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About Us
Syndicate Management
Investing at Lloyd's
tax-corporate-services
News
The recent landfall of Hurricane Melissa has delivered a significant shock to the global Insurance-Linked Securities (ILS) sector, raising questions about market resilience, risk modelling, and capital flows. As the most intense hurricane to ever hit Jamaica, Melissa left a trail of devastation – tragically claiming lives, destroying homes and infrastructure, and causing economic losses expected to far exceed insured damages and run into billions of dollars.
According to a report by Steve Bowen of Gallagher Re, Jamaica’s catastrophe bond, the IBRD CAR Jamaica 2024, valued at $150 million, is expected to be fully exhausted. Likewise, a triggered parametric tropical cyclone policy through the Caribbean Catastrophe Risk Insurance Facility (CCRIF SPC) will also be activated. However, insurance coverage in Jamaica remains critically low. Only about 20% of residential assets are insured, and of those, an estimated 95% are underinsured. Commercial and auto assets fare only marginally better in terms of coverage. Andrew Colcomb, Head of Research at Argenta Private Capital, notes:
The insurance and reinsurance industry will make some contribution to the recovery of livelihoods and infrastructure on the island, but it remains the case that insurance penetration in areas with poor standards of construction is low which will limit the impacts on insurance and reinsurance markets. Our thoughts are with those impacted by this event and those coping with its aftermath.
As a result, the insured share of the overall losses will fall significantly short of the total economic damage. Despite these limitations, insured losses in Jamaica alone are expected to exceed one billion US dollars. There is, however, considerable uncertainty associated with the final value, given the absence of robust catastrophe modelling capabilities in the Caribbean compared to those available in the mainland United States.
Most insured losses are anticipated to be covered by the global reinsurance industry, which remains well-capitalised, with an estimated 804 billion USD in capital as of the first half of 2025, according to Gallagher Re. Therefore, the report does not foresee any meaningful impact on global insurance pricing as a result of Hurricane Melissa.
According to market analysts and reporting from Artemis.bm, the unprecedented scale of damage from Hurricane Melissa has already complicated loss modelling and portfolio management across the ILS space. Traditional catastrophe risk models proved inadequate for capturing the storm’s severity and unexpected path, highlighting the urgent need for the market to invest in more advanced analytics and flexible, scenario-based risk assessments. This is particularly pertinent as climate change continues to increase the frequency and intensity of similar events.
The immediate repercussions for investors have been pronounced. Preliminary loss estimates suggest that both catastrophe bonds and collateralised reinsurance deals are at risk of being triggered. As reported by Intelligent Insurer, pricing has shifted rapidly, with wider credit spreads emerging on new and outstanding cat bond transactions exposed to hurricane risk, reflecting greater uncertainty and investor caution in the market.
In the short term, this poses challenges for sponsors looking to raise capital but may present attractive relative value opportunities for investors with longer time horizons and higher risk tolerance. Though some investors might want to consider spreading their risk as a higher loss frequency may be emerging.
In addition, Hurricane Melissa has drawn scrutiny from regulators and rating agencies over the current state of transparency and loss communication within the ILS industry. The event has reignited calls for faster and more reliable post-event loss assessments, standardised disclosure protocols, and improved investor reporting to rebuild confidence and support market growth. This sentiment is supported by Artemis, which notes that regulatory oversight and information flow are critical for maintaining trust among stakeholders in periods of stress.
For investors familiar with ILS but seeking reduced direct catastrophe exposure, Lloyd's of London (“Lloyd’s”) syndicates offer a compelling alternative. Lloyd’s provides access to a broad portfolio across specialty property, casualty, marine, aviation, and cyber lines, enabling better geographic and risk diversification. This approach benefits from strong regulatory and claims frameworks, offers portfolio resilience, and enhances risk-adjusted returns for investors wary of concentrating exposure solely in cat bonds or similar ILS strategies. Broader underwriting still shows the same low correlation to traditional asset classes as ILS strategies and adds additional diversification to portfolios.
At Argenta, we offer a variety of capital-efficient entry routes to Lloyd’s and have seen an increased demand from both trade investors and private investors, including family offices and hedge funds. Recent strong returns have played a key role in the attractiveness of Lloyd’s as an investment, but the diversification characteristics have also been fundamental to its recent rise in prominence.Despite pressure on insurance pricing, returns to investors in the near future are expected to continue to be attractive and the increased uncertainty in capital markets and the higher loss potential for cat bonds provides a compelling case for investors, and for broader insurance exposure in portfolios.
