By NEIL HARTNELL
Tribune Business Editor
Bahamas First said yesterday’s affirmation of its “excellent” financial strength by the top insurance rating agency was likely the most important ranking in its recent history, due to its $80 million Hurricane Matthew payout.
Patrick Ward, the property and casualty underwriter’s chief executive, told Tribune Business that the timing of A. M. Best’s assessment was especially significant, as it provided “tangible” evidence the company was able to meet all its obligations and maintain a healthy balance sheet at the same time.
He disclosed that the 2,800 Matthew-related claims, which drove the biggest gross payout in Bahamas First’s history for a single event, were three times’ higher than its normal annual claims volume.
“I think this particular cycle of the rating is probably more important than the ones we’ve had in the most recent past,” Mr Ward said, “as it demonstrates that Bahamas First, having gone through the largest single loss event in its history, is able to maintain an A.M. Best rating of A- (Excellent) .
“This demonstrates what they’ve been saying about us in a tangible way; that we’re able to pay claims and go through a significant hurricane event without damaging the financial strength of the company. I think, more than ever, this [rating] is very welcome at this particular point.”
A. M. Best said yesterday that it had reaffirmed the financial strength rating of A- (Excellent), and the long-term issuer credit rating of ‘a-’, for both Bahamas First General Insurance and its Cayman First Insurance Company affiliate.
The outlook for all credit ratings is stable, with both companies being subsidiaries of Bahamas First Holdings.
Mr Ward said the 2,800 Matthew-related claims were triple the volume normally received on an annual basis by Bahamas First General Insurance, and “double” the traditional number submitted group-wide.
“It’s particularly important for us,” he added of the rating, “because I think the insuring public wants to be reassured that the company they are placing their insurance with has the ability to trade going forward, especially given that we are in a difficult trading environment.
Mr Ward told Tribune Business that “there’s some challenging headwinds around us” both in the Bahamas and globally, some of which were referred to by A. M. Best in its analysis, such as the saturated Bahamian insurance market and high level of competition.
“The ratings of Bahamas First reflect its supportive risk-adjusted capitalisation, continued favourable operating performance and leadership position in the Bahamian property and casualty insurance market,” A. M. Best said.
“These factors are supported by Bahamas First’s local market expertise and comprehensive catastrophe reinsurance programme. Partially offsetting these positive rating factors are Bahamas First’s geographic concentration of risk and its dependence on reinsurance as a result of its exposure to catastrophic wind events in the Caribbean.
“Additionally, competition within the Bahamian insurance market is strong, and A. M. Best remains concerned regarding the continuing weak macroeconomic conditions in the Bahamas.”
Mr Ward added: “All the companies in the Bahamas and the Caribbean region have to make sure they are coming up with operational strategies that put them in position to continue trading on a profitable basis, and to be around for the long-term.”
The Bahamas First chief added that Hurricane Matthew’s collective payout, estimated at $400 million, would prompt reinsurers to chare Bahamian underwriters higher premiums to help claw back 2016’s losses.
While this would translate into “some increases” for the premium prices paid by Bahamian homeowners and businesses, Mr Ward said it might not lead to rises across the board.
He explained that premium rates would increase in the areas hit hardest by Matthew, while those less severely impacted would see a modest rise - if at all.
“It’s inevitable there’s going to be some increases, and the insurers that had claims are seeing some movement on their premium,” Mr Ward told Tribune Business.
A. M Best added of Bahamas First’s Cayman First affiliate: “The ratings of Cayman First recognise its solid overall results and stronger capitalisation, as well as management’s expertise and knowledge of the Cayman market.
“Continued improvement in the performance of the company’s health segment has also enhanced overall earnings. Like its affiliate, Bahamas First, these rating factors are also supported by strong reinsurance protection from catastrophe losses.
“Partially offsetting these positive rating factors are the geographic concentration of its operations in the Cayman Islands, and its reliance on reinsurance to protect its earnings and surplus.”