Insurers ‘Trying To Hold Line’ On Rate Increases


Tribune Business Editor


Bahamian insurers yesterday warned businesses and homeowners that premium prices are again coming under “upward pressure”, with one pledging: “We’re trying to hold the line.”

Tim Ingraham, Summit Insurance’s president, told Tribune Business an increase in reinsurance costs for 2022 “would not surprise me” due to a reduction in market capacity as several companies pull-out after sustaining multi-billion dollar weather-related catastrophe loss payouts in recent years.

Affirming that he is “not expecting any decrease”, the Summit chief said that while the magnitude of any reinsurance hike has yet to be determined at least some of this increase may be passed on to businesses and homeowners via higher property insurance premiums next year.

With some $2bn worth of insured risks on their books, but equity capital bases of around $50m or just above, Mr Ingraham said The Bahamas’ property and casualty insurance market was essentially a ‘price taker’ where premium prices are “pretty much out of our control”. This is because they are driven by reinsurers, and the price they demand for insuring the bulk of this nation’s risk.

“I think it’s fair to say it’s what we refer to as a hard market,” he told this newspaper of ongoing negotiations with reinsurers over 2022 treaties. “We’ve seen a number of reinsurance companies withdraw from providing catastrophe insurance, not just because of what’s happening in this region with Dorian in 2019, and Harvey, Irma and Maria in 2017-2018, which were ground-breaking storms, but we’ve seen the US coast get hit quite a few times by storms.”

Pointing to this year’s flooding disasters in Belgium and Germany, Mr Ingraham added: “There’s a number of reinsurers where Boards have said: ‘We’d like you to reduce your exposure to this type of business’. When you get that pull back, you have supply and demand issues, where those supplying can demand a bit more for it. It’s something we grapple with as an industry.”

While the magnitude of any impact to Bahamian premiums from rising reinsurance rates has yet to be determined, he said of the latter: “I certainly don’t expect any decrease. We’re still in the middle of negotiations, but it would not surprise me to see upward pressure on rates.

“I’m sure my colleagues are doing the same thing, pushing back and saying we’ve had a rate increase since Hurricane Dorian and hoping we can pacify reinsurers with some of that. But it’s very much a seller’s market, and we have to negotiate based on relationships built up over the last 20 years to come through for us.

“That’s not to say we won’t get an increase, but it might help to temper the magnitude. We won’t know the outcome until all is said and done, and all of the treaties are signed and sealed. It’s still a bit early; in the next week or two we may know a bit more, but it would not surprise me if reinsurance rates trend up a bit from where they are at the moment.”

Mr Ingraham said any reinsurance cost increase “usually means” a rise in Bahamian property and casualty premiums, as local underwriters with their relatively thin capital bases usually have no choice but to pass at least a portion of this on to their customers.

“It is very much out of the control of local insurance companies,” he reiterated. “We’re negotiating with reinsurers now, and it’s very much up to them what rates we end up with. We can negotiate as much as we can, but it’s pretty much out of our control.

“When you look at the amount of reinsurance each company purchases, we rely heavily on our reinsurance partners and that gives them significant control over what happens with industry’s position with clients. We cannot go without it. It’s impossible to do business without it.

“If you do business in this area, and have $2.5bn in sums insured on your books and have $50m in net capital, you can see the potential problem here. A loss affecting 10 percent of your business can potentially impact you beyond your equity capacity.”

Anton Saunders, RoyalStar Assurance’s managing director, told Tribune Business that reinsurance negotiations were “progressing a little slower than in prior years” due to a combination of COVID-19 and the US market only starting its own discussions now. Insurers there typically go out ahead of Latin America and Caribbean, but both areas are now talking to reinsurers at the same time.

“Let’s put it this way,” he said. “We have always said that, for The Bahamas market, the rates are technically where they are supposed to be and hopefully we will not have increased rates in The Bahamas next year. That is all subject to final negotiations with our reinsurance partners.

“We are trying to hold the line on rates in The Bahamas because we think the rates are very stable, and I think reinsurers appreciate that for The Bahamas they are technically where they should be. We hope and pray there is no increase in rates, certainly that which we have to pass on. If it’s a small increase in reinsurance costs we’ll absorb it as best we can.”


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