The Tribune

The Bahamian insurance industry may have to wait until mid-2017 to return to strong growth, with one leading underwriter saying its main goal is to “hold the fort”.

Timothy Ingraham, Summit Insurance’s president, told Tribune Business that his mid-2017 estimate was effectively ‘a best case scenario’ dependent largely on Baha Mar and the Government’s National Health Insurance (NHI) plans.

“I would have thought that, if we got the hotel project [Baha Mar] on stream at the end of this year, we’ll need 18 months after that to get things going,” Mr Ingraham said.

“That will also depend on what happens with National Health Insurance (NHI). If the Government pushes ahead with NHI in 2016, that would be a setback to the economy because, certainly, I think most people will not be in a position of having as much money in their pocket as they have currently.”

The Summit chief effectively said the Bahamas’ short and medium-term economic future would be dominated by uncertainty, as positive and negative forces clashed to determine which would triumph.

“Things could go the other way,” he conceded. “If the BEC takeover [by PowerSecure] can bring a reduction in people’s power bills, that will have an impact on the economy as people will be getting more income to spend on goods and services.”

Still, Mr Ingraham suggested that the Bahamian property and casualty insurance industry would lag behind other sectors in benefiting from any economic rebound.

This, he explained, was because the sector’s growth depended on increased consumer confidence to drive high-end vehicle purchases, and mortgage/construction activity in the Bahamian housing market.

“There are very few new vehicles being purchased, very few new mortgages, very few new homes being built and businesses coming on stream,” Mr Ingraham said. “You look at all that, and there’s very little growth in the economy for insurers to go at.

“With new players coming into the market, if you are able to hold on to pretty much your share of the market, it’s almost a gain. It’s not a big win, it’s not a substantial win. Everyone would like to grow, but with no growth in the economy everyone is challenged to show growth, significant growth, in any kind of way.”

He added: “The banks are still sitting on a lot of non-performing mortgages they’d like to clear up before they engage in significant lending again. It will take a while to clear that backlog before they start flowing through the system again.

“New home construction is one of the major drivers of the economy. Anything else and we’re really going to struggle to push things forward.”

Mr Ingraham, himself a former BIA chairman, agreed with current incumbent Emmanuel Komolafe that the insurance industry’s future ‘hangs in the balance’.

“I would definitely agree with those sentiments,” he told Tribune Business. “There’s challenges on all fronts in the insurance arena, but NHI has the potential to seriously impact the health industry.”

Mr Ingraham expressed concern that one of the NHI funding options, as detailed by the Government’s Costa Rican consultants, Sanigest Internacional, was a further tax on the property and casualty insurance industry.

He added that it would be “significant” if the Government moves in that direction, as it effectively adds a third taxation layer to property and casualty insurance premiums - on top of the existing 3 per cent premium tax, and 7.5 per cent Value-Added Tax (VAT) levy that will be added from July 1.

“It would drive the cost of insurance beyond the reach of many people,” Mr Ingraham said of the NHI funding option.

This, he suggested, would increase the percentage of uninsured vehicles on Bahamian roads beyond the existing 25-30 per cent. And the lack of insurance, in turn, would increase NHI’s costs and losses due to a rise in uncovered road accident-related injuries.

“I would suggest that the amount of potential costs or losses to the NHI system would outweigh revenue for NHI [from taxing the property and casualty sector],” Mr Ingraham said.

“It would be less costly for people to insure than go into the NHI system.”