Bahamas: Insurers Fear ‘Hardship’ Over 35% Blacklist Capacity Threat

  • Bahamian insurers have warned they, and thousands of businesses and homeowners will face “tremendous economic hardship” if 35 per cent of reinsurance capacity is lost by The Bahamas failing to escape Europe’s tax blacklist.
  • Major property and casualty underwriters told Tribune Business that The Bahamas is running out of time to exit the European Union’s (EU) non-cooperative list, and in effect has only one shot at achieving such an outcome through this October’s review, if it is to secure continued German reinsurance support that is “critical” to maintaining coverage for key real estate, auto and other assets.
  • Anton Saunders, RoyalStar Assurance’s managing director, explained that reinsurers such as Munich Re will be prevented by German law from receiving tax relief or deductions on hurricane-related claims payouts to The Bahamas if this country still remains on the 27-nation EU’s blacklist after the October review.
  • Given that such payouts will likely be worth hundreds of millions of dollars if a Dorian-strength storm strikes a major Bahamian island, the loss of such tax relief might deter German reinsurers from continuing to support local carriers such as RoyalStar by underwriting the bulk of this nation’s risks.
  • Such a scenario, if it happens, would occur at the worst possible time given that reinsurance capacity and willingness to underwrite risks in the disaster-prone Caribbean is at a near 30-year low.
  • Premium prices would be sent skyrocketing even further if Bahamian insurers lose German reinsurance support if the Bahamas fails to exit the EU’s blacklist. Timothy Ingraham, Summit Insurance Company’s managing director, noted that the loss of such backing would likely force all local property and casualty underwriters to halt taking on any new business.
  • Both Prime Minister Philip Davis KC and Ryan Pinder KC, the attorney general, have in recent weeks blasted the EU for subjecting the Bahamas to demands it refuses to impose on its own members even though the likes of Luxembourg are viewed by many as far greater offenders when it comes to tax transparency.

(Source: The Tribune)