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Insurance Reform in the Caribbean: Challenges and Progress

Explore the evolution of insurance reform across Caribbean islands, focusing on legislation, supervision, and industry challenges before and after the reform process.

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Insurance Reform in the Caribbean: Challenges and Progress

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  1. 2010 IABA ANNUAL MEETING MILLENNIUM BROADWAY HOTELNEW YOR CITY, USAINSURANCE REFORM IN THEE.S. CARIBBEANBy. W. St. Elmo Whyte

  2. Opening Remarks • Many small Islands • Includes large (L.M.) Guyana • Small populations • Jamaica 3 mil • Trinidad and Tobago 1 mil • Guyana 0.75 mil • Barbados 0.25 mil • Former Colonies of UK

  3. Opening Remarks (Cont’d) • Laws “looked like” UK laws long ago • Most now Independent • Overall population 7 to 8 mil • Insurance (A.T.) very popular • General knowledge good * Covers Life, Health, P & C, Pensions • Jamaica as Model • Comments on others

  4. Background(prior to 1998) Before ReformJamaica • Weak Legislation - Life, Health P & C • None for Pensions • Capital Requirements – Law • Premium Rates • Reserving/Valuation Bases • Asset/Liability Management • Investments

  5. *SupervisionSuperintendent of Insurance • Low keyed • Poorly staffed • Never pro-active • Returns of Industry always behind All the above applied throughout the region

  6. Drivers of the Crisis • General Comments • Mainly in Life, Health and Pension • Life Companies/Pension/Profitability • Expansion Written Business Asset Conglomerates – Banks, Hotels, P/C, etc

  7. Low capital!Products: TP to Unit Linked High S.T.I.R. GuaranteesMassive mismatch of A/LExtensive Borrowing- including inter-group- segregated Pension Funds

  8. Mis-selling*Stock Market Boom / “Bust”Staffing: MBA’sRole of Actuary* Dominance Risk* Poor Risk Management

  9. Liquidity Problems • G.E.M.: High Interest Rate Policy • Solvency Problems • Mighty Crash of EFS excluding one large Bank (BNS) and one small Life Company – MGB • Actuaries lost face • Government Intervention • Capitalization

  10. Change of ManagementConsolidation9 LOC to 22 BA to 2- Sale to new ownersThe above:Never happened in Barbados or GuyanaNot in Trinidad until recently- One very large company- Same behaviour as those companies in Jamaica

  11. The Reform Process (1998-2004) Was part of reform of the Financial Sector • All FS crashed! • World bank and IMF involved • Foreign consultants, mainly Canadians • Modified Insurance Act • New Pensioners Act • CAA played vital role • Creation of FSC

  12. Powerful- Well staffedHigh ProfileVery inter-activeInsurance Act 2001- Capital (Reg, MCCSR) RB- Products (B,A,L,P, NPP)- Actuary – explicit duties for AA - Premiums – Profit Testing Annually - Reserving (Policy Premium Method)

  13. -Valuation Method- Investments (A/L Modelling)- Other Important Areas covered - Administration and Accounting - Corporate Governance - Investigations by FSC - Winding-up - Insurance Intermediaries - Insurance Contributory Fund

  14. - Overall, Legislation/Supervision have both been substantially strengthened for L, H, P&C

  15. Pensions Act 2004 • First such Act • Group & Individual covered • Tax concessions • Conditions for approval • Registration and licencing • Fit and proper person criteria • Administration

  16. Pensions Act 2004 (Cont’d) • Investment Managers • Actuary • Auditor • Investigations by FSC • Investments • Trustees • Actuarial Valuations • Auditing • Penalties

  17. Reform process is now in progress in T & T Jamaica is used as example Central Bank shall superviseActuaries being employed- Not much information about other islands

  18. Co nclusionToday in Jamaica- Reform continuing- Fewer companies- Fewer Pension Plans- Fewer Insurance Intermediaries- Stronger companies- Better management- Confidence returned- Life companies foreign owned but within CARICOM- CAA playing a vital role - General comments

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