BEST’S COUNTRY RISK REPORT

BEST'S COUNTRY RISK REPORT

Barbados CRT-4

August 26, 2021 Region: Caribbean Country Risk Criteria Procedures Guide to Best's Country Risk Tiers

? The Country Risk Tier (CRT) reflects AM Best's assessment of three categories of risk: Economic, Political, and Financial System Risk.

? Barbados, a CRT-4 country, has a moderate level of political risk and high levels of economic and financial system risk.

? Barbados, an independent member of the British Commonwealth, has a large offshore financial services sector with participation from banks and insurance companies, most of which are of US or Canadian origin.

? GDP contracted 17.6% in 2020 and is forecast to grow by 4.1% in 2021 and 7.7% in 2022.

? The map depicts the countries in the Caribbean AM Best evaluates for country risk.

Nominal GDP Population GDP Per Capita Real GDP Growth Inflation Rate

Literacy Rate Urbanization Dependency Ratio Life Expectancy Median Age

Vital Statistics USD bn mil USD % %

United Nations Estimates % % % Years Years

Insurance Statistics

4.37 0.3

15,163 -17.6 2.9

99.6 31.2 24.3 79.2 40.5

Insurance Regulator

Financial Services Commission

Premiums Written (Life)

USD mil

129

Premiums Written (Non-Life)

USD mil

237

Premiums Growth

%

6.4

Regional Comparison

Country Risk Tier

Barbados

CRT-4

Antigua & Barbuda

CRT-4

Bahamas

CRT-3

Cayman Islands

CRT-2

Jamaica

CRT-4

Trinidad and Tobago

CRT-4

Source: IMF, UN, Swiss Re, Axco and AM Best

Economic Risk

Political Risk

Financial System Risk

Country Risk Tier 1 (CRT-1) Very Low Level of Country Risk Country Risk Tier 2 (CRT-2) Low Level of Country Risk Country Risk Tier 3 (CRT-3) Moderate Level of Country Risk Country Risk Tier 4 (CRT-4) High Level of Country Risk Country Risk Tier 5 (CRT-5) Very High Level of Country Risk

Regional Summary: Caribbean

? The countries in the Caribbean vary by cultural origin, economic foundation, and population affluence, but their long-term growth and stability depend highly on their larger regional neighbors.

? Many Caribbean countries depend on tourism for economic growth. Natural disasters and the COVID-19 pandemic have highlighted the region's dependence on this sector, as well as its vulnerability. Those that do not rely on tourism depend largely on commodity exports, which makes them sensitive to changes in global demand. According to IMF forecasts, economies dependent on tourism contracted by approximately 10%, and economies dependent on commodities contracted by 0.2% in 2020.

? The Caribbean is highly vulnerable to natural disasters and climate change. In addition to the record hurricane season of 2020, there have been three Category 5 hurricanes in the region since 2017. These weather events have the potential to cause damage equal to, or greater than, the country's GDP.

Bahamas

Cuba

Cayman Islands

Jamaica Honduras

Nicaragua

Costa Rica Panama

Turks and Caicos

British

Haiti

Dominican Republic

Virgin

Islands

Puerto Rico

Anguilla St. Maarten

Antigua & Barbuda St Kitts & Nevis

Dominica

St Vincent & the Grenadines St Lucia

Curacao Grenada

Barbados

Venezuela

Trinidad & Tobago

Guyana Suriname

Colombia

SINCE 1899

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BEST'S COUNTRY RISK REPORT

Economic Growth (%)

15

Real GDP

CPI Inflation

10

5

0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

-5

-10

-15

-20

Source: IMF World Economic Outlook and AM Best

Political Risk Summary

Score 1 (best) to 5 (worst)

World Average Barbados

International Transactions Policy

5

Legal System

4

Monetary Policy

3

2

Regional Stability

1

Fiscal Policy

0

Social Stability Government Stability

Source: AM Best

Business Environment Labor Flexibility

GDP Per Capita and Population

100,000

GDP Per Capita Population

3

90,000

2.5 80,000

70,000 2

60,000

USD

50,000

1.5

40,000

1 30,000

20,000 0.5

10,000

0 Barbados

Antigua & Barbuda

Bahamas

Source: IMF and AM Best

Cayman Islands

0 Jamaica Trinidad and

Tobago

Millions

Barbados

Economic Risk: High

? The economy has been in contraction since 2017 due to reconstruction following Hurricane Irma, and fiscal policy needs to be tightened to lower debt levels. COVID-19 exacerbated the slowdown, with a GDP contraction of 17.6% in 2020. A recovery of 4.1% is forecast in 2021.

? With tourism accounting for over 35% of GDP, the economy suffered greatly in 2020. The first quarter of 2021 registered a 96% contraction year-over-year in tourism output. The severe drop in tourism industry also affected other sectors.

? GDP per capita is among the highest in the region because of a highly educated population and sound infrastructure, among other reasons.

? Barbados was granted USD968 million in budgetary support from multilateral institutions in 2020. In addition, the IMF agreed to revise fiscal targets under the Extended Fund Facility agreement. The IMF recognizes the progress Barbados is making towards its economic recovery and transformation program despite the global economic environment.

Political Risk: Moderate

? Prime Minister Mia Mottley was elected in May 2018, and her party achieved an overwhelming majority in the House of Assembly. The former Parliament was dissolved in March 2018.

? The increase in violent crime and the murder rate is a growing concern, as the country is a trafficking route. However, neither social nor political unrest is common, and strikes and protests are typically resolved quickly and peacefully.

? In the World Bank's most recent Ease of Doing Business survey, Barbados ranked 128th out of 190 countries. Barbados scores poorly on enforcing contracts, dealing with construction permits, obtaining credit, trading across borders, and protecting minority investors. The country score relatively well in the category of resolving insolvency.

? The government is attempting to reform the country's state-owned enterprises by implementing stronger oversight, lowering costs, and reducing government spending.

Financial System Risk: High

? The Financial Services Commission regulates a number of financial services, including insurance and pension business.

? The Central Bank of Barbados oversees a 2:1 peg of the Barbadian dollar to the USD.

? The IMF deal has helped increase international reserves from a low of USD220 million to USD1.3 billion and will allow Barbados to comfortably satisfy external obligations.

SINCE 1899

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August 26, 2021

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