2023 Hurricane Season Winds Down as Caribbean Demonstrates Economic Resilience and Tourism Forward Bookings Surge

Publication Date: 3 November 2023  |  Coverage Period: 3 October – 2 November 2023

Morning Briefing

• The 2023 Atlantic hurricane season, which ran above-normal with 20 named storms including Category 5 Hurricane Lee and Category 1 Hurricane Tammy, is approaching its official 30 November close with insurance claims being processed across affected territories including Antigua and Barbuda following Tammy’s passage.
• Caribbean winter tourism season forward bookings are tracking strongly, with Jamaica, Barbados and the Dominican Republic all reporting advance reservations for December through February running ahead of 2022 comparable periods, providing confidence for hotel and villa investors.
• Property insurance premiums across the Caribbean have risen by an estimated 15 to 25 percent in renewal cycles concluded in 2023, reflecting tightening conditions in the global reinsurance market following elevated loss years in 2022 and a busy 2023 Atlantic season.
• The Caribbean Development Bank released its October 2023 economic update projecting regional GDP growth of approximately 5.5 percent for the full year, driven by robust tourism performance and Guyana’s extraordinary oil-sector expansion.
• Jamaica’s Bank of Jamaica kept its policy rate at 7.00 percent at its October monetary policy meeting, signalling continued vigilance on inflation even as headline price pressures in the domestic economy show signs of moderating toward the 4 to 6 percent target range.
• St Kitts and Nevis reported strong Citizenship by Investment programme activity through the third quarter of 2023, with real estate option applications contributing to sustained construction activity in approved resort developments across the federation.

The 2023 Atlantic Hurricane Season: Assessment for Caribbean Property Investors

As the 2023 Atlantic hurricane season approaches its official 30 November close, Caribbean property investors and insurance professionals are taking stock of a season that proved more active than average, though fortunately less destructive to the built environment than the worst-case scenarios that atmospheric scientists had projected. The National Oceanic and Atmospheric Administration had forecast an above-normal season based on warming sea surface temperatures in the Atlantic — a forecast that proved broadly accurate, with 20 named storms, seven hurricanes and three major hurricanes recorded by late October.

The season’s most powerful system, Hurricane Lee, reached Category 5 intensity in the open Atlantic with peak sustained winds of 165 miles per hour, generating significant anxiety across the Eastern Caribbean before its track carried it on a path that largely spared the populated island chain. Lee caused some swells and peripheral impacts in the Leeward Islands and subsequently affected Bermuda, Nova Scotia and Maine, but the Caribbean island communities that had been watching its development most anxiously escaped the worst. The psychological impact of a Category 5 storm tracking through the Atlantic — even one that doesn’t make Caribbean landfall — is nonetheless significant: insurers heighten scrutiny, property buyers pause decisions, and the insurance cost implications of the season are felt regardless of whether any specific island suffered a direct hit.

Hurricane Tammy was a different matter. Forming in mid-October, Tammy tracked through the Leeward Islands as a tropical storm and later hurricane, bringing significant wind and rainfall impacts to Antigua and Barbuda, St Martin and other eastern Caribbean islands. While Tammy did not reach the intensity of Lee, its direct impact on populated areas resulted in property damage, infrastructure disruption and insurance claims that will take months to fully quantify and settle. Antigua and Barbuda, which has been steadily rebuilding its tourism infrastructure since the devastating impact of Hurricane Irma in 2017, faced another unwelcome disruption to its ongoing recovery narrative.

For property investors, the 2023 season reinforces several enduring principles of Caribbean real estate risk management. First, location within a specific island matters enormously: properties on the northern and eastern coasts of smaller islands tend to face materially higher hurricane exposure than those on the leeward (western and southern) flanks, and this differential should be reflected in both insurance costs and investment pricing. Second, construction standards are critical: buildings constructed to modern Caribbean hurricane resistance codes perform dramatically better in storms than those built to older standards, making building quality and code compliance a meaningful due diligence consideration. Third, insurance coverage is not optional: uninsured or underinsured Caribbean property is a fundamentally imprudent investment, and the insurance market conditions of 2023 make comprehensive coverage both more important and more expensive to obtain.

Insurance Market Conditions: Rising Costs Across the Caribbean

The Caribbean property insurance market in 2023 is operating under conditions that represent a significant shift from the relatively benign environment that prevailed through much of the 2010s. Globally, the reinsurance market — which provides the capacity backstop for local Caribbean insurers’ hurricane risk portfolios — underwent a significant repricing in January 2023, following three consecutive years of above-average global catastrophe losses. This repricing has translated directly into higher premium costs for Caribbean property and casualty insurers, who have passed the majority of the increase on to policyholders through elevated renewal rates.

The scale of the increase varies by location, coverage type and property characteristics, but industry estimates suggest that Caribbean residential property insurance premiums rose by between 15 and 25 percent in 2023 renewal cycles, with commercial and hotel properties in the most exposed coastal zones experiencing even larger increases. For a typical beachfront villa in Barbados or a tourism-facing apartment complex in Jamaica’s Montego Bay, the annualised insurance cost increase is material enough to affect investment returns and, at the margin, acquisition underwriting.

The Caribbean Catastrophe Risk Insurance Facility — the regional sovereign risk pooling mechanism — continues to provide a measure of financial resilience to participating governments, but the CCRIF’s mandate is sovereign parametric coverage rather than residential or commercial property insurance. For individual property owners and investors, the challenge is navigating a commercial insurance market that is simultaneously more expensive and, in some high-risk zones, more reluctant to provide the coverage levels that lenders require and investors need.

Caribbean Economic Resilience: The CDB’s October Assessment

Against the backdrop of an active hurricane season, the Caribbean Development Bank’s October 2023 economic update delivered a fundamentally optimistic message about the region’s economic trajectory. The CDB projected full-year 2023 GDP growth of approximately 5.5 percent for borrowing member countries in aggregate — a figure that, while heavily influenced by Guyana’s extraordinary oil-driven expansion, also reflects genuine broad-based strength in tourism, financial services and construction across multiple Caribbean economies.

Jamaica’s economic performance through 2023 has been a particular bright spot in the CDB’s assessment. The island’s fiscal consolidation programme, maintained with remarkable consistency across multiple government administrations, has delivered successive years of primary fiscal surplus and a declining debt-to-GDP ratio. The Bank of Jamaica’s inflation targeting framework, while requiring the maintenance of elevated policy rates that create mortgage market headwinds, has successfully reduced inflation from its 2022 peaks and is progressively bringing price stability closer to the target range. Tourism has performed strongly, foreign exchange reserves are at comfortable levels, and international rating agencies have recognised Jamaica’s fiscal progress through improved sovereign credit assessments.

Trinidad and Tobago’s economy, while more dependent on energy sector performance than most of its CARICOM peers, has maintained solid performance through 2023, supported by elevated global LNG prices that have benefited the country’s Atlantic LNG export operations. Port of Spain’s commercial property market — particularly the financial district and the International Waterfront Centre development — continues to register solid demand from energy sector and professional services tenants. The residential market is more mixed, with HDC social housing supply providing an important affordable segment while the private market faces the same high-rate affordability constraints seen elsewhere in the region.

Investment Outlook: Positioning for the Post-Season Period

For Caribbean property investors, the approach of the hurricane season’s close and the onset of the winter tourism season creates an inflection point in the annual investment calendar. The post-season period — November through the end of the year — is traditionally when property transactions that had been deferred pending the close of the hurricane season are executed, when forward-looking buyers position themselves for the following year’s tourism season, and when developers launch new projects for sale ahead of the peak winter marketing season.

The investment case for Caribbean tourism-adjacent property remains robust despite the insurance cost headwinds and high mortgage rate environment. The fundamental supply-demand picture — with Caribbean tourism demand at record levels and the pipeline of new quality accommodation growing only slowly given construction cost pressures — underpins asset values in well-located tourism destinations. Hotel transaction activity, while not at peak levels, continues across the region, with institutional investors from the United States, Canada and Europe maintaining active interest in Caribbean hospitality assets that offer inflation-protected revenue streams in hard currency.

The citizenship and residency by investment sector continues to generate real estate transaction activity across multiple Caribbean jurisdictions. St Kitts and Nevis, Antigua and Barbuda, Grenada, Dominica and St Lucia all operate CBI programmes that require real estate investment as one of the primary qualifying pathways. The volume of CBI applications through 2023, while not at the extraordinary peaks seen in 2020–21 when pandemic-driven demand for alternative citizenship drove a global CBI boom, has remained solid and continues to support construction activity in approved resort developments across the OECS.

Caribbean Leaders This Month

Jamaica leads this month’s economic assessment with strong tourism forward bookings, continued fiscal surplus performance and property market resilience that reflects the island’s improving macroeconomic fundamentals. The Bank of Jamaica’s inflation targeting framework is delivering the price stability that underpins investor confidence.

Guyana continues its extraordinary economic trajectory, with oil production driving GDP growth that dwarfs every other Caribbean economy and the Georgetown property market reflecting the wealth being generated by the Stabroek Block’s expanding output.

Dominican Republic demonstrated continued momentum in its tourism and construction sectors through October, sustaining its position as the Caribbean’s largest and most dynamic property market by transaction volume.

St Kitts and Nevis reported strong CBI programme activity through Q3 2023, with the federation’s real estate option pathway generating sustained construction activity in approved resort developments and reinforcing the island’s reputation as a well-governed CBI jurisdiction.

Barbados weathered the hurricane season without material property damage and positioned strongly for the upcoming winter season, with the luxury villa market showing transaction momentum and forward rental bookings at strong levels.

Trinidad and Tobago maintained solid economic performance underpinned by LNG export revenues, with the Port of Spain commercial property market providing a stable investment environment for regional and international commercial real estate investors.

Antigua and Barbuda faced the season’s most direct Caribbean impact through Tropical Storm/Hurricane Tammy, with ongoing assessment of property damage and insurance claims underway. The territory’s resilience and rebuilding capacity — tested by Irma in 2017 — will again be demonstrated through the recovery process.

Cayman Islands closed the hurricane season in excellent shape, with its modern building stock, strict construction codes and financial services sector demand maintaining property market stability and strong values into the winter season. Overall October regional performer: Jamaica, for sustained tourism booking performance, fiscal discipline and property market resilience that make it one of the region’s most credible investment stories heading into 2024.

Looking Ahead

November will see the official close of the 2023 Atlantic hurricane season on 30 November, marking the transition to the full Caribbean winter tourism season that typically runs through April. The winter season outlook is positive: airlines have maintained or increased capacity to Caribbean destinations, forward bookings are running above 2022 levels, and the region’s tourism product quality continues to improve through ongoing hotel renovation and new development investment.

The insurance market will be a continuing focus for property owners and investors as the January 2024 reinsurance renewal season approaches. Industry participants are cautiously optimistic that the pace of premium increases may moderate from 2023 levels if the hurricane season closes without further significant Caribbean losses, but the structural factors driving reinsurance cost increases — elevated global catastrophe loss experience, rising asset replacement values and climate model adjustments — are unlikely to reverse quickly.

Across the region, the question of when US Federal Reserve rate cuts will begin will remain the most consequential variable for Caribbean mortgage markets. Bank of Jamaica Governor Richard Byles and his monetary policy committee will be closely watched for signals that Jamaica may be prepared to move toward modest policy rate reductions, a development that would provide material relief to the island’s mortgage market and could catalyse a recovery in first-time buyer activity that has been suppressed by the high-rate environment throughout 2023.

The Caribbean Property & Investment Review is published monthly and covers developments during the preceding calendar month. All factual statements reflect information publicly available at the time of publication.