KINGSTON, Jamaica — Jamaica’s underinsurance problem is emerging as a major financial risk for homeowners, with one insurer reporting that seven out of every 10 property claims it received following Hurricane Melissa involved buildings insured for less than their replacement value.
The disclosure comes as some mortgagors continue to face another consequence of rising rebuilding costs: increases in the amount collected through their mortgage payments to keep properties adequately insured.
General Accident Group CEO Sharon Donaldson-Levine disclosed earlier this year that approximately 70 per cent of Hurricane Melissa claims received by the insurer involved underinsurance. The Insurance Association of Jamaica has previously estimated that as many as 95 per cent of insured properties across Jamaica could be insured below their full replacement value.
The numbers expose a significant weakness in Jamaica’s housing market. A homeowner may have insurance, pay the premium every year and still discover after a hurricane, fire or other major loss that the policy will not cover the full cost of rebuilding.
The consequences became significantly more visible after Hurricane Melissa.
By June 2026, the National Housing Trust alone had processed 3,835 Melissa related peril insurance claims valued at approximately J$7 billion and had disbursed about J$2.85 billion. Across the private insurance market, the Financial Services Commission subsequently began reviewing the treatment of underinsured policyholders and insurers’ use of the average clause following complaints and disputes arising from Melissa claims.
Why J$40 million of property can produce a J$1.6 million payout
Underinsurance matters because many Jamaican property policies contain what is known as an average clause.
The principle is straightforward but potentially costly.
If a building that would cost J$40 million to replace is insured for only J$16 million, it is insured for 40 per cent of its replacement value. A J$4 million insured loss could therefore result in a payment of approximately J$1.6 million, before applicable deductibles, leaving the property owner to finance the remainder.
General Accident used essentially that scenario when explaining the scale of underinsurance revealed by Melissa claims.
JN General Insurance similarly explains that when a property is insured below its value, the policyholder effectively retains part of the risk. Its published example shows a J$10 million property insured for J$7 million receiving only 70 per cent of an insured loss where the average clause applies.
The distinction between market value and replacement value is critical.
A house might sell for J$30 million without costing J$30 million to reconstruct. Insurance is primarily concerned with the cost of rebuilding the insured structure, including construction materials, labour and other reinstatement costs, rather than simply the price the property could fetch on the open market.
The mortgage payment can rise too
For mortgagors, underinsurance can produce a second financial shock because property insurance is frequently tied to the mortgage.
One documented case in 2025 involved a homeowner whose monthly mortgage related payment was increased by more than J$12,000 after his property was assessed as being inadequately insured.
The customer had been advised that the higher contribution would be applied automatically unless he opted out in writing. He said he declined both verbally and in writing but the additional amount was nevertheless charged before later being refunded following a complaint.
The same homeowner reported that his mortgage related monthly commitments had already increased by more than J$40,000 over several years. Had the insurance adjustment remained, he said the overall increase would have exceeded J$50,000 a month.
That case matters because it illustrates how a technically sound effort to correct underinsurance can collide with household affordability.
The Insurance Association of Jamaica said at the time that automatic adjustments were not an industry wide practice, although some institutions used an opt out system because they considered maintaining adequate insurance to be in the customer’s interest.
Why banks care
The lender also has money at risk.
A mortgaged property ordinarily provides security for the loan. If a hurricane or fire destroys a house and the insurance settlement is insufficient to rebuild it, the homeowner can be left with a severely damaged asset while still owing money to the lender.
That creates a strong incentive for mortgage providers to ensure that the properties securing their loans remain adequately insured.
But the question of adequate coverage is separate from the question of consent.
The Financial Services Commission has previously said it does not determine the pricing of individual insurance products and that customers must examine the terms of their contracts when challenging adjustments. Where customers believe an institution has acted outside the agreement, they can make a complaint and seek redress.
Melissa changed the conversation
Hurricane Melissa transformed underinsurance from a technical insurance issue into a national rebuilding problem.
The Insurance Association of Jamaica said in July that many policyholders do not appreciate the consequences of underinsurance until a major claim occurs. It urged property owners to ensure that the sum insured reflects the genuine replacement or reinstatement cost of their buildings.
The problem is no longer theoretical.
Insurance service expenses across Jamaica’s insurance sector increased by approximately J$97 billion, or 223 per cent, during 2025, largely because of Melissa related claims, according to Financial Services Commission data cited following the hurricane.
For homeowners, the lesson is uncomfortable but important: having property insurance does not necessarily mean having enough property insurance.
And for mortgage customers, increases intended to correct that gap can become another sizeable monthly expense alongside principal, interest, maintenance, property taxes and other household costs.
The affordability question therefore no longer ends when a Jamaican household qualifies for a mortgage.
It increasingly extends across the decades that follow, as the cost of financing, insuring, maintaining and ultimately rebuilding that home changes around them.
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