By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A dispute over a captive insurance company established to cover 75 Bahamian physicians against medical malpractice claims may have damaged this nation’s prospects for establishing itself in this industry.

Guilden Gilbert, principal at Chandler Gilbert Insurance Associates, told Tribune Business that he and the Insurance Commission of the Bahamas (ICB) “vehemently disagree to this day” over the regulator’s legal reasoning that forced his clients to bring their coverage back to the Bahamas.

Suggesting that this situation had potentially damaged the Bahamas’ ability to establish itself in the industry, Mr Gilbert argued that Bahamas-based companies should be allowed to create their own captive insurance vehicles in this nation.

Captives are essentially a means of self-insurance and such a move, he said, would be “the best way” of promoting the Bahamas as a captive insurance domicile.

In the meantime, though, Mr Gilbert said the Bahamas had suffered potential negative fall-out from a multi-year argument between the regulator on one hand, and himself and the physicians on the other, over the British Virgin Islands (BVI) captive he established for his clients.

“The Insurance Commission, the year before last, forced the physicians to set up a domestic insurance company here rather than operate the captive,” he told Tribune Business.

The dispute centred around Section 41 (1) of the Domestic Insurance Act, which prevents coverage for liabilities arising in the Bahamas from being placed with an unregistered company. The only way insurance business can be placed with such a company is if the Insurance Commission grants approval, and the only grounds for this are if the regulator “is satisfied that it is not possible to obtain similar protection at a comparable cost from a company registered under this Act”.

The Insurance Commission seems to have taken the position that the BVI captive was an unregistered company, and it decided not to approve the physicians self-insuring themselves through it.

“Myself and the Commission differ on the interpretation of the clause relating to the set-up of the captive,” Mr Gilbert said. “My interpretation is that it relates to a broker, agent or registered person trying to place cover with an unregistered entity.

“The difference is that the captive is self-insuring. The shareholders are those who are insured, and if there’s capital impairment the shareholders need to replace capital. They’re insuring themselves. This is where myself and the Insurance Commission differ to this day, and we will continue to differ. The Insurance Commission takes the view that captives fall under this section of the Act, which I vehemently disagree with.”

The Insurance Commission, he added, wanted each individual doctor to make an application to place insurance with the BVI captive, something that “didn’t make sense”.

Given that a BVI-domiciled company was involved, Mr Gilbert said the situation “caused concern outside the Bahamas”. He told Tribune Business: “it didn’t stay in the Bahamas.

“These things tend to trickle out of the industry itself. One of the concerns was: ‘Wait a second. What’s going on here? The section of the Domestic Insurance Act does not apply to captives’.

“Things like that lead outside entities not to have confidence in the Insurance Commission, and that prevents the development of a captive market.”

Mr Gilbert called for legal and regulatory changes that would see the Insurance Commission allow Bahamian companies to form their own captive insurers in this jurisdiction.

Presently, this cannot be done because the law states that captives cannot write business in the country in which they are domiciled. They would have to be licensed under the Domestic Insurance Act, and this leaves the only self-insurance options as a risk retention or self-insurance programme.

“A local entity cannot operate a captive locally. I recommend that be changed,” Mr Gilbert said. “What better way to promote a captive domicile?”

Describing insurance as a “stable economic pillar”, Mr Gilbert said establishing an international insurance niche in the Bahamas would help to carry this nation through ‘down’ economic cycles – as demand for insurance usually increased during such times.

“The first hurdle is to get the first recognized entity through the door,” he added.