The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian insurer yesterday said it is targeting “non-catastrophe” business lines for growth in a bid to escape continued reinsurance pricing pressures that have impacted recent profits and operating results.

Timothy Ingraham, chief executive of Summit Insurance Company, through which Insurance Management Company places much of its property and casualty business, told Tribune Business that it was impossible to predict how long “restricted capacity” in the global reinsurance market will persist and impact local premium prices.

Speaking after AM Best, the global insurance rating agency, reaffirmed both Summit’s financial strength and creditworthiness, he disclosed that the property and casualty underwriter has “carefully managed the headwinds” since paying out claims worth $225m as a result of Hurricane Dorian in 2019.

Much of that will have been financed by external reinsurers, as Bahamian carriers have to buy huge amounts of coverage from these companies due to the fact their own relatively thin capital bases cannot underwrite all the multi-billion dollar risks present in this nation.

“The reinsurance market remains a very difficult place to do business, with very little relief on reinsurance rates foreseen in the immediate future. It is difficult to say how long this period of restricted capacity will remain, as unprecedented global weather events continue to be a concern to the global reinsurance market,” Mr Ingraham warned.

“For 2025, the Board of Summit is optimistic about the company’s prospects and hopes that the worst of the reinsurance difficulties are behind us. We will focus on growth in non-catastrophe classes, which are not as impacted by the shortage of reinsurance capacity.”

AM Best, in reaffirming Summit’s A- (Excellent) financial strength rating and long-term issuer credit eating of ‘a-’ (Excellent), assigned a ‘negative’ outlook to both - a sign that a possible change or downgrade may occur within the next year. It voiced concern that the carrier’s profitability and operating performance has not returned to in line with historical norms due primarily to higher reinsurance costs.

“The ratings reflect Summit’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, limited business profile and appropriate enterprise risk management,” the rating agency explained. “The negative outlooks reflect a downward trend for operating performance over the past several years with unprofitable underwriting and lower returns.

“Historically, Summit has been very profitable excluding years The Bahamas suffered a significant catastrophe event. Underwriting pressure post-Hurricane Dorian is reflective of the operating environment in The Bahamas, where reinsurance dependence is very high and primary market pricing, which has been soft historically, has shifted. Profitability metrics have lagged historical results.

“The overall reinsurance market hardening has presented limited opportunities for profitable growth in property lines. However, Summit’s management has taken initiatives toward improving operating performance through multiple actions including growth in lines of business not dependent on reinsurance, expense reduction initiatives and working to lower the cost for reinsurance coverage without impacting capital protection.

“Operating results have shown improvement through year-end 2024, but it remains uncertain if operating results will recover to levels that fully support a strong operating performance assessment in the near term,” AM Best continued.

“AM Best assesses Summit’s balance sheet strength at the strongest level, based on its strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), in addition to its moderate risk investment portfolio.

“The organisation has prioritised protecting capital over operating performance when pressured by rising reinsurance costs. Organic growth of surplus has been achieved through favourable earnings, offset by shareholder dividends. AM Best expects risk-adjusted capitalisation to continue to support Summit’s strongest level balance sheet strength assessment,” the rating agency added.

“High geographic concentration and competitive pressures also are reflected in Summit’s limited business profile assessment. The company’s limited geographic reach, operating solely in The Bahamas, exposes it to high economic and financial system risk, as well as The Bahamas’ moderate political risk.”

Mr Ingraham, in reply, told Tribune Business: “Summit’s Board of Directors is pleased that A.M. Best has decided to continue with our ‘A-’ rating, designating us with a very strong balance sheet. This rating represents the company’s commitment to ensuring that we continue to be a strong insurance partner, providing peace of mind to our clients.

“Since the catastrophic Hurricane Dorian in 2019, for which the company paid claims of $225m, we have carefully managed the headwinds of a shrinking reinsurance market and increasing reinsurance pricing, while still being able to meet our clients’ needs.”