2010 IABA ANNUAL MEETING MILLENNIUM BROADWAY HOTEL NEW YOR CITY, USA INSURANCE REFORM IN THE E. S. CARIBBEAN By. W. St. Elmo Whyte
Opening Remarks Many small Islands l. Includes large (L. M. ) Guyana l. Small populations l. Jamaica 3 mil l. Trinidad and Tobago 1 mil l. Guyana 0. 75 mil l. Barbados 0. 25 mil l. Former Colonies of UK l
Opening Remarks (Cont’d) Laws “looked like” UK laws long ago l Most now Independent l Overall population 7 to 8 mil l Insurance (A. T. ) very popular l General knowledge good * Covers Life, Health, P & C, Pensions l Jamaica as Model l Comments on others l
Background (prior to 1998) Before Reform Jamaica l Weak Legislation - Life, Health P & C l None for Pensions l Capital Requirements – Law l Premium Rates l Reserving/Valuation Bases l Asset/Liability Management l Investments
*Supervision Superintendent of Insurance l Low keyed l Poorly staffed l Never pro-active l Returns of Industry always behind All the above applied throughout the region
Drivers of the Crisis l General Comments l Mainly in Life, Health and Pension l Life Companies/Pension/Profitability l Expansion Written Business Asset Conglomerates – Banks, Hotels, P/C, etc
Low capital! Products: TP to Unit Linked High S. T. I. R. Guarantees Massive mismatch of A/L Extensive Borrowing - including inter-group - segregated Pension Funds
Mis-selling *Stock Market Boom / “Bust” Staffing: MBA’s Role of Actuary * Dominance Risk * Poor Risk Management
Liquidity Problems l G. E. M. : High Interest Rate Policy l Solvency Problems l Mighty Crash of EFS excluding one large Bank (BNS) and one small Life Company – MGB l Actuaries lost face l Government Intervention l Capitalization
Change of Management Consolidation 9 LOC to 2 2 BA to 2 Sale to new owners The above: Never happened in Barbados or Guyana Not in Trinidad until recently - One very large company - Same behaviour as those companies in Jamaica
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
-Powerful - Well staffed High Profile Very inter-active Insurance 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)
-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
- Overall, Legislation/Supervision have both been substantially strengthened for L, H, P&C
Pensions Act 2004 l First such Act l Group & Individual covered l Tax concessions l Conditions for approval l Registration and licencing l Fit and proper person criteria l Administration
Pensions Act 2004 (Cont’d) l Investment Managers l Actuary l Auditor l Investigations by FSC l Investments l Trustees l Actuarial l Auditing l Penalties Valuations
Reform process is now in progress in T&T Jamaica is used as example Central Bank shall supervise Actuaries being employed - Not much information about other islands
Co nclusion Today 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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