The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas First yesterday pledged that it would “not lie down” in the face of “aggressive” price undercutting by an upstart Caribbean insurer, which is offering discounts of 20 per cent or greater to existing market premiums.

Patrick Ward, the property and casualty underwriter’s chief executive, told Tribune Business that it would “defend business it wants to retain” in the face of a concerted drive by Netherlands Antilles General Insurance Company (NAGICO) to steal market share.

NAGICO has been in the Bahamian general insurance industry less than a year, having been granted a licence in March 2012, and Mr Ward expressed concern that its premium price ‘undercutting’ would “destabilise” the market and harm consumers.

Contacted by Tribune Business, after this newspaper was informed by insurance industry contacts about NAGICO’s tactics, Mr Ward confirmed: “That is what we’re hearing as well.

“We have come across instances that have been reported to us by our agents and brokers indicating that NAGICO, in particular, seems to be very aggressive on the pricing side.

“Some of the brokers and agents representing them have been indicating to market participants and potential clients a number of issues that would indicate they’re prepared to be extremely competitive.

“They’re making statements that they can unquestionably save money on property insurance, which is a clear indication that they’re trying to price below market levels.”

When asked how much NAGICO was attempting to undercut established Bahamian underwriters on property and casualty premiums, Mr Ward told Tribune Business: “From the examples we’ve seen, some of them are indicating 20 per cent or greater than 20 per cent below current market pricing”.

Questioned as to how existing Bahamian-owned insurers would react, the Bahamas First chief executive said: “I think the market will respond in the same way to this threat as it has to those in the past.

“Those companies that have long-established businesses and clients will do everything within reason to retain that business, so I don’t anticipate NAGICO will have any more than a limited number of successful hits. This is not the first time it has happened in the Bahamas, and it won’t be the last.”

Still, Mr Ward conceded that NAGICO’s tactics were “a concern”.

He added: “All of us [Bahamian insurers] have cost bases that are not too dissimilar, and we always have concerns when someone comes into this country, prices aggressively and destabilises the market. That’s not a good thing in the long-term for consumers.

“Bahamas First has taken the position that we will defend business we want to retain, and not lie down and allow a new entrant to enter the marketplace and steal the share of it we have.”

Mr Ward said there were “a number of competitive threats on the horizon”, although he said another potential entrant to the Bahamian market, Antigua-based Caribbean Alliance Insurance Company, was unlikely to employ the same strategy as NAGICO.

Tribune Business’s insurance industry contacts yesterday said NAGICO had been expanding its agent/broker network in the Bahamas.

It had initially started writing business through Tavares & Higgs, but rival agents informed this newspaper that clients were also being supplied with NAGICO quotes through Cole Insurance Brokers and Agents and AFS Insurance Brokers.

Confirming that Bahamas First’s stance was “we will match them where necessary”, one broker, who requested anonymity, told Tribune Business he had been allowed to match NAGICO’s price on a $40,000 property insurance premium. The business was successfully retained.

“I don’t think they’re [NAGICO] getting much business as yet,” the source said. They pointed to the fact that NAGICO had a lower rating from A. M. Best, the global insurance industry’s rating agency, than its rival Bahamian property and casualty insurers. The likes of Bahamas First and RoyalStar Assurance have ‘A- ratings, while NAGICO’s is ‘B++’.

The ratings difference was emphasised by Mr Ward, who said: NAGICO is a ‘B’ rated company. You’re not necessarily comparing apples with apples when you lay a ‘B’ company alongside an ‘A’ rating.

Other insurance industry sources also suggested Bahamians were likely to be wary of Caribbean insurers, such as NAGICO, given that the CLICO (Bahamas) insolvency was still fresh in the minds of many.

And they also questioned for how long NAGICO could keep aggressively ‘undercutting’ on premium prices, given that reinsurers would want to be sure of getting a return on their invested capital.

Others, though, may welcome NAGICO’s arrival and tactics, given that it seems to have ‘shaken up’ the Bahamian property and casualty market, with the increased competition possibly leading to reduced insurance costs for Bahamian businesses and consumers. Whether this can be sustained is another matter.

NAGICO meanwhile appears to have criticised the Insurance Commission of the Bahamas’ licensing and approval process, branding it as “complex and tedious” in a release issued to announce its entry to this market.

The company said: “After more than a year of focused, determined effort, NAGICO was, in March 2012, granted a license to operate a general insurance company in the Bahamas.

“The process to get licensed by the Insurance Commission of the Bahamas is complex and tedious - a system of checks and balances, verifications and guarantees - and this accomplishment of ours again speaks volumes about the strength of the company and the vision and determination of its leaders.

NAGICO Insurances (Bahamas) Ltd is based in Nassau, and its parent added: “One of the biggest challenges we will face in this nation of 700 islands is learning the local industry culture and understanding the existing relationships and competitors.

“Another critical area of focus for us must be underwriting - ensuring that only quality business is placed on the books - because although the Bahamas, with an estimated property market of $350 million, holds significant promise, these islands are frequently visited by hurricanes of differing magnitudes.

“But we know this business well. Our underwriters and risk managers are among the best in the region, and our reinsurance protection second to none. We are confident that the NAGICO brand of insurance will ensure our success and longevity in the Bahamas...... Game On!”

NAGICO said it operates in 16 Caribbean territories, and takes in a collective $115 million in premium income annually.