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Capacity Building & Institutional Strengthening. Ravi Rambarran Sagicor Financial Corporation June 2006. Agenda. Introduction Insurance Industry – Last Two Decades Sagicor’s Cross Border Experience Sagicor Today Global Life Insurers Impediments Possible Solutions. Introduction.

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capacity building institutional strengthening

Capacity Building & Institutional Strengthening

Ravi Rambarran

Sagicor Financial CorporationJune 2006

agenda
Agenda
  • Introduction
  • Insurance Industry – Last Two Decades
  • Sagicor’s Cross Border Experience
  • Sagicor Today
  • Global Life Insurers
  • Impediments
  • Possible Solutions
introduction
Introduction

Capacity Building : the ability to increase the breadth and depth of risks undertaken

Institutional Strengthening : the ability to meet claims as risks occur

Balancing act between capacity building and institutional strengthening

insurance industry last two decades
Insurance Industry – Last two decades
  • In need of restructuring from as far as the 1970s:
    • Small maturing markets;
    • Low revenue growth;
    • Declining profit margins;
    • Increasing unit costs
    • Branches of foreign companies
  • The companies lacked scale and so ripe for consolidation.
insurance industry last two decades1
Insurance Industry – Last two decades
  • Foreign companies exited
  • The economics remained the same;
  • The issue of control delayed any meaningful solution for sometime.
insurance industry last two decades2
Insurance Industry – Last two decades
  • Most companies talking consolidation by beginning of the 1990s;
  • It took the crisis in Jamaica to kick start the process in late 1990s;
  • Three regional companies : Sagicor, Guardian, CLICO
  • Further consolidation required e.g. Trinidad
insurance industry last two decades3
Insurance Industry – Last two decades
  • The companies now have increased scale through consolidation;
  • The economics of the industry has improved marginally;
  • The companies still uncompetitive by international standards;
  • All of the companies are looking extra region for a long-term solution.
sagicor s cross border experience
Sagicor’s Cross Border Experience
  • Increased Scale mainly through acquisitions
  • 15 acquisitions between 1991-2005 spanning USA, Jamaica, Trinidad, Barbados, Bahamas, Panama & Cayman
sagicor today
Sagicor Today

Sagicor Group is a widely held public company :-Market Cap of BD 1.2 billion-Capital of BD 748 million (1989: BD16 million)-Profits BD 137 million (1989:BD 3 million)-Assets BD 6.4 billion(1989:BD 308 million)-Rating BBB+ by Standard & Poors and A Excellent by AM Best

Sagicor Group operates in four main lines of business:

Life and health insurance, annuities and pensions

General insurance

Property development

Banking and other financial services

impediments
Impediments
  • Industry Issues:
    • Continued lack of long-term assets to support liabilities so there is a significant mismatch between assets and liabilities
    • Investment portfolios concentrated in sovereign bonds with some no longer being sovereign
    • Restrictions on intra regional investment and possible build up of asset bubbles
    • Regulatory policy focused on institutional strengthening with little focus on capacity building and hence regional competitiveness
    • Regulatory policy is more entity specific than risk specific and so ignores convergence between insurance and banking
impediments1
Impediments
  • Industry Issues:
    • Multiple capital adequacy standards across region
    • Multiple regulatory reporting standards across region
    • Multiple approval processes for products across region
    • Multiple tax regimes across region
impediments2
Impediments
  • Industry Issues:
    • Higher level of insurance liabilities as a result;
    • Double whammy in that less capital available for capacity building and
    • Companies forced to raise capital in thin markets and high cost of capital environment to finance capacity.
impediments3
Impediments
  • Industry Issues:
    • Introduction of several new accounting standards adversely affecting reported performance;
    • Lack of appropriate financial instruments to neutralize the impact of the new standards.
    • Greater pass through of risks to end users who are unaware of risks
    • Continued pressure on unit cost as insurance portfolios mature;
    • Further restructuring required to achieve international competitiveness.
proposals
Proposals
  • Comfort with Duopolies
  • Compulsory credit rating
  • Single regulatory regime in terms of capital standards, product approval, risk specific monitoring, reporting standards and timelines for response
  • Single tax regime
  • Removal of restrictions on intra regional investment
  • More long term issues by sovereigns
  • Outsourcing of state retirement programs