By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Insurance regulators found an entity registered under the Friendly Societies Act was breaching multiple laws by selling insurance products to persons who were non-members.

The Insurance Commission of The Bahamas (ICB), in its just-released 2023 annual report, revealed that the unnamed entity was operating in breach of both the Insurance Act and Friendly Societies Act and committing what it branded “a significant breach of regulatory protocols”.

“An extensive investigation uncovered that an entity registered under the Friendly Societies Act had been illicitly disseminating insurance products to individuals who were not members of said entity, contravening the provisions stipulated in both the Insurance Act and the Friendly Societies Act,” the regulator wrote.

“Further examination revealed that the entity was operating without the requisite registration and licensing from the Commission, signalling a significant breach of regulatory protocols. In response to these findings, a public warning was promptly issued, cautioning individuals against conducting any form of insurance transaction with this entity.”

Friendly societies are collectives formed by groups for their mutual benefit. The Insurance Commission’s annual report did not mention whether any further legal action was taken against this entity such as the imposition of fines or other sanctions against its principals.

Elsewhere, the Insurance Commission said the process of combining the domestic Insurance Act with the External Insurance Act has begun. “The process of amalgamating both pieces of legislation has begun and involves not only the amalgamation but also amendments to the legislation,” the regulator said.

“The Insurance Act, External Insurance Act and accompanying regulations are being amalgamated into a single Insurance Act and regulations. The primary objective of the amalgamation is to eliminate the preferential treatment of external insurance companies over domestic insurance companies.

“Additionally, the amalgamation aims to ensure that the legislation is progressive, innovative and positions the insurance industry to enhance the jurisdiction’s attractiveness for those interested in conducting business in The Bahamas.”

Dana L. Munnings-Gray, the Insurance Commission’s superintendent, said the regulator is “unwavering” in its drive to upgrade the industry’s legislative regime. “The Commission is unwavering in its commitment to harmonise and modernise Bahamian insurance legislation,” he wrote.

“A significant achievement in 2023 was the ongoing amalgamation process of the Insurance Act 2005, the Insurance (General) Regulations 2010 and the External Insurance Act 2009. This strategic initiative aims to streamline the legislative and regulatory framework of the Commission, fostering clarity and operational efficiency for our key stakeholders.”

Mrs Munnings-Gray said this had already led to a governance amendment where the Insurance Commission’s chairman is no longer the superintendent of insurance who, in effect, is the regulator’s chief executive, but a non-executive director.

Keith Major, who is now the Insurance Commission’s chairman, added: “Significant progress has been made in amalgamating the Insurance Act 2005 and the External Insurance Act 2009. This process has highlighted the need for even deeper, far-reaching amendments to address emerging issues within the Bahamian insurance sector.”

He added that the regulator plans “a comprehensive review” to ensure the insurance supervisory regime protects policyholder interests; safeguards against insurance company insolvencies; and maintains “a fair and competitive market” while also accounting for new and emerging risks such as climate change.

The Insurance Commission, in its analysis of property and casualty sector, said: “Gross premiums in the property and casualty sector totalled $535.4 [compared to] $479.1m in 2022, an increase of $56.3m representing 12 percent over the prior year. The increase in gross premiums is largely attributed to the increase in rates in the reinsurance market, particularly on catastrophic risks impacting property insurance.

“As the economy continued to expand, and construction activity was on the rise, the volume of insurance underwritten in the general market also increased at a moderate pace. However, given the continued challenges obtaining reinsurance, the local market was constrained with regards to its capacity to underwrite new business.”

Bahamian property and casualty insurers have no choice but to purchase significant amounts of reinsurance on an annual basis because their relatively thin capital bases mean they cannot underwrite all risks in this nation.

As a result, premium prices paid by local homeowners and businesses are dictated by the reinsurance market. Those with mortgages, though, are mandated by the loan contract to insure or their lenders take out coverage on their behalf. 

Bahamian property and casualty underwriters last year revealed that insurance costs had hit a record 26-year high, and acknowledged that the affordability of insurance is becoming an increasing concern with reinsurance costs at their highest-ever level.