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Opening Remarks

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 Includes large (L.M.) Guyana Small populations Jamaica 3 mil Trinidad and Tobago 1 mil Guyana 0.75 mil

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Opening Remarks

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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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