By NEIL HARTNELL
Tribune Business Editor
The Bahamas should “take concrete steps” to reverse the development of sovereign credit standing downgrades after the nation’s two largest life and well being insurers noticed their very own monetary energy assessments slashed because of this.
Patrick Ward, Bahamas First’s president and chief government, made his name earlier than A. M. Best, the worldwide insurance credit standing company, on Friday downgraded each Colina Insurance Company and Family Guardian because of the newest sovereign downgrade imposed on the The Bahamas by Moody’s.
Pointing to the additional threat generated by the actual fact the each BISX-listed life and well being insurers have business portfolios nearly fully concentrated in The Bahamas, A. M. Best lower the monetary energy score for each to ‘B++’ (Good) from ‘A-’ (Excellent).
And the long-term issuer credit standing for every was additionally slashed to ‘bbb+’ (Good) from ‘a-’ (Excellent), with each guardian corporations – Colina Holdings (Bahamas) and FamGuard Corporation – seeing their very own long-term issuer credit score scores to ‘bb+’ (Fair) from ‘bbb-’ (Good).
The A. M. Best actions present there are actual penalties for The Bahamas, its economy and the businesses that function in it because of the continuous downgrades to the nation’s creditworthiness from the likes of Moody’s and Standard & Poor’s (S&P). They additionally got here simply days after Mr Ward warned this nation must take sensible steps to point out the score companies it’s making the required fiscal and financial structural reforms.
“Any downward pressure on the rating of the country puts it in a category of country where more risk is involved in making investments in that territory,” the Bahamas First chief instructed Tribune Business of the Moody’s downgrade. “It simply provides the general impression… there are extra inherent dangers within the economy that would show harmful to corporations working there.
“I believe score companies like A. M. Best will monitor the scenario. They have a view to what which means, and it may have an effect on their evaluation of nation threat on an total foundation. The place to begin for a score is the nation’s personal underlying monetary situation.
“I think we’re concerned about it. What we’re more concerned about is there needs to be concrete steps taken to improve the overall environment that satisfies the rating agencies we’re headed in the right direction.”
Mr Ward stated he was not but involved about having to take provisions in opposition to, or low cost, Bahamas First’s personal holdings of presidency debt because of the continuous downgrades “although that is a potential danger if we go too far down this scenario where the country gets downgraded”.
Moody’s pushed The Bahamas additional into so-called ‘junk’ standing by chopping its sovereign creditworthiness from ‘Ba3’ to ‘B1’ on the idea that its entry to borrowing on the worldwide capital markets is being squeezed by a mixture of world rate of interest rises, elevated rising market spreads and considerations about its personal fiscal situation.
Mr Ward stated the existence of such a squeeze was “probably true”, however was not The Bahamas’ fault. He added that the nation was particularly susceptible to pure disasters and, because of this, the Government’s “headroom is getting less and less” due to having to continuously step in with “emergency funding” for post-hurricane rebuilding.
Both Family Guardian and Colina are among the many largest sources of long-term investments and financial savings in The Bahamas, holding lots of of hundreds of thousands of {dollars} in authorities bonds and different securities on the steadiness sheets as they search to match long-term property to liabilities.
A. M. Best, in downgrading Family Guardian and Colina, made clear its resolution was based mostly on exterior sovereign components quite than points with each corporations. Colina, in an announcement responding to the transfer, stated: “Colina’s persevering with funding technique contains, however just isn’t restricted to, buying long-term sovereign debt securities as these property present one of the best asset/legal responsibility matching.
“Moreover, the company’s investment options are limited by the country’s exchange control regime. Colina’s investments in The Bahamas’ sovereign debt comprise a significant proportion of the company’s total assets, and the country’s downgrade has negatively impacted its A. M. Best rating. However, Colina still considers The Bahamas’ sovereign obligations as creditworthy.”
In its evaluation of Family Guardian, A. M. Best stated: “The scores replicate Family Guardian’s steadiness sheet energy, which A. M. Best assesses as robust, in addition to its robust working efficiency, impartial business profile and applicable enterprise threat administration (ERM).
“The steadiness sheet energy evaluation displays Family Guardian’s risk-adjusted capital on the robust stage, as measured by Best’s Capital Adequacy Ratio (BCAR), the elimination of monetary leverage and continued good liquidity, which is offset partly by the corporate’s restricted funding choices and excessive focus of sovereign debt holdings. The firm’s BCAR ranges declined previously yr on account of downgrades of the Bahamas’ sovereign scores.
A. M. Best added: “Family Guardian’s working efficiency stays robust, with return on fairness ranges constantly over 10 p.c and a continued development of optimistic internet earnings, which have supported capital progress.
“The business profile evaluation considers Family Guardian’s good market place in The Bahamas and creditworthy product choices offset by its geographic focus in The Bahamas. The firm’s ERM framework and governance construction are applicable for its threat profile.
“There are ongoing concerns regarding global economic conditions and their negative impact on The Bahamas. A. M. Best will continue to monitor the economic conditions in The Bahamas and take appropriate rating actions as they change.”
