Introducing the Bahamian Insurance Sector
Background
The general insurance market in The Bahamas began early in the twentieth century when a few merchants established agency agreements to write business for composite general insurers based in the United Kingdom.
As the economy expanded and the demand for insurance products grew, these insurance divisions were spun-off into stand-alone agencies. The Road Traffic Act of 1958 spurred demand by legislating compulsory third party liability insurance for motorists.
An agents association was formed in 1972 and the name was changed to the Bahamas General Insurance Association in 1975, with the addition of underwriters and adjusters as members. The BGIA was incorporated in 1993.
The early 1980s saw the emergence of the first general insurance company voluntarily formed and supported through its associated agency portfolio.
In the late 1980s composite insurers that wrote business in the Caribbean and The Bahamas had a rude awakening to the reality of their property portfolios' exposure to natural disasters after experiencing significant losses from Hurricane Hugo. The resulting retraction of capacity in the region led some of the composite insurers withdraw from The Bahamas, which created an opportunity for the establishment of new insurers in the local market.
These local firms wrote business primarily for their associated agents. However, in the 1990s a few local insurers began to offer their products to other non-associated agents/brokers in the market.
Since the late 1990s there has been a dilution of foreign ownership in the local insurance market, and subsequent years saw the acquisition and mergers of agency portfolios by industry players seeking to increase their market shares.
General insurance products are sold throughout The Bahamas predominantly by agents or brokers. Prices - particularly in the property or fire class - are largely driven by reinsurers.
The industry also faces internal pressures from further regulatory control and increases in the cost of doing business as a result of new legislative provisions and compliance requirements that are being introduced.
Externally, the industry faces further challenges as it looks ahead to the effects of trade liberalization through regional initiatives like the Caribbean Single Market and the Free Trade Area of the Americas. There is a need to look for local capital to reduce dependence on reinsurance and to remain competitive in a broader market.
