Insurance sparks in 2000

- File

Insurance giant Life of Jamaica's New Kingston headquarters.

Denis St. Bernard, Contributor

A NUMBER of sparks during the late 1990s in the insurance sector, created a flame of transformation which has continued in year 2000. As the year quickly comes to a close it might be of interest to reflect on a few of these sparks.

Regional invasion

One of the biggest sparks this year saw the concretising of the Guardian Life deals with FINSAC to buy the portfolios of at least four local life insurance companies including the giant of them all Jamaica Mutual Life Assurance Society, which were taken over by FINSAC.

Guardian Life, the Trinidadian powerhouse also seized the opportunity to purchase a general insurance company - Royal SunAlliance, just over two months ago. Together with their associate company Union Bank, which was bought by Royal Bank of Trinidad and Tobago, don't be surprised by an upsurge of new bancassurance products hitting the market in the year 2001.

Barbados Mutual Life, another large regional player, secured the portfolio of Island Life, in late 1999/2000 and already this month declared a profit of $50 million. It is quite clear that the Jamaican market (consumers) is ready for new products and services to respond to their growing global needs and wants.

The battle of battles continues

The battle between the local life insurance giant Life of Jamaica (LoJ) and FINSAC started with some sparks in the early part of the year, as FINSAC laid their cards on the table for a 76 per cent equity stake in exchange for an injection of approximately J$2 billion. However, it appears that the matter is not entirely closed, and there might still be some sparks left before all agreements are signed off. The only problem with situations like these is that, while the little "mind games" are being played, the poor taxpayers suffer, as they have to pick up the final tab, after the "fete".

The new Insurance Act

The new Insurance Act continues to be topical throughout 2000 as the sector continues with an obsolete Act dated back from 1972.

The formation of Financial Services Commission (FSC) as the super regulatory body for the securities and insurance sector was another spark for the insurance industry. What this meant was that the original Commission of Insurance, which saw representation from a wide cross-section of the industry now had to be dismantled and make way for this super regulatory body. Naturally many players in the insurance sector felt slighted, to say the least, as their forum for representation, now appears only to reside with the office of the Superintendent of Insurance. It is expected that there will be more sparks in this area, especially in light of the impending new Insurance Act, which is expected to be law by the second quarter of 2001.

Re-insurers hike premiums

The year 2000 also saw sparks in the re-insurance market, which saw hikes in local re-insurance rates. Many re-insurers have indicated that they are finding it almost impossible to hold down existing property rates in the region. Some have refused outright to continue to underwrite any more risk in the region, due primarily to the continuous heavy losses experienced in this part of the world. The bottom line is further increases in local insurance premiums.

Actuaries flex

The insurance actuaries were very much in the news in the year 2000. With the virtual collapse of the life insurance, where the mismatch of assets and liabilities, valuations and investment guidelines etc. apparently were not managed properly. Hence the presence of FINSAC playing the role of saviour.

After the fact questions were posed as regards the role of the actuary in the business of insurance in Jamaica. Even some of the actuaries themselves were a bit confused about the role they should play and the role they actually played. Under the proposed Insurance Act the role of the actuary appears much clearer now, as they have been given wider powers, even outside the boardroom, in some instances. We expect to see more sparks in this area in 2001, in an effort to strengthen the overall financial operations of the entities in the sector.

Local initiatives - 2000