Caribbean Property & Investment Review — Edition 82: October 2019

Publication Date: 3 October 2019  |  Coverage Period: 3 September – 2 October 2019

Morning Briefing

• Hurricane Dorian struck the Abaco Islands and Grand Bahama on September 1-3 as a Category 5 storm with 185 mph sustained winds — the strongest Atlantic landfall on record — causing an estimated USD 3.4 billion in damage, killing at least 70 people with hundreds still missing, and displacing more than 70,000 residents in what is the Caribbean’s worst property disaster since Hurricane Maria struck Puerto Rico and Dominica in 2017.
• Nassau and Paradise Island were spared direct impact, and Bahamian tourism officials have stressed that the vast majority of the country’s tourism infrastructure remains fully operational — but the catastrophic destruction in Abaco and Grand Bahama has created an acute humanitarian crisis that will define the nation’s agenda for years.
• The rest of the Caribbean has largely emerged from the peak of hurricane season without catastrophic landfalls, allowing tourism and investment activity to continue across Jamaica, Barbados, the Dominican Republic, and the Eastern Caribbean, though the season officially continues through November 30.
• Caribbean property insurance sector faces its largest single-event Caribbean loss since Maria, with initial loss estimates from Lloyd’s and major reinsurers indicating total insured losses likely in the range of USD 1.5–2.5 billion — triggering reinsurance programme activations across most Caribbean-exposed underwriters.
• Jamaica’s tourism sector reports its eighth consecutive month of year-on-year arrivals growth in September, with the island firmly on track to surpass its previous annual record and the north coast hotel investment pipeline continuing to advance.
• Guyana oil project: ExxonMobil’s Liza Phase 1 continues commissioning progress with first oil now widely anticipated before year-end 2019, maintaining Caribbean investor attention on Georgetown’s already-transformed commercial property market.

Hurricane Dorian: The Caribbean’s Costliest Property Catastrophe in Two Years

When Hurricane Dorian made landfall on the Abaco Islands on September 1, 2019, it did so at peak intensity seldom witnessed in recorded Atlantic hurricane history. Sustained winds of 185 miles per hour placed it jointly at the top of the all-time record for Atlantic landfalls, alongside the 1935 Labour Day hurricane. But what distinguished Dorian from most Category 5 storms was not merely its peak intensity but its behaviour once it arrived: the storm stalled almost completely over the northern Bahamas, grinding across Grand Bahama and the Abaco settlements for more than 24 hours with negligible forward motion, subjecting the islands to a prolonged assault of wind, surge, and rain that their infrastructure — however well-built — was fundamentally unable to withstand.

The physical destruction in the Abaco Islands is difficult to describe in terms that adequately convey its totality. In Marsh Harbour, the largest settlement, the storm surge reached 18 to 23 feet in many areas, inundating essentially all structures in the low-lying communities of The Mudd and Pigeon Peas — informal settlements home to several thousand Haitian-Bahamian residents — and damaging or destroying a large proportion of the town’s formal housing stock. The airport, the marina facilities, the commercial district, and the schools were all severely damaged. In Treasure Cay and Green Turtle Cay, similar patterns of destruction unfolded.

Grand Bahama, home to Freeport, the Bahamas’ second city and the site of substantial industrial, port, and tourism infrastructure, was struck even more severely in terms of duration. The storm surge in Freeport reached levels that inundated much of the low-lying eastern half of the island, including residential areas, the airport (temporarily), and sections of the Freeport Harbour complex. The Lucayan National Park, a significant natural asset and tourism draw, was damaged. The University of The Bahamas Grand Bahama campus, the Grand Bahama Shipyard, and numerous commercial properties sustained serious flooding and wind damage.

The preliminary economic damage assessment of USD 3.4 billion, compiled by the Inter-American Development Bank and Bahamian government agencies in the weeks following the storm, encompasses physical property damage across all categories: residential structures, commercial buildings, infrastructure, vehicles, boats, and contents. Private property accounts for the largest share, with public infrastructure — roads, utilities, schools, health facilities — representing a substantial secondary claim on reconstruction resources. The total figure represents a staggering share of the Bahamas’ approximately USD 13 billion annual GDP, and the economic disruption from lost tourism revenues and displaced population will add considerably to the headline damage number over time.

The Insurance Reckoning: What Dorian Means for Caribbean Property Coverage

The Caribbean property insurance market is absorbing a loss event of a scale not experienced since Hurricane Maria’s simultaneous devastation of Puerto Rico, Dominica, and several other islands in 2017. For the specialist underwriters and reinsurers who provide Caribbean wind and flood cover — concentrated in the Lloyd’s of London market, Bermuda, and among the major international reinsurance groups — Dorian represents a severe test of their catastrophe modelling and a significant financial event.

Initial loss estimates from the reinsurance community suggest total insured losses in the range of USD 1.5 to 2.5 billion, though the final figures will take months to determine as adjusters complete their surveys and claim negotiations progress. The gap between insured losses and total damage — which the IDB estimates at USD 3.4 billion — reflects the chronic underinsurance problem that affects much of the Caribbean residential property market, particularly in informal and lower-income housing segments where coverage penetration is low.

For the broader Caribbean property market, the Dorian event carries several important insurance-related lessons. First, the adequacy of wind coverage limits: many property owners, particularly second-home buyers, insure to the market value of their property rather than the full replacement cost, creating coverage gaps that become painfully apparent when substantial reconstruction is required. Second, the importance of storm surge coverage: standard wind policies in many Caribbean jurisdictions do not automatically include flood and surge cover, and the Dorian surge damage — in many cases exceeding wind damage — has caught some owners without the protection they assumed they had. Third, the reality of business interruption coverage: resort and rental property owners dependent on tourism income are discovering that the scope and limits of their business interruption policies vary enormously.

Looking forward, Caribbean property professionals should anticipate meaningful increases in wind and catastrophe insurance premiums across the region, not just in the Bahamas, when 2020 renewal cycles arrive. Reinsurers who have absorbed two major Caribbean loss events — Maria in 2017 and now Dorian in 2019 — within a short period will adjust their pricing to reflect the loss experience, and those adjustments will flow through to retail policy pricing in all Caribbean markets.

Reconstruction: Scale, Complexity, and the Property Market Implications

The initial emergency phase of the Dorian response — search and rescue, emergency shelter, water and food distribution, medical care — has been followed by the beginning of early recovery operations. International organisations including PAHO, UNICEF, and the UN’s OCHA have been heavily engaged, alongside bilateral assistance from the United States, United Kingdom, Canada, and Caribbean neighbours. The Bahamian Red Cross and the NEMA (National Emergency Management Agency) have been coordinating the domestic response.

For the property and construction sectors, the reconstruction phase represents both an enormous challenge and, in some respects, an opportunity. The volume of construction work required in Grand Bahama and Abaco will dwarf the normal construction sector capacity of the Bahamas, creating demand for materials, equipment, and skilled labour that cannot be met domestically and will need to be sourced regionally and internationally. Trinidad and Tobago’s construction sector, Jamaican building material suppliers, and regional contractors have all identified Bahamas reconstruction as a potential source of business.

The property market questions that will shape Abaco and Grand Bahama for the next decade are beginning to crystallise. Should the rebuilt communities be configured along the same spatial patterns as the destroyed ones, or should reconstruction incorporate flood-plain mapping, sea-level rise projections, and storm surge modelling to create more resilient layouts? Should building codes be strengthened and more rigorously enforced? What role should the government play in land assembly and planned reconstruction versus relying primarily on private insurance settlements and individual owner decisions? These are questions without easy answers, and the choices made in the coming months will define the character of these islands — and the investment case for their property markets — for decades.

The Rest of the Caribbean: Season Navigated, Markets Performing

While the Bahamas absorbs the full weight of Dorian’s devastation, the rest of the Caribbean has navigated the 2019 hurricane season’s peak without catastrophic landfalls. The late August and September period — historically the most active for the Atlantic basin — produced multiple systems, including several that tracked through the northern Caribbean, but the combination of storm tracks and island geography spared the major tourism and property markets from significant direct impacts.

Jamaica’s tourism performance through September was notably strong, with the island extending its streak of year-on-year monthly arrivals growth and remaining firmly on track for an annual record. The north coast hotel market — Sandals, RIU, Iberostar, and the expanding boutique sector — reported solid September occupancy despite the traditional shoulder-season softening, a performance that reflects the growing strength of Jamaica’s airlift from key source markets and the appeal of the island’s diversified tourism offering.

Barbados is progressing steadily through its BERT economic recovery programme, with September fiscal data generally in line with IMF programme targets. The Platinum Coast property market remains selectively active, with international buyer inquiry gradually increasing as the island’s economic trajectory becomes clearer. The approach of the winter season — Barbados’s highest-demand tourism period — is providing some uplift to short-term rental returns and generating the buyer interest that traditionally accompanies the island’s most prominent social season.

The Dominican Republic’s tourism sector continues its strong recovery from the challenges of the early summer months, with September occupancy data from Punta Cana and other resort zones tracking well. The major international operators who temporarily paused promotional activities during the height of the US media scrutiny have returned to full marketing programmes, and forward booking data for the winter season suggests the recovery is substantive.

Caribbean Leaders This Month

Bahamas (Crisis Response): The government and people of the Bahamas have shown remarkable resilience in the face of an unprecedented catastrophe. The reconstruction challenge is immense, but the international support response has been substantial and the determination to rebuild is genuine.

Jamaica (Tourism Leadership): Eighth consecutive month of year-on-year arrivals growth in a year already tracking toward a national record — Jamaica’s tourism performance is the region’s most consistent bright spot through a difficult summer.

Dominican Republic (Recovery Execution): The speed and professionalism of the government and hotel sector response to the mid-year challenges is evidenced in September’s strong occupancy data. The winter season outlook is genuinely positive.

Guyana (Pre-Production): The Liza Phase 1 commissioning progress continues to attract international investment attention to Georgetown’s commercial market. The energy services ecosystem being built around the oilfield development is creating permanent structural demand for property.

Turks and Caicos (Resilience): Providenciales emerged from the hurricane season without significant storm damage and with its luxury property market intact. Winter season advance bookings are strong and the development pipeline continues to advance.

Cayman Islands (Stability): Grand Cayman’s financial services-anchored economy provides a degree of recession and hurricane resilience that is reflected in the consistent performance of its commercial and residential property markets through 2019.

St Lucia (Luxury Positioning): The island has capitalised on its reputation for environmental quality and exclusive positioning to attract a premium visitor demographic, supporting above-average villa rental yields and inquiry for upper-end property purchases.

Overall Regional Performer — October 2019: Jamaica. Against a backdrop defined by the Bahamas disaster, Jamaica’s combination of tourism record pace, housing programme delivery, and investment attraction consistency makes it the region’s standout market this month.

Looking Ahead

The Caribbean property community’s most pressing near-term preoccupation will be the Bahamas reconstruction programme and the insurance market repricing that Dorian has made inevitable. Professionals with Bahamas exposure — whether as agents, developers, investors, or advisers — need to engage seriously with both the specific asset challenges of the post-Dorian environment and the broader insurance and risk management implications that the storm has brought into sharp relief.

For the wider Caribbean market, the approach of the winter season — the region’s most commercially important tourism period — provides a positive near-term focus. Advance booking data from Jamaica, Barbados, the Dominican Republic, St Lucia, and the Eastern Caribbean CBI destinations all point to a strong season, and if that performance materialises it will provide important evidence that investor confidence in Caribbean resort and villa property remains well-founded despite the Dorian shock.

Guyana’s first oil milestone — now widely expected before the end of 2019 — will be the Caribbean’s most consequential single economic event of the year when it arrives. Its property market implications in Georgetown are already being priced; its broader regional investment signalling will unfold over the months and years following first production. The Caribbean enters its final quarter of 2019 carrying both the weight of an unprecedented natural disaster and the excitement of an unprecedented economic opportunity — a combination that captures the perennial complexity and resilience of this remarkable region.

The Caribbean Property & Investment Review is published monthly. Edition 82 covers the period 3 September – 2 October 2019. All market data represents conditions during the coverage period. This publication does not constitute investment advice.