jamaica’s Insured Losses From Hurricane Melissa Likely to Fall to Reinsurers, insurance penetration in Jamaica is low, as only a small portion of property is insured on the island, which will limit insured losses. Nevertheless, the ratings agency estimates that economic losses from the Category 5 hurricane will be in the billions. While noting that the primary focus will be humanitarian aid after the weather system, the company said it will likely be days or weeks before ascertaining insured loss estimates.

Since catastrophic losses from hurricanes, flooding, and earthquakes pose the biggest risk to property insurers in the Caribbean, the primary mitigation tool against these exposures for insurers is a significant use of reinsurance.

“Reinsurance partnerships are the cornerstone that provides the capacity for insurers to write property business in the Caribbean,” said Bridget Maehr, director, AM Best.

“It remains to be seen how this event will affect reinsurance pricing going forward.”

While entities such as the Caribbean Catastrophe Risk Insurance Facility have provided some economic relief to the governments of member countries, including Jamaica, the AM Best commentary asserts that, looking ahead, a combination of macro-initiatives and microinsurance may have greater potential in narrowing Jamaica’s and the region’s protection gap.

Still, AM Best pointed out that catastrophe models in the Caribbean are generally not as robust as the ones used to model for US hurricanes.

“Modelling 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.

“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.”

AM Best will continue to monitor the impact of Hurricane Melissa on Jamaica, as well as other Caribbean islands, including the eastern Bahamas and Turks & Caicos islands.