The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas is “on the wrong path” in efforts to establish itself as a captive/international insurance jurisdiction, a well-known executive has warned, adding that it could see $5 billion in gross premiums within five-seven years if it altered course.

Guilden Gilbert, a principal at Chandler Gilbert Insurance Associates, told Tribune Business that unless the Bahamas changed its regulatory and promotional approach, it would have “a difficult” time carving out its niche as a captive domicile.

Admitting that the Insurance Commission of the Bahamas (ICB) would “not like to hear this”, Mr Gilbert urged it to appoint a full-time official whose sole responsibility would be supervising captives. He warned that unless this person was someone well-known in the international insurance industry, with ample experience in the captive sector, all the Bahamas’ promotional efforts would be for nought.

Mr Gilbert said these concerns had been reinforced by feedback generated by a captive manager, AMS, that Chandler Gilbert works with. “He’s surveyed potential clients, other captive managers, and the feedback is they’re not particularly impressed with the Insurance Commission,” he told Tribune Business.

“If the Bahamas is going to enter the arena, it needs to commit itself and bring in persons to head up captive supervision who have the reputation. That reputation alone can bring business.”

The former Bahamas Insurance Brokers Association (BIBA) president added that a statement by the responsible Cabinet Minister, telling the world this nation was “open for captive business”, was long overdue. But promotional efforts would also remain stymied as long as the sector did not feature at financial services conferences.

The Bahamas Financial Services Board (BFSB) last week identified the captive/external insurance industry as one of its three marketing priorities for 2013 but, while wishing this effort well, Mr Gilbert said little progress had been made to-date despite being talked about for more than a decade.

“If it can happen, I think it will be very exciting,” Mr Gilbert told Tribune Business of the captive insurance drive. “I think it’s going to be difficult. I’m not saying it’s not going to happen, but it’s going to be very difficult if we continue on the path we’re on now. Certain things, positions have to change to make this market an attractive domicile.

“I’ve been here for 16 years now, and we’ve been talking about this for the last 10-11 years. Not once has the Government Minister responsible made any statement to the international press that the Bahamas is open for captives.

“Any new jurisdiction, which is what the Bahamas would be viewed as, would need to show that the sector has the full backing and support of government. I’ve been saying for years that the relevant Minister needs to stand up and say: ‘The Bahamas is open for captives’. To date, that has not happened.”

Mr Gilbert said the failure to mention captive insurance at financial services conferences was another drawback for the Bahamas. “You can’t promote the jurisdiction without talking about the product,” he added.

Nor would the BFSB’s promotional efforts bear fruit unless the Insurance Commission appointed “someone known and respected in the international insurance industry” to handle captives and other aspects of that business.

Pointing out that Bermuda had such a person in Jeremy Cox, Mr Gilbert said the Bahamas would need to soften its ‘Bahamianisation’ policy to succeed in this sector.

“I fully understand Bahamianisation,” he told Tribune Business, “but in an industry that can be very fickle, the sector wants someone who it knows and can trust.

“The reality is there is no one locally who can fill that role in the first instance. Long-term, that may change, but if we are to be recognized as an international insurance jurisdiction we need someone who can handle captive applications full-time, and who knows - and is experienced in - the industry.

“The difference here is that the insurance regulator has a consultant who comes in with reference to captives. We need someone full-time.”

Mr Gilbert said tiny Caribbean jurisdictions, such as Anguilla and Nevis, had both appointed recognised regulators – a move that had “lent credibility” to both islands. They were now starting to establish their respective captive niches, he added, and were growing their business books.

“It’s all well and good for the BFSB to market the Bahamas as a captive domicile, but people are going to ask: ‘Who’s the regulator?’ ‘What’s the likelihood that my applications are going to be put through in a timely manner?’” Mr Gilbert said.

“That’s not to speak ill of the Insurance Commission, but if we’re going to enter the market, we need to put someone in who’s known and can attract business.”

Pointing out that the global captive insurance industry was “very competitive”, Mr Gilbert said the Bahamas “should not begin to think about targeting” the high-end, large captive business that Bermuda and the Cayman Islands had built for themselves.

This nation’s niche, he suggested, lay with small and medium-sized captives. He also recommended that the Bahamas stay away from the US, given that South Carolina was already established in the business, and the likes of Florida, Delaware and Maine were looking to get into the industry. Regions such as Latin America and Asia could instead provide fertile ground.

Although the Bahamas is unlikely to get near Bermuda’s annual $40 billion in gross written premium, via the captives it creates for Fortune 100-type companies, Mr Gilbert said this nation still had the ability to generate business quickly.

“There’s no reason why the Bahamas cannot get up to $5 billion in gross written premium if it is handled correctly,” he told Tribune Business, “with an aggressive marketing campaign and the Insurance Commission getting the right person in. Within five-seven years it could reach that level.”

But, illustrating just how far behind the Bahamas is in this sector, Mr Gilbert described that $5 billion figure as “not a lot”. Such a sum could be handled by just one or two captive management companies.