Market forces limiting the availability of property insurance in the Virgin Islands and raising prices could begin to level off, officials told the Senate Monday. But it hasn’t happened yet.

A so-called hard market, where large insurance companies charge more to cover potential losses by smaller insurance companies, started in 2019, said Glendina Matthew, director of the Division of Banking, Insurance and Financial Regulation, part of the Office of the Lieutenant Governor. It was the first hard market since 2001-2004, after which rates softened.

The cyclical nature of these markets can be difficult to predict but can mirror the likelihood of major insurance-payout events, like natural disasters, Matthew told the Committee on Housing, Transportation and Telecommunications.

“Climate change and global warming continue to have a significant impact on our weather, particularly as it relates to the frequency and intensity of catastrophic events,” she said. “As a result of catastrophic events such as hurricanes Irma and Maria and other weather-related activities, reinsurers have been declining or limiting the amount and types of risks they will undertake, which in turn has limited insurer’s ability to write new and renewal coverage.”

The National Oceanic and Atmospheric Administration reported that 1980 to 1989 had the least billion-dollar losses in the United States, totaling $218.9 billion. In contrast, between 2010 and 2019, total losses topped $993.4 billion, Matthew said.

“To put things in perspective, Hurricane Irma, which devastated the U.S. Virgin Islands and Florida and caused severe storm surge damage in other states total costs was $64 billion. Hurricane Maria which also devastated the U.S. Virgin Islands 12 days after Hurricane Irma and devastated Puerto Rico and other states had a total cost of $115.2 billion. These two events cost the insurance industry $179 billion. Most recently, in late June, Hurricane Beryl became the earliest forming Category 5 hurricane on record, and it is estimated to cost $6 billion,” she said.

Despite the storms, other economic factors could help soften the market, Matthew said.

“Overall, based on what we are hearing in the insurance industry including the reduction in interest rates by the Federal Reserve, the market should continue to soften, which will result in rates flattening or decreasing and insurance coverage becoming readily available. Do remember despite industry predictions the weather conditions will play a major part on what happens next,” she said.

Sandra Harty, president of the VI Insurance Association and manager of Inter-Ocean Insurance Agency, said insurance companies rely on large companies for reinsurance. If they can’t get insurance underwriting, they can’t sell it to homeowners.

“The capacity problem is not unique to the VI but worldwide. We have been seeing major carriers like State Farm, Allstate, Farmers stop writing in California, in Florida, and some regional carriers in the Caribbean,” Harty said. “Note that the lack of capacity is for windstorms as other types of insurance such as fire and earthquake are available.”

She said rates were beginning to stabilize but nothing was for certain. A quiet storm season would help.

“We have been hopeful that 2025 would bring a turn in the market and provide additional capacity to enable proper competition with one another since insurance markets are cyclical,” Harty said.