The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas First's top executive yesterday pledged it is doing "everything possible to remedy" its Cayman Islands' subsidiary's non-compliance with that territory's health insurance regulations due to a claims processing "backlog".

Patrick Ward, the BISX-listed insurer's president and chief executive, told Tribune Business that its Cayman First subsidiary has already submitted a plan to address the shortcomings to the territory's regulator and is confident they will be resolved "for sure" in 2023.

He added that there was "no reason" for Bahamas First to believe that its Cayman subsidiary faces any further regulatory action over the regulations breach, which stems from issues encountered with a new health claims processing system implemented during the 2022 third quarter, and the situation was "not a material issue" for the wider group.

Mr Ward was also quick to point out that there is no issue with Cayman First's ability to pay claims on behalf of its insured clients, with the matter instead focused on delays in processing such payments and later-than-normal payouts.

He spoke after the situation was flagged in Bahamas First's audited financial statements for 2022 by the group's external auditors, Deloitte & Touche. Under the heading "contingencies", the financials said: "As at December 31, 2022, the group was not in compliance with the prescribed reporting timelines outlined in subsections three, nine and 20 of the Cayman Islands’ Health Insurance Regulations (2017 Revision).

"The delay in reporting resulted from the group’s implementation of a new policy and claim processing system during the year. The group has subsequently established a remediation plan to improve reporting timelines to ensure it is in compliance with the regulations for future reporting periods."

Mr Ward told this newspaper: "That basically was something that related to the period in 2022, and so we have a plan in place to address the issue with the claims backlog which has been communicated to the regulator in Cayman, the Health Insurance Commission.

"The plan basically introduces oversight by both Board and management of a remediation plan that tackles the issue of claims payments past the due date, which has arisen because of the system implementation issues we've had. While I cannot go into the details of the plan, we are confident we will take every measure possible to to ensure we're within the timelines set by the Health Insurance Commission.

"This is nothing to do, or an issue with, resources to pay claims or our ability to pay claims. It's just a processing issue," Mr Ward added. "We're highly confident [this will be addressed] because we've given an undertaking to the regulator. While I cannot give any specific details, everything possible to remedy the situation will be done within the timeframe indicated."

Asked whether the Cayman woes will be resolved this year, Mr Ward replied: '"During the course of 2023 for sure. That's our view at this stage. All our efforts have been focused on making sure the claims backlog is addressed." And, as to the prospect of further regulatory measures being taken against Cayman First, he said: "There's no reason for us to believe any further action will be taken at this stage.

"As you can tell from what the auditors have said, it's a matter that's been noted in the accounts but is not a material issue from a group standpoint." Asked when Cayman First would be compliant once again with the regulations, and the claims backlog eliminated, Mr Ward said: "It's a moving target. Every day as we speak it goes down.

"It's something we see progress being made on, but don't want to go into any specifics at this point. I'm confident the efforts we are putting in place now will put us in a much better position than we are presently." Cayman First's implementation of the new claims processing system was one of the issues identified as a "key audit matter" by Deloitte.

With gross written health insurance premiums of $45.498m for 2022, the audit firm wrote: "During the year, the group implemented a new policy administration system for its health line of business. The implementation of the policy administration system introduced risks related to system access, change management and data integrity.

"The new policy administration system became operational during the third quarter of the [2022] fiscal year. The implementation of the new policy administration system resulted in management having to make manual adjustments to address the completeness and accuracy of the amount reported as gross premiums written for health."

Deloitte added: "In evaluating the new system implementation, we involved our information technology specialists to understand the controls over access and change management. We also assessed whether policyholder information related to billing transferred to the new policy administration system was complete and accurate.

"We evaluated the design and implementation of controls related to revenue recognition impacted by the new policy administration system, and reviewed management’s process to reconcile revenue omitted from the new policy administration system. We performed analytical procedures and tested a sample of individual policies included in the manual adjustments, and vouched them to supporting documentation."

Mr Ward, in a previous report to Bahamas First shareholders, conceded that Cayman First's health business had performed "below our expectations". He added: “The roll-out of new technology and connected systems, together with a change in key personnel within the health segment, has caused a number of operational challenges for our Cayman subsidiary, leading to negative market perceptions about the company’s ability to fulfill its obligations to policyholders.

“The Board and management are focused on the remedial actions that are required to resolve these issues, and to ensure that the benefits of the new systems are experienced by our clients in that market in the shortest possible timeframe.”