By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas First’s top executive yesterday expressed further concern about the “affordability” of insurance for many households and businesses, with premium spend already “very high” compared to other Caribbean nations.

Patrick Ward, the underwriter’s president and chief executive, told Tribune Business that insurance was already consuming “a big chunk” of household income, accounting for 8 per cent of gross domestic product (GDP) per annum.

He emphasised that “it doesn’t take a lot of increase” to push property and casualty premiums beyond the reach of many Bahamians, pointing to the impact of Value-Added Tax (VAT) being introduced on July 1 last year.

Describing this as a ‘tax upon a tax’, given that it is levied upon the 3 per cent premium tax, Mr Ward said VAT had to be factored into ‘sums insured’ going forward.

With the 7.5 per cent levy increasing the replacement costs for homes and autos, Mr Ward said Bahamians should be increasing the value of what they were insuring - not reducing it.

Acknowledging that it was difficult to “isolate” VAT’s impact on insurance consumers, Mr Ward told Tribune Business: “We do know there is a lot of sensitivity around premiums and the cost of insurance.

“As premiums go up, there’s a reduction in retention levels. The implementation of VAT in the second half of 2015 on top of premium tax, there is no doubt that pushed insurance above the level of affordability for some consumers and had an impact on the overall premiums production levels across the market.”

Mr Ward said the Bahamas’ consumption of insurance, as a percentage of GDP, was already relatively high compared to other Caribbean countries.

“When you look at the Bahamas in isolation compared to Caribbean premiums, the cost of insurance as a percentage of GDP is very high,” he told Tribune Business.

“So, as a result of that, it’s consuming a big chunk of personal income. Our insurance as a percentage of GDP is round about 8 per cent, and if you compare the cost to other purchases households make in any given year, that’s one of the most expensive items outside of the big ticket ones, such as housing and cars.

“It doesn’t take a lot of increase to push it beyond the affordability factor.”

Mr Ward added that Bahamians needed to “factor in” VAT to ‘sums insured’ when they either renewed or took out property and casualty insurance policies in the future.

“You’ve got to factor in increases in sums insured going forward,” he said. “Because the expense of replacing cars and houses, people should be increasing the sums insured, not reducing them.”

Conversely, Mr Ward said there was “a tremendous amount of pressure” being imposed on premium rates as a result of new entrants to the Bahamian property and casualty insurance market.

“The competition level has significantly increased,” he added, “and there is a tremendous amount of pressure on rates to decrease as well, resulting in gross written premiums declining,” he told Tribune Business.

“There is more activity from a bigger number of insurers, but also more existing agents and brokers in the market are being more aggressive in pricing on business they have some involvement with.”

Still, Mr Ward said Bahamas First’s 2015 financial performance had met the company’s expectations despite the impact of Hurricane Joaquin.

“The results were in line with our overall expectations for the 2015 financial year,” he confirmed to Tribune Business.