The Journal sits down with Garth MacDonald, Chief Executive Officer of Island Heritage, to hear how the company intends to continue to expand and prosper, despite economic recession in the US.
When was Island Heritage first established and who did it aim to service?
Island Heritage was established here in Grand Cayman in 1996. The genesis for the company’s formation was the withdrawal of substantial insurance capacity and market instability in the aftermath of Hurricanes Hugo and Andrew in the early 1990s. It became clear that the Caribbean needed a property insurance provider that was domiciled in and committed to the region. The company’s founding shareholder, Bob Clements, felt that such a provider would need to be prepared to provide long term capacity for the specific requirements of the Caribbean and have a sufficiently experienced and knowledgeable management team to carry out these objectives. Island Heritage was formed specifically to meet this need.
How has the company expanded over the years? In particular, in what field has the company found the most success?
Since acquiring our first license in the Cayman Islands in 1996 we have expanded into most all of the English speaking Caribbean, 17 countries at last count. Our head office is in the Cayman Islands and we have a branch operation in Barbados which looks after our Eastern Caribbean operations. On the other islands we deal exclusively through a network of top level agents and brokers. Most recently we have established an office in Puerto Rico and we are looking at opportunities in other Spanish Caribbean islands as well as Latin and Central America.
To what do you attribute the success of the business?
Central to our business model is the development of strong strategic alliances with a select group of business counterparts. We have long standing relationships with all of our business partners which include reinsurers, agents, brokers and banks across the Caribbean region.
You recently moved premises to the Atlantic Star Building – why was that?
With our continued growth and expansion plans we determined we would need more space to accommodate staff and to better service our customers. We also wanted a second floor secure location in the event Grand Cayman is impacted by another hurricane. The Atlantic Star building is a category 5 rated structure which is totally self contained with internally housed generators and water supply. Atlantic Star has provided us with a great building and we have the entire second floor, 5,700 square feet. Our location on Lawrence Blvd between West Bay Road and the Harquail Bypass also makes the office easily accessible for our clients with lots of customer parking.
Is the business growing?
Yes. We budget our growth for each year based on individual country by country assessment. In our more established markets we will be looking to maintain our position with modest growth and in our new markets we anticipate higher growth rates as we become established in those jurisdictions.
Our growth has always been balanced with the capital strength of the company. Our Board of Directors and Shareholders are all insurance professionals who know that the most important thing in an insurance company is its capital strength and claims paying ability. This is what the clients demand. In this regard we have maintained our A.M. Best “A- (excellent)” rating without interruption since 2001. The company has proven itself over and over again having successfully managed the effects of over 15 hurricanes since 1996. With an enhanced reputation the Company expects to continue its growth in the market place.
How does the current economic climate affect business?
There is no doubt that the current financial crisis will have an impact on the worldwide insurance industry. It is open to speculation as to what extent we will feel it in the Caribbean. There will in all likelihood be less reinsurance capacity in the market in 2009 which, based on supply and demand, could, and I stress could, cause rates to rise. We are in regular contact with our reinsurance broker and our reinsurers and while the general consensus is for a hardening market no specific figures have been mentioned.
As relates to the amount of business we write we do not foresee a major impact given our core business is residential and small commercial accounts. A lot of our customers have been with us for a number of years so as long as we continue to give them the first-class service they have come to expect from us we anticipate they will clients. In the latter half of this year we have seen some development projects which we were slated to insure cancelled, but these only account for a small proportion of our overall business. A benefit we have of doing business in a number of countries is that we are less susceptible to the effects from any one single economy.
What’s the state of the insurance market in Cayman right now? Can this jurisdiction withstand another hurricane hit, insurance-wise? Are the re-insurers still behind this region?
Our company is in great shape. We have a dedicated professional staff, strong support from our shareholders and a core panel of reinsurers who have been with us from the beginning. We continue to see good support all of our partners and we expect 2009 to be another good year for us.
With Ivan in 2004, Paloma just this year and a number of near misses in the intervening period, the Cayman Islands is very much on reinsurers minds when we renew our treaties. Provided they feel the price they get for their capacity is adequate for the risk they are assuming they will continue to support the jurisdiction. For our company, given we are a pan Caribbean operation, Cayman is one part of a larger enterprise.
Our staff and I believe our clients are highly cognisant of the need to be prepared for another hurricane. We see our clients taking measures to prepare themselves and improve their properties from a loss prevention perspective.
I think in the Cayman Islands we have a very strong domestic insurance industry which is well regulated by CIMA.