The Tribune

By NEIL HARTNELL Tribune Business Editor MORE than 25 per cent of all existing Bahamian insurance brokers and agents are unlikely to be licensed under the new Act governing the sector, the Insurance Commission told Tribune Business yesterday. Arvind Baghel, the regulator's head of insurance supervision, confirmed to this newspaper that around 25 of the existing 85 insurance brokers and agents - some 29 per cent - were likely to "fall off" and not meet the Insurance Act's enhanced registration requirements. That means more than one in four existing brokers/agents will disappear. That will leave around 60 remaining in the market, and of those, Mr Baghel said some 34 were "pretty close" to meeting the Commission's capital and other licensing requirements. The regulator was working with another 25 brokers/agents to help them come into compliance by the time it publishes the list of all its registrants/licensees by end-February. Mr Baghel added that all major Bahamian general and life/health underwriters were in compliance with the Act, explaining that apart from agents and brokers, the Commission's other major compliance challenge lay with companies who were operating in this nation as branches. Conceding that the transition to the new regulatory regime would "take time", due to the unfamiliarity of many smaller players with its enhanced standards and requirements, Mr Baghel told Tribune Business that getting everyone prepared would be "no silver bullet". He added, though, that the regulatory shake-up was "a change for the better", and would give the Insurance Commission a "foundation to build a risk-based regulatory regime". The deadline for all licencees to meet the new Act's requirements was end-2011, but it is clear than many companies - especially the smaller intermediaries - are still struggling to get their house in order. "The big one is the agents and brokers," Mr Baghel told Tribune Business of the compliance challenges facing the Insurance Commission. "We feel we have made quite a lot of progress....... "We had started with 85 or so. About 25 will fall off, and that leaves about. About 34 are pretty close to completing their registration requirements, and the other 20-25 are still working with us." Of the 25 agents/brokers unlikely to be licensed under the new Act, Mr Baghel said many had elected not to apply for re-registration, knowing they would have difficulty meeting the tougher regulatory requirements. Others had already ceased operating, or were not doing much business, while some were likely to merge with other agents and brokers to ensure they complied with the new regime's standards. "Considering that we're getting from a stage where a lot of them did not have regular books and records, and that they're not used to filing requirements and capital issues, we think we are making good progress," Mr Baghel told Tribune Business of the intermediaries. "My thinking on these companies and institutions is that you don't change them overnight. Some of this is going to take time. For some of them, it is entirely new. Some have realised a little late that this is a changing dynamic, where they have to be more accountable and meet certain standards and requirements as far as capital. "Thirty-four of them are pretty close to meeting the re-registration requirements of the Act, 25 will fall-off, and we are working with another 25 at this stage." And Mr Baghel added: "It's taking a bit longer to get where we need to be. We're prepared to work with them as long as they're making progress, and it's not disruptive to the marketplace. "There are always a couple who are clearly not following the spirit of the law, and have actually shown they've not acted responsibly. Those are the ones falling into that category of 25 who we will not be issuing the licence to." While the Insurance Act does appear to have sparked a long-anticipated consolidation in the Bahamian insurance brokerage and agency market, one broker, speaking to Tribune Business on condition of anonymity, expressed "disappointment" that the players in an over-saturated intermediary market had not been reduced further. "I was in St Lucia a couple of months ago," the broker said, "and looking at their industry, they had about 25 insurance companies and 10 intermediaries, whereas here it's totally skewed the other way. We have 85 intermediaries and less than a handful of general insurers. Of those five, two are tied carriers, and Royal Star Assurance has made it clear they're not taking on any more agents and brokers." The two tied carriers, of course, are Insurance Company of the Bahamas (J. S. Johnson) and Summit Insurance (Insurance Management). According to the broker, that leaves intermediaries with, apart from RoyalStar, a choice between Bahamas First and Security & General. This reflects the fact that the Bahamian insurance market's evolution has been dominated, and driven, by agent and broker intermediaries, rather than the (relatively) thinly-capitalised carriers that underwrite all risks. Mr Baghel, meanwhile, confirmed to Tribune Business that the other major challenge was bringing Bahamas-based insurance branches into compliance with the new Act. These companies, like the former Imperial Life, which was acquired by Colina Insurance Company in 2005, operate in the Bahamas as branches of their foreign-based parent, not as subsidiaries incorporated in this nation. As a result, under the previous Insurance Act they did not have to be capitalised here, place a deposit with the regulator or meet certain reporting requirements others had to. "There are some likely delays with companies operating as branches of foreign companies, but who are not registered as local companies," Mr Baghel said. "There are going to be some challenges, and some we're going to have to say are not registered under the new legislation. "It's not going to be disruptive to the marketplace, as they're not doing too much business here." The Insurance Commission was working with some "half a dozen" branch operations to bring them into compliance. Many were specialists, providing capacity and/or co-writing business in areas such as title insurance. Some were also underwriting risks that were "hard to place" in the local market. "They've operated here as branches, not having any reporting or deposit requirements," Mr Baghel said. "That's a bit of a change for them, and we're working with them. We recognise that process will take a bit of time." There were no such problems when it came to the main underwriting carriers. "I can say comfortably that anyone who writes any significant amount of business is in compliance," Mr Baghel told Tribune Business. "The domestic carriers are in compliance. The branches are the ones we are still working with, but anyone who writes significant amounts of business or deals with the public has met the requirements." Acknowledging that regulatory reform might take time, Mr Baghel said: "This is not going to be a silver bullet. This is something that takes time. I think it's a change for the better, and I'm quite pleased generally with the response from the industry as a whole. "I think they've worked pretty hard to meet our specific requirements. It's been a lot of work for some of the companies to meet some of the requirements, but this will give us a foundation to build a risk-based regulatory regime, which is what we want to do."