The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Regulators say “significant progress” has been made in combining the Bahamian insurance industry’s regulatory regime into one law after the sector saw gross written premiums increase by $60m in 2022.

Michele Fields, the Insurance Commission’s superintendent, writing in the regulator’s just-released 2022 annual report confirmed that work to amalgamate the Insurance and External Insurance Acts is continuing after the initiative was sparked by the removal of preferential tax benefits for foreign entities to meet the European Union’s (EU) demands.

“The removal of preferential exemptions and the Commercial Entities (Substance Requirements) Acts of 2018 encouraged the harmonisation of regulatory and tax treatment of foreign and domestic entities, and served as the catalyst for the amalgamation of the insurance legislation,” she said.

“During 2022, the Commission made significant progress in amalgamating the Insurance Act 2005 and the External Insurance Act 2009. In 2023, the Commission will continue with the review and amalgamation of the regulations, following which a final industry consultation will take place.” The Commercial Entities (Substance Requirements) Act 2018 was this week replaced by upgraded legislation.

Elsewhere, Mrs Fields said total gross written premiums generated by the Bahamian insurance industry - both life and health and property and casualty underwriters combined - increased by 5.5 percent year-over-year in 2022 to account for a sum equivalent to 7 percent of national economic output.

“The industry continues to be a key contributor to the economy, generating $963.8m (2021: $913.2m) in gross premiums in the domestic market, which constituted approximately 7.5 percent of the country’s nominal GDP. Overall, the industry reported growth in net income of 11.8 percent over the prior year. Premium taxes from the sector amounted to $29.6m (2021: $26.3m),” Mrs Fields wrote.

“The financial results of the Commission for 2022 reflect prudent management and stewardship of entrusted funds. The Commission’s income of $8.4m (2021: $7.6m) is derived primarily from the retention of 25 percent of premium taxes collected from registrants on behalf of the Government.

“Other sources of income include license and registration fees and interest income. Total expenses in 2022 amounted to $5m, an increase of 10 percent over the prior year, largely due to increased staff complement and the return to in-office operation.”

The Bahamian insurance industry’s total combined profits rose from $47.534m in 2021 to $53.167m last year. A significant amount of the increase in gross written premium income, especially on the general insurance side, will have been driven by an increase in property and casualty rates due to the “hardening” of reinsurance costs following Hurricane Dorian and similar disasters elsewhere in the Caribbean and rest of the world.

“During 2022, gross premiums in the general insurance market amounted to $479.1m (2021: $427.8m), an increase of 12 percent,” the Insurance Commission said. “This increase in gross premiums is as a result of growth in the volume of business and rate increases across the market. In particular, the cost of catastrophe cover on property insurance has been impacted by increasing reinsurance rates.

Property, motor and liability insurance were the three largest lines of business accounting for approximately 69 percent, 16 percent and 9 percent of gross premiums respectively. These lines of business experienced growth in premium during the year. Property insurance grew by $36.3m (12 percent), motor insurance grew by $7.7m (12 percent), and liability insurance increased by $8.9m (27 percent).

“The marine, aviation and transport line of business experienced marginal growth of $1.8m (3 percent), while the pecuniary loss and personal accident lines, which account for less than 1 percent of gross premiums, shrunk by 25 percent and 46 percent, respectively, compared to the prior year,” the regulator added.

“The general insurance market finished the year with a net claims ratio of 27 percent, and a combined loss ratio of 70 percent. Net claims increased by $10m (45 percent) in this market and totalled $32.2m at the end of the year (2021: $22.2m).

“The motor line experienced a 62 percent increase in net claims to $23.2m (2021: $14.8m), and the property line increased 106 percent to $6m (2021: $3.1m). These lines of business accounted for approximately 90 percent of the claims; property – 18.5 percent, and motor – 71.6 percent.”

Continuing with its analysis, the Insurance Commission said: “General insurers use reinsurance to mitigate their risk. Companies cede between 70 percent to 90 percent of insurance risk to highly rated reinsurers, as determined by A. M. Best. The Commission reviews the reinsurance treaties of general insurers annually to ensure that the reinsurance programmes appropriately mitigate risks and adequately protect insurers’ capital.

“At December 31, 2022 general insurers reported a retention ratio of 25.2 percent (2021: 26.2 percent), with net premiums of $125.5m (2021: $112m), an 8 percent increase over the prior year.

“Net underwriting income for the year amounted to $36.1m (2021: $39.4m), a decrease of 8 percent. Operating expenses rose by $2.5m (7.8 percent) to $33.9m (2021: $31.4m). Nonetheless, general insurers reported a 20 percent increase in net income to $16.8m (2021: $14m) after taking into account the investment income.”