Aim of the Project
The great recession that began in 2007 was a period of significant uncertainty. Economic activity in most Caribbean countries contracted, resulting in rising rates of unemployment and reduced sales for most companies.
Our client was a company within the Barbadian insurance industry, which is particularly sensitive to changes in the labour market. The Managing Director believed that the uncertainty within the local and international economy warranted a more rigorous approach to their annual strategy development sessions.
Antilles Economics was tasked with helping the MD understand the economic developments currently affecting his company, as well as anticipating how these developments could impact the insurance company’s revenue stream.
What we did
Antilles Economics has a proprietary macroeconomic forecasting model for Barbados. We used this model to provide macroeconomic forecasts for the next six years. In addition, a new module was constructed to forecast premium income and other company-specific information.
This forecasting exercise correctly predicted the reduction in real GDP in 2008, 2009 and 2010. Using this information and other predictions from the model, we provided additional information on the likely path for both insurance claims and premiums. The model also accurately forecasted the falloff in revenue premiums as well as the reduction in new policyholders.
Impact of the Project
The results of this forecasting exercise formed the foundation of the company’s strategic plan for the next few years, and our client was able to plan for the downturn before it arrived.
The MD presented the projections to the Board of Directors and successfully argued the need to implement revenue-enhancing and cost-control measures as a matter of urgency. Being able to anticipate what has turned out to be one of the longest economic slumps in Barbados in decades allowed our client to develop strategies to minimise its negative impact on the company’s bottom line.
