The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian general insurer yesterday said it would have beaten 2016 profit forecasts “by 16-17 per cent” had it not been for Hurricane Matthew, which blew gross claims 69.4 per cent higher than its previous record.

Tom Duff, Insurance Company of the Bahamas (ICB) general manager, told Tribune Business that if its $2.8 million share of those gross losses was ‘written back in’, the company’s performance would have been flat compared to 2015.

However, Mr Duff said ICB was especially encouraged that its balance sheet had emerged “relatively unscathed” from the record loss event for both itself and the wider Bahamian insurance industry, with net equity just shy of $30 million at year-end 2016.

He added that Matthew had been “the perfect storm” in terms of its path, which took the Category Three/Four hurricane near New Providence and Freeport - its two areas of greatest risk exposure.

Looking ahead, Mr Duff said the relatively weak economy and tight disposable incomes will make it hard for Bahamian property and casualty underwriters to increase gross written premiums, ICB’s having fallen by 1.4 per cent year-over-year in 2016.

However, he suggested that ICB and its competitors could be helped by Hurricane Matthew, as losses associated with the event were likely “to halt any further softening” in Bahamian property insurance premium rates.

“That’s the reality of our results,” Mr Duff told Tribune Business of last year’s record claims experience. “Had it not been for Hurricane Matthew, we would have beaten Budget by 16-17 per cent.

“Matthew effectively eliminated our profit for the year, but the encouraging thing for us was that this is the biggest hurricane the industry has faced, and the biggest hurricane ICB has faced, but despite that it didn’t erode the balance sheet.

“It’s pretty encouraging that while we sustained a loss of that magnitude, we came through relatively unscathed. We withstood one of the biggest hurricanes in the Bahamas over the past 80 years, and the balance sheet was relatively intact.”

ICB, the underwriter through which BISX-listed J. S. Johnson placed much of its property and casualty business, saw total comprehensive income plummet from $2.948 million in 2015 to $20,885.

This was almost entirely due to Hurricane Matthew-related losses, with Mr Duff pegging ICB’s net loss, or share of the gross, at $2.8 million. It received just over 2,000 claims.

“The gross loss was $61 million, and the net loss to us was $2.8 million,” he confirmed. “If you add that in, we were flat with the prior year but better than budget.”

Mr Duff said ICB’s previous gross loss record was set in 2004, when Hurricane Frances produced $28 million in claims, followed by Hurricane Jeanne with $8 million.

“That was our worst ever, but this one coming in at $61 million was substantially greater,” the ICB general manager added.

“It’s a bit unfortunate that the path that Matthew took was the one that was least welcome. The hurricane tracked across our main areas of risk concentration in western New Providence and Freeport, where we’re pretty heavily exposed.

“That was the one we wanted to avoid; that particular path, the perfect storm in taking out our exposures. We’re hoping lightning doesn’t strike twice, or hurricanes don’t strike twice and take the same path.”

ICB’s 2016 performance mirrored that of its property and casualty rivals, with net claims more than doubling to $4.186 million compared to $1.993 million in 2015.

This resulted in the carrier seeing a $2.239 million underwriting profit the prior year turn into a $108,236 loss in 2016, with interest and other income from its investments enabling ICB to barely scrape into the ‘black’ at year-end.

Mr Duff, meanwhile, economic and property premium softness had also impacted ICB’s top-line, with gross written premiums down 1.4 per cent at $44.627 million, compared to $45.243 million the year before.

“Last year, premium rates were dropping and a lot of that was passed on to the consumer,” he told Tribune Business. “As well as a difficult economy, we had rates dropping, certainly in the property class, which made it difficult for anyone to grow income short of expanding into other areas or countries.

“Looking forward to 2017, one of the big challenges for ICB is how we grow our premium base in an environment where disposable income for private individuals and businesses is likely to be under pressure.”

Mr Duff explained that Hurricane Matthew was likely to help in this instance, as the losses experienced by Bahamas-based insurers and their global reinsurance partners will likely cease the slippage in property premium rates.

“Over the last few years local property rates have fallen to fairly unhealthy levels on the back of reduced reinsurance costs,” he told Tribune Business.

“What this hurricane will probably do is halt any further softening of property rates. I don’t think there will be significant increases, but it will halt the slide we’ve seen over the last two-three years.

“It will provide an opportunity for general insurers to stabilise rates, particularly in the property class.”