Slow claims in spotlight as FSC reviews ‘average clause’ after Hurricane Melissa

Many policyholders still await settlement of their insurance claims more than eight months after Hurricane Melissa battered the island, prompting the Financial Services Commission (FSC) to intervene.
The regulator has launched a review of how insurers apply the ‘average clause’, a policy provision that can sharply reduce payouts to underinsured homeowners, even as it acknowledges receiving complaints about slow claims processing across the sector.
“We are aware of reports and concerns regarding the responsiveness of insurers in relation to the processing and settlement of insurance claims arising from the hurricane,” the FSC said in a statement published in The Sunday Gleaner. The storm, it added, “has generated a high volume of claims and placed substantial demands on insurers, loss adjusters, brokers and policyholders”.
The FSC did not say how many complaints it has received or over what period. But it made clear that high volumes do not excuse delays.
“These circumstances do not diminish the obligation of insurers to handle claims fairly, transparently and in a timely manner, in accordance with the applicable policy terms and conditions, and legislative and regulatory framework governing Jamaica’s insurance industry,” the commission said.
The ‘average clause’ under scrutiny
The regulator wants detailed claims data from insurers to strengthen its monitoring of complaints, and increase direct engagement with the sector.
The average clause, commonly found in property insurance policies, applies when a property is insured for less than its replacement value. In such cases, insurers may reduce a claim payment in proportion to the degree of underinsurance. If a homeowner insures a house for 70 per cent of its true value, for example, the clause can mean the insurer pays 70 per cent of an otherwise valid claim – even for a partial loss.
The FSC did not say what prompted the review or whether it has already identified problems with how the clause is being applied. But it urged policyholders to “review their policy terms and conditions, including limits, exclusions and insured values, and seek clarification from their insurer or broker whenever any aspect of their coverage is unclear”, particularly after increases in property values or material changes to insured assets.
The scrutiny comes against a backdrop of broader concerns about underinsurance. The   Insurance Association of Jamaica (IAJ) previously indicated that roughly 95 per cent of residential properties are underinsured, exposing homeowners to reduced payouts when replacement costs exceed insured values.
Policyholders concerned about delays should “first raise the matter through the established complaints handling process of the insurers and/or brokers”, the FSC stated. Where the matter remains unresolved, “policyholders may submit a complaint to the FSC via email, complaints@fscjamaica.org, supported by relevant documentation”.
The FSC said it “will consider the information received as part of its supervisory review and will take appropriate action where warranted”.
Industry in loss mode
The regulator’s intervention comes as the general insurance sector faces significant financial strain from Hurricane Melissa. In its Insurance Sector Quarterly Review for March 2026, released this month, the FSC reported that the general insurance industry recorded a pre-tax loss of $200 million for the quarter, compared with a pre-tax profit of $600 million a year earlier – largely because of hurricane-related claims costs. The report also noted a reduction in industry-wide solvency, although most insurers remained above the regulatory minimum capital benchmark.
Less than half of industrywide claims settled, says insurer
The FSC did not disclose settlement data, but IronRock Insurance reported last month that 56 per cent of its reported Hurricane Melissa claims had been settled. IronRock CEO Christian Watt estimates that that compares with market settlement rates of 35 to 40 per cent – a figure The Financial Gleaner was unable to corroborate with the IAJ or the FSC.
Asked about the FSC’s review, Watt said the company would cooperate with any regulatory effort to speed up claims resolution industry-wide.
“We will support and cooperate with any initiatives that will help to accelerate Melissa claims settlements further,” he told The Financial Gleaner.
IronRock has also identified underinsurance as an area of focus following the hurricane, saying improving property valuation reviews forms part of its post-Melissa agenda as it works through remaining claims.
IAJ yet to respond
Questions were sent to the Insurance Association of Jamaica seeking comment on the FSC’s review, the average clause, and the broader claims-settlement picture. The association acknowledged receipt but had not responded up to publication time.
The FSC said it will “continue to monitor developments closely and will provide further updates as its supervisory review progresses”.
carolyn.guniss@rjrgleaner.com