Durrant Pate/Contributor

The Bank of Jamaica (BOJ) is sounding the alarm bell about an expected spike in loan delinquency and insurance claims, given the widespread damage to the country’s productive capacity caused by Hurricane Melissa three weeks ago.

The warning about the impact of the category five storm also extends to the general economy, which the island’s central bank acknowledges is expected to adversely affect domestic GDP (real gross domestic product) growth over the coming quarters. In addition to key sectors directly impacted by the hurricane—such as tourism and agriculture, the BOJ reports, “households in the affected sections of the country are expected to experience weakened debt servicing capacity, potentially leading to an uptick in non-performing loans. Notwithstanding the negative impact on credit quality, the deposit-taking sector remains well positioned to absorb this deterioration owing to historically low non-performing loans, high levels of provisioning and robust capital positions.”

The BOJ’s Financial Policy Committee (FPC) made these observations at its meeting on November 17, which reviewed the financial system’s performance and systemic risks based on data up to September 2025. Having also considered developments in the December 2025 quarter, including the impact of the passage of Hurricane Melissa, the FPC decided to issue a Financial Policy Statement outlining its observations and remedial action.

According to the BOJ, “while insurance claims are likely to increase, this should not significantly impair insurer solvency due to strong reinsurance coverage coupled with low property insurance penetration in some affected parishes. The overall impact on the economy is anticipated to be mitigated by financial transfers and gifts in kind from several jurisdictions and agencies to aid the recovery and rehabilitation process as well as the activation of the Government of Jamaica’s disaster risk financing framework, which could provide significant budgetary support.“

Sufficient capital to absorb negative impact 

The BOJ in assessing financial system resilience, conducted stress tests and systemic risk evaluations to gauge the financial sector’s ability to withstand credit, liquidity, and market risk shocks with the preliminary results indicating that the respective financial system sub-sectors possess sufficient capital and liquidity to absorb the negative impact of Hurricane Melissa and to support the uptick in cash demand as the recovery efforts commence. Also, while institution-specific factors, including internal policies and risk appetite may result in varied approaches to the provision of customer relief, financial institutions are well-positioned to support the recovery effort. This includes currency supply, processing of verified insurance-related payments and, where appropriate, offering temporary deferral of credit-related facilities. 

“BOJ stands ready to provide the necessary liquidity support to deposit-taking institutions should the need arise and to maintain orderly conditions in the foreign exchange market. Climate-related shocks will remain a significant risk to our jurisdiction. To address this risk, authorities have committed to measures aimed at strengthening the financial sector’s climate resilience in the long term. Financial system supervisors will remain vigilant, actively monitoring the risks and evaluating appropriate policy responses to preserve financial stability in the context of the increasing frequency and intensity of natural disasters,” the BOJ emphasised in its statement. 

It reports, “financial system supervisors will ensure that climate risk mitigation and resilience are effectively integrated into the business models of the financial sector. These efforts form part of a broader agenda to enhance systemic resilience and to protect vulnerable sectors.”

Highlights of September quarter

The statement highlights that the domestic financial system had been stable during the September 2025 quarter, underpinned by enhanced prudential oversight and favourable macroeconomic conditions. Key contributing factors included real GDP growth, low inflation and a general easing of monetary policy globally, which supported the orderly functioning of the financial markets. 

In this context, the BOJ says core elements of the financial sector continued to demonstrate sound performance across key metrics, including adequate capital, solvency, asset quality, liquidity and profitability.