By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
THE Government cannot "damage our revenue position" in seeking to making catastrophic insurance coverage more affordable, the Deputy Prime Minister said yesterday.
K P Turnquest told Tribune Business that the increasing cost of hurricane protection was "of great concern" to the Government as well as homeowners and businesses, but demands for Value-Added Tax's (VAT) removal from property and casualty premiums left it with a difficult 'balancing act'.
Speaking after Bahamian insurers warned their clients to brace for a 15-20 per cent increase in premium costs this year, Mr Turnquest said: "This is an issue that we have been concerned about even before the election, and one that is of great concern to many Bahamians.
"We don't have to go through the issues that are put on the Government, or the burden put on the Government, as a result of the increasing number of residents that are not insured or under-insured because of the cost of coverage today. Mr Turnquest added that rising catastrophe insurance costs were not both an immediate and long-term concern for the Government, "as in a major event the cost would come back to the Government of the Bahamas"
"To the extent we can strive and encourage individuals and entities to secure third party coverage, that is obviously a very desirable position for us," he added. "The exposure of the Government to individuals who do not have coverage or are under-insured is significant, and you can't really plan for that."
Hurricane Matthew illustrated the kind of burden that will be imposed on the Public Treasury and Bahamian taxpayer due to the reduction in insurance penetration, the Deputy Prime Minister yesterday revealing that the Government had spent more than $10 million repairing private homes that were either not covered or under-insured.
Hurricanes Irma and Maria, the two storms that devastated large parts of the Caribbean and Florida in 2017, have prompted 2018's major increase in reinsurance costs as companies look to recoup $135 billion in disaster-related payouts from last year.
Given that Bahamian insurers, with their relatively thin capital bases, have no choice but to purchase huge quantities of reinsurance to help them underwrite billions of dollars in risks annually, this nation is effectively a 'price taker'. Local companies are thus forced to pass on increased reinsurance costs to their clients, hence this year's 15-20 per cent premium rise.
To mitigate these increased costs, property and casualty insurers have again urged the Government to examine removing VAT from insurance premiums - especially since the Bahamas is one of few nations that impose it on this product.
Mr Turnquest, though, said the Government had to balance its revenue and fiscal needs with any desire to make property and casualty insurance more affordable for Bahamian consumers.
"We are working through this issue with the industry as best we can to come to a meeting of minds," he told Tribune Business. "We are very concerned about the impact this will have, the significantly increased cost of reinsurance, on individuals' ability to acquire insurance.
"We are looking at the problem, and willing to take whatever suggestions might be put forth without damaging our current revenue position."
Mr Turnquest added: "It's like all the policy choices before us: None of them are easy. It's always a trade-off between providing advantages to the consumer and taking care of our fiscal responsibilities.
"We have had several sit downs with the insurance industry, and continue to have an open door for further discussions on how they see us moving forward in this regard. We are all about the ease of doing business, being competitive and making sure the product is affordable to consumers, but at the same time we have responsibilities as a government."
The Bahamian insurance industry has also expressed concern over a $30 million VAT refund owed on its Hurricane Matthew claims payouts, but Mr Turnquest yesterday indicated the Ministry of Finance was disputing the amount and some of the requests.
The Deputy Prime Minister added that the Government's position was "supported by the law", and he urged insurers to use the appeals process if they believe they have been wronged.
"We have addressed the issue of VAT refunds with the insurance industry," he told Tribune Business, "and explained to them our rationale, and how we derived our position.
"We believe we are in accord with the VAT legislation, and to the extent they still have a discrepancy there is an appeals process they can avail themselves of."
He added: "We believe that our position is supported by the law. Again, there are varying cases, so there are some that are owed legitimate refunds that we can support, and others we have questions about.
"They [the insurers] are fully aware of our position, and it's a matter of them lodging any objections they may have so it can be dealt with appropriately."
Mr Turnquest acknowledged that there were still numerous outstanding VAT refund claims from other industries and companies, and said: "We are working our way through them with a view to settling them as quickly as we can. That's our commitment."
Comments
The_Oracle 6 years, 3 months ago
The Governments mistake is taking the same political road in this, by rebuilding private homes, as it has taken for decades in all other spheres of Government operations: "The Government will give-The Government will look after-The Government will spend" The Government is a most incompetent set of Power hungry thieving despots who have dug for the country the hole it is in, the digging of which illustrates the Governments only competency.
Porcupine 6 years, 3 months ago
This article exemplifies the plight of the Bahamian. The GOVERNMENT is worried about THEIR revenue position, despite the fact that they are taxing the average Bahamian to death. As if, the government is not of and for the people. Today's Bahamian, and everyone else who lives here, is paying dearly for the abject incompetence of past and present governments who have lied, cheated and stolen to enrich themselves. The government justifies their extremely high tax rate based on what THEY need to make ends meet. Which includes making restitution for the decades of poor business decisions, incompetence, greed and corruption. All on the backs of the poor Bahamian who is taxed on everything they touch, often taxed many times over on the same article. A natural decent person would recognize that taxing taxes is immoral, but not here in The Bahamas. We are taxed on duty, transportation, hurricane insurance, even health insurance. How obscene! The Bahamas is screwed, whether or not most people can see what is coming. Our government is in exactly the same position as a crack addict who has spent their last dime. They are beholden to the global financiers. The Bahamas is not special, despite the nonsense we hear on the radio. We will be forced to; suffer pension reductions, cuts to our social services, to sell off our natural resources, sell our national assets, and see real wages be reduced even further in relation to cost of living. The economic situation in The Bahamas is dire. No magic bullet can fix it. Our past leaders have royally screwed The Bahamas. It requires a D- education, or no education at all, to not understand these fiscal realities.
JohnDoe 6 years, 3 months ago
Every time our Minister of Finance opens his mouth all I can do is shake my head as it certainly appears that the job maybe bigger than his capabilities. Shelter and food are basic human needs. If there is widespread dislocation in either of these basic human needs due to a catastrophe what do you think will happen to productivity in this country and your tax revenue position. Think about Puerto Rico Mr. Minister, because if uninsured businesses are closed and employees are not working then what do you think would happen to your Fiscal Position then in addition to the other potential social/economic consequences. We are willing to borrow hundreds of millions after a catastrophe to help persons repair their homes but we cannot make tax concessions to incentivise persons to purchase adequate business/homeowners insurance before a catastrophe. C'mon man, if you are gonna make statements then please make some sense and stop trying to just sound like you are smart because it is neither smart or prudent for a Minister of Finance to utter these type statements.
Further, I am still deeply troubled by our $USD FX borrowing and debt expansion to repay B$ debt at a time of record level liquidity in the domestic banking system. I am also deeply troubled with our flirtation with NHI when we damn well know that we cannot afford it in its current form as a nation but more importantly we do not have the infrastructure to support the increased demand that will inevitably result from its implementation.
proudloudandfnm 6 years, 3 months ago
Want to increase revenue Tommy?
Eliminate all duty. Increase VAT to 15%.
And watch our country grow.
We have lost and wasted way too much money on government incompetence and corruption. Reduce government staffing by 50% over the next 5 years. After you eliminate duty jobs will grow on trees. Of course hiring a government employee is a huge risk, they've been paid to do nothing for too many years. But that, is entirely their problem, you have to work to live. A concept they need to absorb...
If government tries to tax us again we need a general strike. Close the country down. Time to fight government incompetence and corruption. NO MORE TAXES!!!
Millions and millions lost on EVERY SINGLE BAHAMIAN GOVERNMENT RUN CORPORATION BECAUSE OF INCOMPETENCE AND CORRUPTION. EVERY SINGLE ONE...
Time for this crap to stop. Look at the country today. Falling apart. How many islands in or near bankruptcy? Every government owned building falling apart due to zero maintenance. Salaries are shit and expenses are exorbitant. Something has to give and it aint us. Time for us to CONTROL OUR USELESS GOVERNMENT....
OldFort2012 6 years, 3 months ago
There are some matters the government should interfere with (for the common good) and some others where it should not and let the private sector do the job.
Hurricane insurance is precisely a matter where the government SHOULD get involved. It is the height of stupidity to let undercapitalized "joke" local insurance companies sell insurance and then immediately buy reinsurance abroad. What good is that?? Money leaves the country and we only see a percentage of it back over the years.
Why not start a National Hurricane Insurance Fund? The government should charge everyone a small insurance premium, say $200/year. Since there must be about 100,000 households in the Bahamas, that would be $20m per year. All proceeds can be invested in local bonds and lower the deficit interest payments. We are not going to have a major hurricane every year and as a rule only distant islands with few households will be hit. This fund would do very well financially, all money would stay here and we would certainly do better than now, when we have no insurance.
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