…paves way for consumer protection, improved regulations
By Alva Solomon

THE insurance industry in Guyana is set to undergo improved regulatory changes, including the promotion of competition; and consumers can enjoy protection in insurance matters with the passage of insurance legislation in the National Assembly.

The Insurance Bill 2016, which has been in the making for several years, was passed in National Assembly on Thursday evening. The bill was brought to the House by Finance Minister Winston Jordan, and saw calls by the Opposition People’s Progressive Party (PPP) for the bill to be relegated to a special select committee for further consideration, but those calls were defeated by the governing majority.

The legislation has its genesis in the 2009 CLICO financial debacle which led to dozens of customers here being left in the dark regarding their financial contributions to that company, which was a subsidiary of the Trinidad-based CL Financial Group.
The bill provides a consolidated legal framework for the prudential supervision of insurance, which Jordon noted is pertinent at this time.

He said the bill gives effect to important government policy objectives, and enhances the regulatory framework while establishing prudential standards for wide supervision of the sector, licensing, governance and financial soundness of insurance and protection of policy holders.

“The Insurance Bill covers international best practices for insurance regulation, including a risk-based approach to supervision under which insurers with higher risks receive higher scrutiny and intervention. It will raise professional standards in the industry”, he said.

Jordon said the legislation was crafted under the previous government “and they had taken it to an advanced stage; and when we came to power, we took up the mantle.”

He said that assessments of the insurance sector by international regulatory bodies were undertaken as recent as in May. Prior to this, the last assessment was undertaken in 2005/2006. Reports from that assessment highlighted several gaps in our insurance regulatory regime. It noted that the sector in Guyana is underdeveloped, relative to its potential and compared to its neighbouring countries. He said that an industry diagnostics conducted by the World Bank in 2012 echoed those sentiments.

According to Jordan, key findings in the 2006 assessment indicated that while there was an institutional legal framework in place, it did not satisfy international best practices, particularly in the areas of licensing, governance, and transparency and investments.

“It was recommended that clear and prudent licensing criteria, including minimum capital levels, shareholder eligibility requirements, management skills and governance rules, should be issued in order to ensure entry of quality companies into the market”, he said.

Jordan said analysis of financial statements as part of ongoing supervision was described as primitive, owing to a lack of onsite inspection programme. The current Insurance Act is silent in this regard, he said. It was noted, too, that the Office of Commissioner of Insurance suffers from lack of information among regional supervisory bodies.

In giving a background on the legislation, Jordan provided an analysis of the consultations done by the authorities with key players in the sector, including insurance companies and brokers. He said many objections were made and changes proposed, and consequent drafts were produced. He said that the bill was sent to his predecessor, former Finance Minister Dr Ashni Singh, in 2014 to take to Parliament, but prorogation of Parliament under the Donald Ramotar Administration led to the bill being stymied.

He said that upon assuming office, the Government proceeded to have the bill passed in the National Assembly, following additional consultations and drafts being done to fine-tune the bill. He said a draft copy was sent to the sector and other stakeholders, including the Private Sector Commission and the Bar Association, among others.

Opposition Member of Parliament Irfaan Ali noted that modernization of the financial architecture of the country has seen several changes, with various forms of legislation being passed by the National Assembly.
He said that one of the issues the party had was the necessary regulations which were needed to support the bill; he said the PPP thought that those regulations required a comprehensive approach and the bill should benefit from a special select committee. He cited the magnitude of the bill and “issues “and “oversight” which he noted must be sorted out. He added that there were numeracy matters within the bill which needed clarification.

“We have to have a lot of education on this bill, we have to have a testing period”, he said, and he noted that the industry stakeholders needed “some amount of time” to adjust to the changes the bill would effect.

Former Attorney General Anil Nandlall also echoed similar sentiments for the bill to be sent to a select committee. He described the bill as a “foundation bill for an entire sector”, and said it involves a number of sectors, including Central Bank, insurance companies and policy holders, among others.

Minister within the Ministry of Finance, Jaipaul Sharma, noting the collapse of CLICO, pointed to the lack of a regulatory authority and said the bill corrects that fault. He said the entire Caribbean benefited in knowledge of handling insurance matters from the collapse of CLICO.

Minister Jordan noted that CLICO’s exposure to the financial crisis, the mismatch between its obligations and its financial assets were described as too late. He said those who await their money from CLICO and those who have suffered losses tell a story of the company as a failed one.

In relation to calls for the bill to be taken to a select committee, Jordan said the bill has been in the making for some four years.

“The new Government did not sit on its laurels”, he said as regards the further consultations it had experienced. He described the bill as one of the most consulted bills which have passed through the National Assembly.

Minister of Business, Dominic Gaskin, noted that consumer protection, which is addressed by the bill, is a welcome improvement when compared to the former Act, in which such provisions did not exist. He said there are also in the bill numerous provisions which protect the consumers. The bill was then put to a vote, with the Government side using its majority for its passage through the National Assembly.