While officials at the National Insurance Board (NIB) will try to find creative ways to increase revenue, Minister of State in the Office of the Prime Minister Myles LaRoda said that unless the matter of increasing the NIB contribution rate is addressed, the fund will be depleted.
The latest NIB actuarial report noted that NIB would have to increase its contribution rate by two percentage points next month and continue increases every two years until 2036 to ensure its financial sustainability.
It noted NIB’s reserve will be exhausted by 2028.
“The prime minister has said, and he’s the leader of government, that an increase is not imminent right now,” said LaRoda on the sidelines of Commonwealth Heads of Government Meeting in Kigali, Rwanda.
“Those are his exact words.
“We are still in a dire situation as it relates to the National Insurance Board. We are paying out much more than we are taking in. The last actuarial report is stating that unless something changes immediately, that we are going to be looking at the fund being dissolved within the next six years.
“So, at National Insurance, the managing director, Ms. Sonia Gill, along with her executive team, the chairman and the board, along with myself, are trying to find ways of which we can increase revenue.”
He continued, “We need to be creative but we need to face the reality that unless this matter is addressed and relatively soon, that we are looking at depletion.
“That fund will only be supplemented by the taxpayer, The Bahamas government.
“… We are going to try and find innovative ways, but that reality that the fund is just blowing through cash is a reality that we must pay attention to also.”
LaRoda, who has ministerial responsibility for NIB, previously shared details of NIB’s 11th actuarial report.
In April, he said he expected NIB contributions to increase by 1.5 to two percent in the next year.
LaRoda also pointed to the fact that there has only been one rate increase — the rate increased from 8.8 percent to 9.8 percent in 2010 — since the NIB started in 1974.
However, Prime Minister Philip Davis in April dismissed the idea of a rate increase.
When asked about the report yesterday, Davis said, “The recommendation has been made. It doesn’t come off the table until we decide whether or not to accept that recommendation. We have not yet done that, as I indicated.”
He also said, “… We have to find ways and means of softening any increases that are put on the backs of the Bahamian people.”
The prime minister also said he has not seen the latest report but he is not surprised by its findings.
Davis said he intends to review the report and assess the government’s fiscal issues and determine how best to deal with NIB.
The report noted that a significant increase in the contribution rate from 9.8 percent to 16.9 percent will be required to pay the full benefits in 2029.
The report added that the required contribution rate to pay all expenditures of all branches during the next 60 years is 22.55 percent.
“Of course, the schedule of increases should take into account the situation in the country and the government’s plans and underpinned by agreements with social partners,” it read.
“An increase of the contribution rate by two percent on July 1, 2022, followed by increases every two years until 2036, could restore the short and the medium-term financial sustainability of the scheme.
“Because the contribution rate from July 1, 2036 is likely to not be sufficient in future, it is strongly recommended that future contribution increases and their frequency be discussed by the stakeholders and become part of a funding policy.”