The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Insurance chiefs yesterday demanded "more maturity" from Bahamian politicians, warning that a Moody's 'junk' downgrade could have a "devastating" impact on their own companies' ratings.

Anton Saunders, RoyalStar Assurance's managing director, urged the main political parties to "stop bickering about the past" and instead focus on resolving the Bahamas' fiscal crisis by growing the economy.

Describing Moody's 'downgrade review' as another "wake-up call" for the country, Mr Saunders also called on the Government to embrace all "brains" in crafting a recovery strategy rather than listen only to its own supporters' advice.

RoyalStar is rated by A. M. Best as having the joint-highest financial strength among Caribbean insurers. However, a second 'junk' downgrade of the Bahamas' sovereign creditworthiness would force the global insurance rating agency to look more closely at 'country risk' when evaluating local insurers.

Besides RoyalStar, both Bahamas First and Summit Insurance Company enjoy high financial strength and 'issuer' ratings from A.M. Best. Patrick Ward, Bahamas First's president and chief executive, warned less than two weeks ago that this nation could not afford any further sovereign downgrades due to the impact on private firms' ratings.

With his worst fears now materialising, Mr Ward yesterday backed Mr Saunders' arguments in more cautious language. Besides avoiding Moody's threatened action, the Bahamas First chief urged the Minnis administration to lay out its economic growth plans as a "balance" to its 2017-2018 Budget statements.

"It's not just a question of avoiding the downgrade," Mr Ward told Tribune Business. "We need to see some specific steps taken so that we have a clear pathway to improving the position.

"We obviously need to give the administration a chance to plot out its future plans, but whatever was said now has to be balanced by a proactive statement about the way forward, so that local and international concerns have an opportunity to weigh - and balance - those statements with the statements that were made so far."

Mr Ward's comments indicate that, having spooked Moody's and others by laying out the full extent of the Bahamas' fiscal woes during the 2017-2018 Budget debate, the Government now needs to produce a comprehensive strategy for resolving these problems.

Mr Saunders, meanwhile, said the Bahamas' sovereign creditworthiness was one factor that lay outside the control of locally-rated insurance companies.

Responding to the Moody's threat, he told Tribune Business: "That is going to be a devastating situation if it happens, not only for RoyalStar but all the rated companies in the Bahamas.

"We are all in the same boat, and I hope we get cooler heads to prevail, the rhetoric on both sides calms down, and we get back to fixing the economic situation of the Bahamas so that these threats go away as soon as possible."

Mr Saunders pointedly called for the political 'finger pointing' between PLP and FNM, over who was to blame for Moody's action, to cease and instead focus on crafting a 'rescue plan' for the economy and government finances.

"Start being mature," he urged. "This country is 44 years-old, and we need to be more mature. Start doing what's best for the Bahamian people; stop bickering about the past and look to the future, and whoever did wrong the law will deal with it.

"It's time to get mature; it's time for the country to get mature. If we don't get mature, when the hell are we going to get mature? That would be my advice to all politicians and businessmen."

The Minnis administration has blamed its $722 million borrowing needs, and the $500 million deficit for 2016-2017, on the actions of its predecessor, whom it has accused of reckless and irresponsible spending.

While the Government is blaming the former Christie administration's 'concealment' of the Bahamas' true fiscal woes for Moody's move, the Opposition is countering that its 'alarmist' Budget statements and dramatically revised fiscal forecasts are chiefly responsible.

Mr Saunders, though, said the extent of the Bahamas' problems demanded an end to political tribalism.

"It's been far too long for any party to come to power and only rely on half the brains in the country," he told Tribune Business. "Something has to give some time. But whoever broke the law ought to be charged and dealt with according to the law of the Bahamas."

That is a likely reference to the various allegations of wrongdoing made against the former Christie administration by the current government during the 2017-2018 Budget.

Describing the Moody's downgrade as "another wake-up call", Mr Saunders added: "We can't be asleep forever. We have to wake-up. We can't have teachable moments and it's not taught.

"Yes, I am concerned about RoyalStar, but I'm more concerned about the country. We're all floating in the same boat, so we have to get real."

Mr Ward said that whenever the Bahamas' long and medium-term economic prospects were impacted by uncertainty and negative developments, such as the Moody's review, companies operating in it were "likely to be caught up" in those developments.

The Bahamas First chief emphasised that a sovereign downgrade to 'junk' status would "not automatically" affect the ratings of local companies, "but it does make it difficult to go through the process and maintain existing ratings if the country is continually being downgraded and put on negative watch.

"It doesn't automatically flow, but it does certainly create the environment where potential downgrades might occur simply because the country conditions are such that it puts the company in a position where they are fighting country challenges."

The Nassau Airport Development Company's (NAD) credit rating was downgraded by Fitch as a result of the Bahamas' sovereign creditworthiness being cut to 'junk' by Standard & Poor's in December 2016, illustrating the concerns of Mr Ward and other rated insurers.

The Bahamas First chief said geographical diversification, and mitigating country risk, was one reason why the property and casualty insurer had expanded to the Cayman Islands via acquisition.