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BUSINESS GUARDIAN guardian.co.tt DECEMBER 15 • 2016
New insurance legislation
---is it important?
Much has been said and written in the pub-
lic domain especially following the Clico
debacle on the need for modern insurance
legislation. Yet, seven years later, after two
changes in the administration of the country (firstly the
People's Partnership and a return of the PNM) there is still
no updated legislation.
This law requires a three-fifth majority in order to pass
which the PP government had during their tenure but this
PNM administration does not have, therefore, this gov-
ernment requires at least three Opposition votes in order
to be enacted into law.
There is no denying that the proposed bill is complex as in
its current state there are 282 clauses and 13 schedules and
therefore reflects a comprehensive overhaul of the existing
Insurance Act, 1980 which has remained basically intact
over these past 36 years.
In the United Kingdom, for example, insurance supervi-
sion was formerly handled by the DTI---the Department of
Trade and Industry---and later the Financial Services Au-
thority (FSA). Since 2012, this has been replaced by two
regulatory agencies: the Financial Conduct Authority (FCA)
and the Prudential Regulatory Authority (PRA); part of the
Bank of England.
This evolution of insurance supervision has taken place
in the UK while T&T has remained stuck in an outdated
regulatory framework in spite of numerous attempts to
modernise in the intervening period.
Today, the Bank of England is the supervisory entity for
banks, building societies, credit unions, insurance companies
and major investment firms to ensure that these entities
are safe and sound and do not pose a danger to the health
of the UK financial system.
The insurance business has become intertwined into
the financial system in the country and failures can have a
deleterious effect and hence the need for robust oversight
and strong legislation in order to protect the consumer.
Indeed, insurance legislation can be seen as consumer
protection legislation but in spite of strong insurance laws
there can be no guarantee that failures will not occur in
What a strong legislative framework and pro-active en-
forcement by regulators do is to minimise the risk of failures.
In jurisdictions like the UK, the legislative framework is
supported by a compensation fund to settle claims in the
event of failures but there is no such safety net on the ho-
rizon in T&T and we are still some way off from enacting
modern insurance legislation.
Good insurance legislation must incorporate best practice
as enunciated in the insurance core principles (ICP's) set
by the International Association of Insurance Supervisors
This body was established in 1994 and its members come
from over 200 jurisdictions and nearly 140 countries around
the world. This is an international standard setting body
responsible for developing principles, standards and other
supporting material for the supervision of the insurance
sector and assisting in implementation.
The draft bill before the Parliament has, in very large meas-
ure, adopted these principles and if passed in its current
form will be deemed to have met the best practice test.
Clearly the present Insurance Act, 1980 falls far short
of the IAIS core principles and this shortcoming of our
outdated legislation has long been confirmed by the In-
ternational Monetary Fund Financial Sector Assessment
The insurance sector is complex and therefore oversight
must be more akin to what occurs in the banking sector. The
insurance sector is both similar and yet different compared
with other areas in the wider financial sector and risks are
managed through diversification and pooling using many
Insurers carry business risks as well as risks on the liability
side of their balance sheet that are deemed technical includ-
ing claims estimation and forecasting. Insurance compa-
nies are exposed to market, credit, liquidity and operational
risks from their investments and asset/ liability mis-match.
Insurers have to deal with anti- money laundering (AML)
and Terrorist Financing and all of these exposures were not
contemplated under the Insurance Act, 1980.
One of the key areas addressed in the new bill is the Cap-
ital Adequacy regime. At present, the capital required to
establish an insurance company is $1 million for a general
insurance company and $3 million for a life company while
the minimum entry requirement that is proposed takes the
capital to $15 million.
However, the Capital Adequacy regime will determine
the level of capital that an insurer is required to hold as
this will be calculated on the liabilities and risk appetite. In
short, the greater the level of risk carried by an insurer the
higher will be the capital required. The present legislation
is not sensitive to changes in an insurer's risk profile and is
not in keeping with the dynamics of the evolving financial
One of the major hurdles for new insurance legislation
has been the level of capital required but the Bill provides
for a five year transitional period to meet the capital ade-
However, the Bill has introduced the concept of admin-
istrative fines and penalties in harmony with the Finan-
cial Institutions Act (FIA) and this remains a contentious
issue. While this is a feature worldwide for wrongdoing
and breaches of the law in the financial services industry,
this approach to compliance is new to the industry in T&T.
What is clear is that the time is long past for new legislation
and the bill must not be allowed to lapse for a third time.
Bernard K Aquing, chartered insurer and insurance consultant
With the coming dispensation in the White House
the world may be in for a turbulent trip as far as
economics and politics are concerned. The two have
always been two sides of the same coin. This is the
reason why econometrics---mathematical economics---has not been
a reliable predictor of economic outcomes. Even if the data inputs
are accurate and the model design rigorous, the discipline cannot
take account of human motivation.
Since the end of World War Two, mainly starting with the Bretton
Woods Conference---the aim of which was to restructure international
currency and financial relationships, so as to avoid a Third World
War---high government and business officials (some very powerful
but unknown to the general public) have been attempting to estab-
lish a New World Economic Order, which in effect would be a new
political order; dominated by Europe and North America, though
such was not stated.
But the best laid plans of mice and men often go awry. So now there
is a Republican President-elect who---on the face of it---is threat-
ening to bring major established structures of that order crashing
down. This is very ironical because it is the conservative business
and political leaders in North America and Europe who have been
the most ardent proponents of this new order.
In a series of articles, I intend to show how the policies enacted
have negatively affected developing countries like T&T, where once
there were several garment manufacturers, that were killed off by
trade liberalisation; as one example.
World economics may return to a more nationalistic or bi-lateral
paradigm if Trump begins to up-end the mango cart. Of course,
change is in the air because of the serious negative effect World
Trade Organisation policies have had on the working-class popu-
lations in North America and Europe. This will also be dealt with.
The following is a letter which I had published in the Guardian in
2008, which summarises the intent of the New World Order. It was
published when the international financial system was in free-fall.
It is a good starting point.
Why world on brink of financial collapse
There were those of us who recognised from early on that globalisa-
tion was primarily about facilitating the economic viability of Europe
and North America into the distant future.
Their economic hegemony could not continue on the basis of ag-
gressive nationalism /colonialism, as in the past such a posture had
led to wars,the destruction of the international economy and the loss
of great treasure for most of the combatants.
Their solution therefore was to seek free rein for corporatism on an
international basis. The WTO, IMF, IFC, and the World Bank were
made arbiters of the new ground rules.
For this to succeed ,Japan had to be included because of its worldwide
economic strength. China and India too,because huge impoverished
populations have always been a source of great turmoil in the world.
One important reason for the plan was the stagnating profits of
the primary commodity and consumer-product industries (so-called
sunset industries in North America and Europe).
Sales of these products had reached a saturation point internally,
and much of their installed technology was outdated. The Japanese
were defeating them in both product- quality and price in the inter-
To make matters worse there were all the newly-independent coun-
tries with their tariffs aimed at protecting nascent industries; and
their new openness to non-colonial products.
As a result the Europeans and North Americans decided that the
rules of international trade and finance had to be changed through
the WTO, IMF etc. (West Indian cricket lovers are well aware of this
ruse as used by the ICC in the past.)
Another prong of the strategy was to lower the factor-costs of
production wherever possible. For political and economic purposes
Ronald Reagan set about systematically destroying the power of the
unions in the US.
In conjunction with the above tactic, US manufacturing corporations
began exporting their jobs to low-wage countries (China, Indonesia,
Malaysia, India, Mexico). The mantra was that the US economy was
to become service-oriented.
However there were unforeseen consequences, and those consequenc-
es have brought us to the brink of an international financial collapse.
Now we are in the Trump era. Hang on for the ride!
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