By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian insurer says it is “very, very close” to hitting its goal of reducing its reliance on this nation to 55 percent of its property and casualty underwriting aggregates.

Anton Saunders, RoyalStar Assurance’s managing director, told Tribune Business in a recent interview that the carrier is around three percentage points away from achieving its goal as it seeks to diversify and spread its risk through multiple Caribbean territories.

Reaffirming that RoyalStar is seeking to lower its dependence on The Bahamas to around 55.5 percent of its collective aggregates, he said: “We are very, very close to that. We are almost there. For us, because we judge it based on aggregates and not on premium, our aggregates are just over 58 percent so we are there.”

Mr Saunders’ remarks signal that RoyalStar has been steadily lessening the proportion of its business generated by The Bahamas, as this stood at 65 percent and 61 percent, respectively, at year-end 2023 and 2022. The company underwrites business in the Cayman Islands, Turks and Caicos Islands, British Virgin Islands, United States Virgin Islands and Anguilla as well as The Bahamas.

RoyalStar also approved returning capital to its shareholders via payment of a $2m, or 20 cents per share, dividend to its shareholders following the 2023 year-end. Mr Saunders said the payout was in line with the company’s policy following years in which there was no major hurricane claims payout.

“Our policy is normally to pay about a 30-40 percent dividend from our profits,” he explained. “The rest goes into the company to grow the capital base so we can retain more of the risk. That’s the standard dividend we normally pay if there is not a hurricane.”

RoyalStar saw its 2023 net income slump by more than 40 percent year-over-year, dropping from $8.651m to $5.169m. However, a $1.888m one-off gain on the revaluation of RoyalStar’s land and buildings brought its total comprehensive income within range of prior year figures at $7.058m - an 18.4 percent fall compared to 2022.

Mr Saunders said the property and casualty underwriter’s 2023 financial performance came close to budgeted expectations. “We are pleased in these trying times to come close to budget,” he told this newspaper. “It’s not where we’d like it to be.

“There’s some revaluations that we benefited from. Those are one-offs. Yes, we enjoy them, but we don’t run our business on those. Our core profit, it was just that we would have liked that to have been a bit higher, but the IFRS 17 accounting standard and how we account for things now will show in 2024.”

Mr Saunders said implementation of the new IFRS 17 standard generated audit and accounting-related work that was “the most I’ve ever seen to produce accounts”. He added: “I know it was difficult for us, the regulators and the wider public.”

The Royal Star chief previously said that restricted reinsurance capacity throughout the Caribbean was limiting the ability of underwriters to provide coverage to new development projects, although thus far RoyalStar has not been impacted by this.

“The unfortunate thing is development is continuing for the territories that we deal in,” he told this newspaper. “We’re looking at about a 10 percent increase in organic insurance per year across these territories. The demand for catastrophe insurance has outstripped the supply.” Developers unable to find coverage were instead having to place their risks in the “facultative market” and incur prices 10-20 percent steeper.

“We are fine,” Mr Saunders said. “We would like to grow a bit more but understand the reality of where we are and what we’re trying to do more is contain costs.... The margins shrunk [in 2023] and we did not pass on all the costs to the customer because we have to ensure that customers can afford the product.

“I think over the past few years we have seen where a lot of people have increased their deductibles, some are eliminating the catastrophe cover and just taking the fire. It’s tough. We can’t sit on our laurels and say people have to buy insurance or are forced to buy insurance. We have to do the best we can to keep the product affordable and turn a small profit.”

Households and businesses with mortgages secured on their property have to acquire insurance protection as part of the loan terms. Mr Saunders said of the market: “The toughest I have ever seen it was when I joined the industry after Andrew. This is the second worst.”