BUSINESS MONDAY - Fighting for survival

General insurance companies incurring underwriting losses

 

STEPS are being taken by the Financial Services Commission  (FSC), which regulates insurance companies in Barbados, to rescue the market and to ensure that general 
insurance companies remain viable.
 
News of this has come from Chief Operations Officer of Beacon Insurance Company, Christopher Woodhams, while discussing the state of the local industry.
 
He said that general insurance companies in Barbados continue to chalk up underwriting losses, which is not a good sign for the either the companies or the industry. He also revealed that when a company like Beacon moves to increase market share, it has to be concerned by these losses, because that means “you [companies] are pricing at a level that is not 
profitable”.
 
He warned that if the situation continues, essentially what will happen is that it would erode the capital base of insurance industry. 
 
“That capital is what is needed not to pay your normal run-of-the-mill motor claims, the odd fire losses etc, but if capital is being eroded year after year, you have to ask where new capital is going to come from,” said the Beacon insurance official.
 
Woodhams explained that the FSC wrote a number of companies informing them of plans to specifically bring in what is known as risk-based capital management. “That essentially is the new way of ensuring that survival of insurance companies,” Woodhams said. 
 
According to him, “It is a distinct change to how the companies manage their business. We at Beacon support it 100 per cent because we see it as a mechanism to solve a lot of the problems the industry is currently experiencing, including the erosion of capital and the underwriting losses.
 
“We want it [the new measure] to happen,” he pointed out, while noting that the regulator is very vocal on what is being seen in the market. 
 
Beacon currently has two per cent of the general insurance market in Barbados. However, the COO said that growing market share on the island has to be done strategically.
 
“The regulator has a concern and we too are concerned and it needs to be addressed,” he remarked.
 
Similar measures which the FSC has raised with the industry were introduced in Europe and in Jamaica. They are now before the Parliament in Trinidad and Tobago and are in draft form in the Organisation for East Caribbean Countries (OECS), Woodhams explained.
 
“The market will correct itself because of how companies manage their business affairs. Beacon supports the measure and we are going to be working with the regulator to ensure we comply with that new requirement,” he added. 
 
(JB)

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