By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A major Bahamian insurer yesterday credited the "Dorian effect" for sparking "a huge effort" by companies and individuals to maintain coverage despite COVID-19's devastating financial impact.

Patrick Ward, Bahamas First's president and chief executive, told Tribune Business that home, vehicle and marine insurance policy renewals continued to be "a high priority" with Bahamian consumers given that the Category Five storm's impact on Abaco and Grand Bahama was still fresh in many memories.

While policy lapses had occurred as a result of the pandemic's fall-out, Mr Ward said the numbers were "not too much" at this stage as evidenced by Bahamas First's half-year results. The property and casualty insurer's gross written premiums for the six months to end-June 2020 were down just 1.7 percent year-over-year at $83.093m as opposed to $84.529m the year before.

"There seems to be a huge effort on the part of the buying public to maintain their insurance coverage," the Bahamas First chief told this newspaper. "In the case of property coverage I can understand that because we're in a very active hurricane season. You can so why it would be a high priority to maintain coverage.

"I'm surprised to some extent but not entirely so because of the Dorian impact. Anyone who has seen the devastation and impact that Dorian caused will be well advised to take that into account when they look at their own insurance requirements.

"If we were further removed from a major catastrophic loss there would be less impetus on the part of the public, but the Dorian effect reminds everyone why it's so important to buy insurance." Mr Ward conceded there had been cases where policyholders elected to drop or take lesser coverage, but not as many as expected, and he described this as "not surprising given the scenario we are in".

He added that the uncertainties surrounding the Government's COVID-19 emergency powers orders, and their impact on the property and casualty insurance sector, were unlikely to produce "a major issue" for underwriters.

The orders mandated that Bahamian general insurers defer premium payments by clients who lost their jobs due to COVID-19 and, within 60 days of the emergency period's end, those persons must either pay the amount due in full or work out a payment plan acceptable to all parties. Coverage has to be maintained by underwriters for the deferral's duration, and any claims that occur are to be paid.

Several insurers have voiced concern about the deferral's impact on their cash flows, especially since the 2020 hurricane season's peak has been reached. Mr Ward acknowledged the uncertainties over when the emergency orders will end, and the 60-day period "kicks in", plus "whether or not the property and casualty sector will be held to that in the strictest sense".

"There is a little bit of uncertainty around because of how the programme unfolded, and some of the uncertainty was never clarified," he added. "There are some unanswered questions around that, but I don't think it's going to be a major factor for the property and casualty industry."

Bahamas First continues, meanwhile, to reap the benefits of its diversification strategy created when it expanded to the Cayman Islands via acquisition. Its Cayman operation more than offset the Bahamian equivalent's $339,735 first half loss for 2020, producing net income of $1.881m.

"I think it's fundamental to your business, particularly if you are domiciled in an area that is prone to catastrophic loss on a fairly frequent basis," Mr Ward said. "A strategy to diversify into other lines of business or geographical locations to spread the concentration of risk is a fundamental that will ultimately determine how successful you are in the long-term."

Bahamas First's total comprehensive income for the six months to end-June 2020 was down year-over-year by 12.85 percent, coming in at $1.788m compared to $2.051m in 2019. This was largely driven by the decline in the value of its investment holdings, which increased by 4,900 percent from a $31,664 fall in 2019 to $1.583m this time around.

"Apart from that we'd have been ahead of last year by quite a bit," Mr Ward said, attributing much of the fall to the decline in Commonwealth Bank's share price, in which Bahamas First is heavily invested.

With "maybe less than 1 percent" of Dorian claims left to be settled, the Bahamas First chief said the company's balance sheet was starting to "normalise" again. "Barring a hurricane I would say I'm reasonably optimistic the second half of the year is not going to be too disappointing," Mr Ward added.

"Typically the second half of the year tends to be better than the first, but that's going to be determined by events that we have no control over." However, Alison Treco, Bahamas First's chair, warned shareholders that the COVID-19 pandemic means "the months ahead will be some of the most uncertain the group has ever encountered".

She added: "Until a long-term solution is determined for the virus, the economies in which we operate will struggle to rebound to normal levels. We expect the impact of high unemployment and closure of businesses to ultimately present challenges in premium collection, and adversely impacting equity investments. The Group will make adjustments as necessary to minimise these potentially adverse effects."