The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A TOP insurance executive has hailed the decision not to impose additional regulatory requirements that were "in the opposite direction" to improving the 'ease of doing business'

Patrick Ward, Bahamas First's chief executive and president, told Tribune Business that including property and casualty insurers in the Financial Transactions Reporting Act's (FTRA) definition of 'financial institutions' would have imposed an unnecessary and significant cost/bureaucratic burden on the sector.

Property and casualty insurers, frequently known as general insurers, were removed from the definition and consultation between industry and the Government, and Mr Ward said: "It's certainly a big relief from our perspective.

"It would have created some enormous administrative burdens for us, and added costs to our operations at a time when we're trying to mitigate additional cost developments both from our perspective and the consumer's perspective.

"We're trying to create an environment where the ease of business is a major part of the focus, and that would be going in the other direction, especially if you look at the risk or exposure. One would have to question whether it's worth the effort in relation to what you're trying to achieve."

Property and casualty insurers were initially included in the FTRA's definition of 'financial institutions' as the Government sought to address deficiencies in the Bahamas' anti-crime defences identified last year by the Caribbean Financial Action Task Force (CFATF), ahead of a June evaluation by that organisation's Paris-based parent, the FATF.

The insurance industry, though, argued that this was 'overreach' because the FATF's globally-accepted anti-money laundering standards did not include general insurance on the 'defined institutions' list.

The sector argued that the Bahamas was going beyond global standards in a move that would have forced property and casualty insurers to undertake Know Your Customer (KYC) due diligence on all accounts, adding significant costs and 'red tape'.

Mr Ward told Tribune Business that the relatively small premiums paid for auto and property insurance, in most cases, made it "very difficult" for the sector to be exploited by money launderers.

"It would have been very difficult to implement a system that allows us to introduce a new regime without adding more cost and complexity to the way we do business," he added, "so we're very happy it's not something we have to actually do."

Mr Ward was speaking after A. M. Best, the insurance industry credit rating agency, reaffirmed the Financial Strength Rating of A- (Excellent) and Long-Term Issuer Credit Ratings of 'a-' for Bahamas First and its Bahamian and Cayman subsidiaries.

A. M. Best said the ratings reflected the group's "balance sheet strength", which it described as "very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM)".

"The very strong balance sheet strength is derived from risk-adjusted capitalisation at the strongest level and the group's ability to raise capital if needed, which is partially offset by a high dependence on the reinsurance markets to protect capital in the event of natural catastrophes," A. M. Best said.

"The investment portfolio, while conservative in nature, is subject to regulatory constraints and, in a large part, the sovereign rating of the Bahamas. In addition, the operating companies pay dividends to Bahamas First to service debt, which may constrain capital growth."

The rating agency added: "The group's operating performance has been favourable, especially in years where there have been few major hurricanes impacting the Bahamas or Cayman Islands. Above-average profitability has supported capital growth, despite highly competitive markets and weakened economic conditions.

"The business profile is considered neutral due to its leading market positions and operations in two territories, and recognising that the Bahamas represents the larger exposure sphere. The group benefits somewhat from geographic diversification and product mix, which helps stabilise overall results through market cycles and further reduces the impact of catastrophic events.

"Furthermore, ERM appears to be appropriate for the group's size and the complexity of its underwriting, investment and other risks based on its developed ERM framework and controls, which include a capital management policy."

Looking to the future, A. M. Best forecast: "The group will continue to produce favourable earnings in non-catastrophe affected years, and its strong surplus position and comprehensive reinsurance programme will continue to keep the balance sheet very strong."