BF&M leads the way during tough year for local insurers
2010 proved to be a tough year for Bermuda's local insurance market but one insurer has weathered the storm well and is looking to improve on its performance in 2011.
BF&M Ltd. reported an impressive set of financial results increasing its net earnings by three percent for the nine months to September 30, 2010 driven by strong underwriting in most big lines of business.
But like many of its competitors, the company posted a loss in its health insurance segment due to higher than expected medical claims.
Speaking in an interview with
The Royal Gazette reflecting on the past year and looking ahead to the New Year, BF&M CEO John Wight covered a number of issues from the rising cost of health care and the new International Financial Reporting Standards (IFRS) to the impact of Hurricane Igor.
Mr Wight pinpointed an ageing population with more people having more regular doctor's appointments and tests resulting in an increase in medical inflation combined with a new billing model introduced a few years ago leading to a higher value of claims being submitted to local insurers above the levels prior to its implementation as the reasons behind the substantial rise in health care costs.
He also cited the increase inexpensive technology being brought to the Island and the demand for medication advertised on television to be prescribed by their doctor.
“In terms of addressing those issues, there has been in the last year and continues to be a lot of dialogue with the stakeholders in the health industry, including the Bermuda Health Council, the Ministry of Health, the Bermuda Hospitals Board and local insurance companies, so I think there's a general desire to see where the common ground is in attempting to limit the inflation increase locally,” he said.
The global recession that hit Bermuda in late 2008 had resulted in employers and employees struggling to cover the rate increases they may have been able to in previous years, according to Mr Wight, who company's premiums rose by 8.8 percent in line with the annual rate of health care costs.
Having served as chairman of the Institute of Chartered Accountants of Bermuda, Mr Wight said that IFRS, the new global reporting standard for companies that comes into effect next year, with comparative information reported for 2010, had led to a number of publicly-listed companies in Bermuda determining what it meant for them, including additional costs, and some ultimately deciding to de-list from the Bermuda Stock Exchange as a cost benefit in the interests of their shareholders.
“It is a uniform reporting standard in Bermuda and globally and the transparency that results from IFRS outweighs the one time costs inherent in having to comply with it,” he said.
Reflecting on Hurricane Igor, he said that the Island was fortunate that the storm weakened from a Category 3 storm to a Category 1 and veered away at the last moment, with local insurers incurring less than $10 million in claims, of which BF&M footed the bill for a relatively immaterial amount, compared to the $250 to $300 million paid out by the industry for Hurricane Fabian in 2003 as a result.
Asides from health insurance, the company did well across the board in the other parts of its business, from home, motor and marine insurance to pension administration one of the biggest areas of growth in recent years.
Another local insurer which has struggled this year has been Argus Group Holdings Ltd., which suffered a drop of $29 million in its stake of Butterfield Bank during the second half of the fiscal year, but Mr Wight said that despite his company picking up its fair share of new business, it has not benefited as a result.
Looking forward to 2011, he believes that Bermuda faces some significant challenges, particularly in the construction and hospitality sectors, resulting in further job cuts and less people for local insurance companies to cover for health and life insurance and to administer pension plans.
On the flipside, Mr Wight said that most people consider insurance to be an important part of their asset protection and would continue to maintain their home and life insurance policies and he expects to see some moderate growth for the company in the coming year.
He is also happy to see that Government has come fully on board as part of a public private joint venture with the health industry, including the Health Insurers Association's meeting with the Health Minister Zane DeSilva, to work towards the continued growth and sustainability of the sector as a whole.