The Tribune

By NEIL HARTNELL

Tribune Business Editor

THE Government was yesterday warned not to completely nationalise healthcare in the Bahamas, the Insurance Advisory Commission's (IAC) chairman also expressing concern that post-CLICO over-regulation would deter insurers from providing "savings-type products".

Addressing a Bahamas Institute of Chartered Accountants (BICA) conference yesterday, Chester Cooper, who is also BAF Financial & Insurance's president and chief executive, urged the Government to adopt a private-public partnership model when it came to its proposed National Health Insurance (NHI) scheme.

In a 'no so cryptic' reference to the lack of success the Government has enjoyed when it comes to running/managing businesses and finance over the decades, Mr Cooper said: "Nationalising health insurance, however, will have a detrimental impact on the insurance sector, and it is perhaps the unknown that private insurers fear the most, not just about loss of business, but losses to the Government, taxpayers and its ultimate sustainability. We know what astute business people governments make."

Arguing that Bahamians would be "best served" by a public-private partnership, Mr Cooper said that while universal healthcare for all was a "noble" objective, the Government had to work with all parties to ensure it happened "in a prudent and sensible way".

"Perhaps a model where it is mandatory for private sector employers to have basic health insurance, whilst the Government pick up the indigents and the seniors, as they do now via PMH and the public system, might be a way to support private enterprise whilst still providing health care for all," Mr Cooper suggested.

Meanwhile, the BAF chief said the capital requirements imposed on annuity products in the wake of CLICO (Bahamas) collapse were acting as a "disincentive" for Bahamian insurers to sell savings products.

The now-insolvent CLICO (Bahamas) had sold products called Executive Flexible Premium Annuities (EFPAs), which were really akin to bank deposits, and the regulators blamed this - and, by association, all annuities - for the company's collapse.

"The story is yet to be told of the colossal failure on the part of regulators in the lack of oversight of CLICO in the Bahamas and elsewhere, as well as the neglect of the corporate governance role of its Directors," Mr Cooper said.

"Actuaries will tell you that it takes great effort to kill a life insurance company. Suffice to restate the obvious, but when the horse bolted and escaped, the gates of the barn were closed reactively behind it.

"The regulators, who saw annuities as a tipping point for CLICO, have implemented punitive measures with respect to the determination of capital requirements for this product, which has been done [sold] successfully in the Bahamas for 100 years without incident. The 20% capital requirement is compounded by the substantial discounts applied to invested assets in addition to the 100 per cent reserve requirement- effectively, a triple whammy, and there is no co-ordination whatsoever between the three.

"The effect on the future is that the regulations, though well intended, will be a disincentive to insurers providing savings type products. This is clearly not in the national interest given the need for more savings in the Bahamas."

Mr Cooper said the Insurance Commission of the Bahamas (ICB) had accepted this point, and the need to transition regulations and reserving to a more risk-based approach. The BAF chief also called for a 'level playing field' when it came to relaxing exchange controls, so that Bahamian insurers could access foreign capital markets.

He added that the Bahamas was also likely to reject the insurance regulatory regime being proposed by the European Union (EU), which was seen as being too onerous and regulation-heavy.

Describing the US Foreign Tax Compliance Act (FATCA) as 'Know Your Customer' "on steroids", Mr Cooper said: "The upside of all the increased regulation and reporting is that we hire twice as many chartered accountants than we did five years ago.

"I would go further in saying that by and large, when I came to the industry 10 years ago, the CEO's were sales people. Now it's financial and compliance people, certainly a sign of the time."