The Government keeps getting letters from other Governments calling on the State to use T&T taxpayers’ funds to help Clico policyholders in other territories who suffered due to Clico’s 2009 collapse, Finance Minister Colm Imbert revealed yesterday.
Imbert noted the problem yesterday in the Senate when he piloted a bill to repeal and replace insurance legislation. It will regulate insurance businesses and privately administered pension funds
The Bill’s 282 clauses seek to increase policyholder protection.
Among the clauses the bill proposes are standards of market, conduct for insurers/sales people in dealing with the public. It also gives the regulator of the sector the power to revoke an insurer’s registration where claims practices are found to be unfair or there are unreasonable delays in settlement.
Citing a host of inadequacies in current law, Imbert said, “Even with the 2009 CL Financial/ Clico crisis of 2009, our insurance sector is still being governed by woefully deficient legislation which dates back to 1980 and which cannot address adequately the current emerging risks in today’s insurance sector.”
“The financial sector is only as strong as the weakest link. It’s instructive for T&T to learn from its own costly crisis and enact appropriate legislation for the insurance industry,” Imbert said the assets of the insurance industry totalled $49.4 billion at September 2017 and accounts for approximately 33 percent of GDP.
“Assets under management for the pensions sector total $51.4 billion and accounts for 34 percent of GDP,” he said. “The combined assets of the insurance and pensions sector are of the order of $100 billion dollars of which more than one third is invested in securities of Government,”
Before the 2009 Clico debacle, Imbert noted a 2005 IMF report had forewarned about the risks posed by the rapid structural changes in T&T’s financial system and shortcomings of local legislative/regulatory framework.
On issues such as those arising in foreign territories from the Clico debacle, the bill proposes insurance companies doing business through overseas branches, will be required to maintain/hold adequate assets to support their liabilities to foreign policyholders.
Clauses also allow the Central Bank Regulator oversight over overseas subsidiaries. This removed the need for undue reliance on the regulators of other jurisdictions who may not have the ability, due to resource constraints or otherwise, to deal with these operations effectively.
Imbert particularly thanked Opposition and Independent senators including UNC’s Gerald Ramdeen for “a very supportive collaborative, co-operative” committee scrutiny of the bill.
PROVISIONS INCLUDE
• Stemming excessive risk taking, promoting good governance and sound risk/capital management practices by management/boards of regulated entities.
• CEOs and CFOs must now sign a statement acknowledging the board of directors’ and management’s responsibility for (a) preparing financial statements, (b) maintaining adequate internal controls, (c) establishing and maintaining adequate procedures for the settlement of claims, and (d) complying with prudential criteria Regulations and Guidelines issued by the Central Bank.
• Mandatory Audit Committee.
• Restrictions on an insurer in respect of the credit exposures it can, directly/indirectly, incur to anyone/group
• Insurers’ Board must ensure policies /procedures established for transactions with connected parties/employees.
• Owners/shareholders must have a stake in the outcome Insurance companies and financial holding companies will be required to hold adequate capital and adequate and appropriate forms of liquidity.
• Expansion of tools for preventative /prompt corrective action and intervention triggers by Central Bank.
• Deterrent for breaches via a regime of improved fines/penalties.
• Provisions for restructuring of business groups that engage in financial/non-financial activities and would require the formation of a financial holding company to hold exclusively the regulated financial entities in the group.
• Powers of the Regulator to deal with the re-emergence of systemically important conglomerates in the region.