The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

THE MINISTER of Financial Services said  yesterday that the Bahamas should develop insurance as a major component of the financial services industry, telling Tribune Business that domestic underwriters could participate in the international insurance market via collaboration with traditional financial providers.

Mr Pinder, who was a speaker at the opening session of the 22nd annual Caribbean Actuarial Association Conference, noted that international insurance products in the Bahamas have been a smaller part of the financial services market.

He told Tribune Business: “I believe that there are numerous opportunities for expansion, especially in wealth management and insurance products as a whole. I believe that domestic insurers can participate in the international insurance market in conjunction with what we do in the financial services industry, as far as the wealth management sector goes.

“I encourage greater collaboration between the insurers was well as the financial institutions. There are creative life insurance products that allow for certain benefits in wealth management that I think can be offered by our insurers here.

“Insurance internationally has always been known to be creative in new product offerings to customise and be attractive to clientèle. I don’t think that our insurers in the Bahamas are any different. We just need to encourage greater collaboration between the insurers and the traditional financial service providers in the jurisdiction to come up with creative products that fit the scope and mold of what our institutions are offering clientele. We have a leg  up in that regard.”

Mr Pinder added: “There are Latin American countries that are currently facilitating legislation to permit international insurance products to be purchased by their citizens, recognizing that financial services in all regards are now international.

“If we grasp this opportunity in international insurance products, identifying and integrating products into new markets we pursue as part of a comprehensive financial services strategy, the industry has nothing but growth in its future. 

“The Bahamas is not the only financial centre to identify this opportunity; we will need the co-operation of the private sector to further define our offerings. If nothing else, the insurance industry is very creative and extraordinarily competitive, so I have the utmost confidence that you, the private sector, can drive this initiative.  Gone are the days that a single niche can support a country’s financial services sector, we now need to be all inclusive, being a viable market for all parts and products in the industry.”

Mr Pinder further revealed: “Other financial centres are recognising this strategy and seeking to enter, or re-enter, the insurance market as part of their financial services strategy. 

“For example, the Cayman Islands have recently passed and Gazetted legislation that will allow them to compete with Bermuda in the captive insurance market.  Insurance is the new frontier for international financial centres who are looking to expand their industry. The Bahamas must not only keep pace, but get ahead of the developments, and ensure that as we expand our industry, as we develop new geographic markets, we ensure that insurance offerings are a key component of that.

“An example of an insurance offering that might fit perfectly in our established private wealth sector is the International Private Placement Life Insurance, which is a life insurance policy that allows the policy owner to choose the investment advisor that will direct the investment of the cash values within a selection of various global investment vehicles. 

“These are usually stocks, bonds, mutual funds, international real estate funds and many other options.  We can be creative and innovative as we further develop the international insurance product sector of financial services.”

With regards to the domestic insurance industry, Mr Pinder noted that CLICO (Bahamas) failure has brought about a change in the regulatory landscape in the domestic insurance industry through the Insurance Act 2005,  which came into force in July 2009. 

The new Act created the Insurance Commission of the Bahamas (ICB), which is responsible for the regulation of about 70 insurance licensees (both life and health and general insurers, international and captive), 150 brokers/agents and 1,500 sales persons.

Mr Pinder said there was new legislation drafted to provide a regulatory framework for pension plans in the private sector, called the Employees Pension Fund Protection Act.

“We as a Government seek to ensure adequate public consultation on the development of this new regulatory framework.  The Bill seeks to establish the Pension Commission of the Bahamas,” Mr Pinder said.

“The Commission is to administer the Act, monitor the administration and funding of pension plans, and to enforce the provisions of the Act; approve the payment of benefits under pension plans; promote public education on pension plans and their benefits; and advise the minister.

“The Act requires pension funds to be registered with the Commission. The legislation likewise requires private pension funds to be administered by an administrator registered with the Commission.” 

He added: “Regulatory reform in the context of pensions plans is a necessary evolution, especially as more and more private pension plans are put in force, and more and more retirement benefits are found in private pension plans.  Challenges with pension plans in recent times have demonstrated the importance of proper regulation and oversight. Like many areas in the industry, pensions and their importance and oversight is in constant motion.”