A little over 10 years after the country’s independence celebrations, the local insurance industry welcomed the birth of the first domestically capitalized property and casualty insurance company in The Bahamas. By the mid-1990s, there were eight active domestic property and casualty companies operating in the market. Premium income grew from a modest $50 million annually to approximately $300 million by the end of 2006.

The life and health sector has also moved towards complete local ownership and control, also generating annual premiums in the range of $300 million. Both sectors account for a significant portion of the local component of the total national income derived from the financial services sector.

The shift in ownership and control has resulted in major benefits for The Bahamas, most notably the development of technical and managerial jobs that were previously performed in a head office or offshore environment, mostly in Canada and the United Kingdom. The career prospects that exist in the industry offer tremendous opportunities for the talent pool in the country.

The development of the local industry has not occurred in isolation from the previous alliances with international connections. Insurance, by its very nature, will always remain a globally integrated business. This is especially so for a country that faces the natural and geographical challenges and resource limitations that The Bahamas does. The number one challenge facing the insurance sector is its ability to keep pace with the rate of growth and expansion in the marketplace.

The amount and scale of foreign direct investment in The Bahamas has, over the last 15 years, been unparalleled in the history of our nation. The number of investment projects that have been announced publicly will generate even more economic expansion, provided they all come to fruition. The growth in physical assets alone has ballooned to a level beyond that which was envisaged even a decade ago. Protecting these assets is not just about refinancing their replacement in the event of a loss; it is also about protecting a way of life.

There are a growing number of links between the international and domestic components of the financial services sector. One such example relates to the increasing tendency of offshore clients to establish secondary or even primary residency in The Bahamas, thereby creating opportunities for local participation in the protection of their life, health and wealth.

The risk-based capital for domestically incorporated companies is insufficient to accommodate the anticipated growth and so there will continue to be a reliance on a combination of both direct and indirect financial alliances with larger international entities, together with prudent reinsurance support. The local regulatory environment will play a large role in determining the viability of the industry in the future insofar as it relates to facilitating such arrangements where they are appropriate. It is important that the government moves ahead with the full implementation of its plan to upgrade the regulatory infrastructure.

Navigating the road ahead will require a flexible approach to the sourcing of the requisite capital, skills and knowledge that the industry will need. This will necessitate a high level of collaboration between the industry and government to ensure that this vital component of the financial services sector not only survives but also thrives in the emerging landscape.

Bio:
Patrick G W Ward, MBA, FCIP
Patrick Ward is currently group president and CEO of Bahamas First Holdings Limited and its principal subsidiary, Bahamas First General Insurance Company Limited. Ward has held various technical and managerial jobs within the insurance industry since the beginning of his career in 1984. He is a Fellow of the Insurance Institute of Canada and an honours graduate of the University of Miami Graduate Business School Executive MBA programme. Ward serves on various private sector boards and is a past chairman of the Bahamas General Insurance Association.