The Tribune

By NEIL HARTNELL Tribune Business Editor SCOTIABANK (Bahamas) says its group homeowners insurance programme is growing in size every year due to the "stress" in its $1.498 billion loan portfolio, as it pledged to resolve any concerns the industry regulator and private sector may have over the initiative. Kevin Teslyk, the bank's managing director, pledged to "reach out" to both Bahamian insurance brokers and underwriters after fresh worries were raised via a Tribune Business article on Friday, and he pledged: "Scotiabank is not in the business of insurance." The Scotiabank (Bahamas) chief was responding after Bruce Ferguson, head of New Providence-based brokerage, Professional Insurance Consultants (PIC), disclosed to Tribune Business that two of his Family Island clients had been contacted by the bank's officials and offered the inducement of lower premium rates to switch to its group homeowners' coverage. This, Mr Ferguson alleged, was in spite of Scotiabank (Bahamas) knowing that both his clients had already fully renewed their homeowners insurance policies. He implied that this effectively meant the bank was going against its own stipulated processes, as Scotiabank (Bahamas) mortgage clients were only supposed to be placed in the bank's group homeowners policy if they failed to produce evidence that coverage had been renewed in full by the due date. Mr Teslyk, though, was fairly dismissive of Mr Ferguson's assertions, telling Tribune Business when the case was put to him: "Allegations are allegations." He indicated that he was disappointed that the Bahamas Insurance Brokers Association (BIBA), which represents the likes of Mr Ferguson, had not come back to him in the 2012 New Year, as it had promised, with any new concerns raised by its members. "What's frustrating about the process from my perspective is that the past president of BIBA, Mr [Vaughn] Culmer, indicated he would be following up with me in the New Year to raise any additional concerns. That was the message," Mr Teslyk told Tribune Business. Promising to "reach out" to BIBA himself, Mr Teslyk suggested the organisation's failure to-date to come back to him was probably why "there's confusion here yet again" in relation to Scotiabank (Bahamas) group homeowners insurance policy. He added that the group policy, how it worked and what BIBA's members needed to do on behalf of their clients who held Scotiabank (Bahamas) mortgages, was discussed between the bank and Mr Culmer in early 2011. Mr Teslyk, though, said he was "not sure how well understood it is by the [BIBA] members". Questioned about Mr Ferguson's complaint that Scotiabank officials were encouraging mortgage clients to switch to the group policy, despite the bank knowing they were fully insured with their existing underwriter, Mr Teslyk described the latter aspect as "an assumption". "I think that's an assumption," he told this newspaper, "because until and unless the customer delivers evidence of insurance being in full force, with the bank as loss payee, they will go into the insurance programme." Nevertheless, Mr Teslyk pledged to resolve any concerns harboured by the Bahamian insurance industry or its regulator, the Insurance Commission of the Bahamas (ICB), this newspaper disclosing that complaints over how Scotiabank (Bahamas) group insurance policy was being operated had already been made to the newly-empowered supervisor. "I will reach out to the new president of BIBA [Tanya Woodside] and the Insurance Commission of the Bahamas, and touch base with Mr Ward and Mr Rollins [head of Bahamas First and Security & General], and seek to hear their concerns and speak to our interests," Mr Teslyk told Tribune Business. "Hopefully, we will resolve everything to everyone's satisfaction." The Scotiabank (Bahamas) group homeowners policy is being administered by BISX-listed agent/broker, J. S. Johnson, and underwritten by Caribbean-based carrier, Island Heritage. But, in light of the allegations made by Mr Ferguson and others, Patrick Ward, Bahamas First's president and chief executive, has questioned whether the bank could be breaching insurance laws by contacting clients direct and urging them to switch coverage. This concern, though, was emphatically dismissed by Mr Teslyk. He told Tribune Business: "Our bank is not in the insurance business. Scotiabank is not in the business of insurance. We're not in the business of soliciting and advising on insurance business." Scotiabank (Bahamas) does not have an insurance agent/broker licence, even though it has long sought one, as its two Canadian-owned rivals, FINCO and CIBC FirstCaribbean International Bank (Bahamas), both have such standing. Explaining the process, Mr Teslyk said Scotiabank (Bahamas) was contacting all its mortgage clients some 90 days before the renewal date for their homeowners coverage to remind them of the need to do so. Registered and regular mail were being used, and he pointed out that maintaining full insurance coverage on their mortgaged property was part of the loan contract between homeowner and bank. Follow-up phone calls were also being used to remind Scotiabank (Bahamas) clients of their obligations, and Mr Teslyk said those initially placed on the group homeowners programme were being "fully reimbursed" for sums added to their monthly repayments if they subsequently provided evidence of full coverage. To cover the premium costs of the group homeowners programme, Scotiabank (Bahamas) adds a sum to the borrower's monthly mortgage repayment, but Mr Teslyk added: "We are reversing that charge if they bring in evidence." Scotiabank (Bahamas) started its group homeowners insurance policy to ensure that its estimated $1 billion mortgage portfolio, and its clients, were protected from being exposed to the risk of 100 per cent loss if the latter either failed to insure or underinsured their homes. "It's a big problem, and became a bigger problem in the crisis," Mr Teslyk told Tribune Business, in respect of mortgage borrowers who either failed to insure, or underinsured, their homes. "You have an element of customers who don't have the financial means, who are over-extended and whose loans are in default, non-accrual......... Because of the strain, the difficulty has gotten worse." Scotiabank (Bahamas) was "broadly consistent" with the commercial banking industry average for arrears and non-performing loans, which at end-December 2011 stood at 19.3 per cent and 13 per cent of the total loan portfolio respectively. "The size of the group insurance programme has increased year-over-year because of the stress," Mr Teslyk told Tribune Business, adding that while Scotiabank (Bahamas) was attempting to "aggressively" work with clients to restructure their credit obligations, it was impossible for many to recover in the short-term. The Scotiabank (Bahamas) chief executive, meanwhile, disputed Mr Ward's assertions that the group homeowners programme eroded customer choice. "That I respectfully disagree with," Mr Teslyk said. "The customer always has the choice to choose what insurance is appropriate for their property. They have obligations under their contract with the lender. "The bank, under the same contract with the borrower, has certain rights, title and obligations. As soon as the Insurance Certificate is not produced, there is a default under the agreement, and the customer does lose the element of choice. They have full flexibility and choice up to the expiry date of their insurance; up until then."