Wismar Greaves was for 17 years managing director and chief executive officer of the Insurance Corporation of Barbados Limited (ICBL), the successor company to the former Government-owned Insurance Corporation of Barbados. He was also Barbados’ third Supervisor of Insurance, an office he held for five years.
In this week’s Big Interview, he talks candidly with Senior Reporter Gercine Carter about his stewardship presiding over the two organizations and gives his views on matters involving the local insurance industry.
Looking back, what do you consider to be your major accomplishments as head of ICBL?
Greaves: Managing ICB was a fairly interesting challenge. We made no losses after 1994. We made profit from 1995 up to last year and we paid dividends consistently throughout that period.
I feel that the ICB model is a good model for Government to study for other statutory boards.
We had no interference from politicians. If politicians needed something, they talked to the chairman, they talked to the manager. We grew ICB – in David Deane’s time from zero to $35 million – and I grew it from $35 million to $99 million.
Carrying ICB through privatization was a lot of technical work. I used some of my knowledge of the insurance industry and because I was in the team that set up the International Association of Insurance Supervisors, I knew what were the top processes behind insurance regulation and best practice for insurance companies.
Are you saying ICB influenced change in the insurance market?
Greaves: What ICB did with the market is that it made insurance a lot more competitive in the market. ICB was really like a social revolution to the insurance market in Barbados because the market was [run by] a lot of the plantocracy and the merchant class, and ICB came along and introduced a different class in Barbados and a significant amount of training.
I believe your early work at ICB may have been influential in your selection as Supervisor
of Insurance. Share with us the experience of moving to that position.
Greaves: When the Government moved me to the office of the Supervisor of Insurance, I thought that was a fairly interesting experience. The staff of that office did not understand insurance, people in that office had never had formal insurance training and I reorganized that office.
We were registering captive insurance companies, and the way it was being done, in my view, was not efficient enough; and in terms of regulating those companies, it was not being
done on a methodical basis.
We worked as well with the life insurance salesmen. In those days [they] used to come to the office, they would get registered and they would walk out of the office with a certificate
of registration; and the next two or three weeks that person would go and somebody else would come; and we felt that was not good for the insuring public.
In addition, there used to be the industrialized companies where the salesmen would go around and pick up premiums. There were a lot of complaints for those because sometimes the premiums never got to the company, so we put in place the exam (for insurance salespeople).
You did the exam first and you got the licence after. That cleaned up the industry in my view significantly. So a lot of people could not just go into the industry overnight and walk out. That licensing regime is still in place today.
What were some of your other achievements?
Greaves: I worked on the proposals to amend the Insurance Act. We put in place things like requiring companies to have a Statutory Fund to protect the policyholders. The Statutory Fund would be drafted in favour of the Supervisor of Insurance so that in the event something went wrong, there was adequate funds in the Statutory Fund that the Supervisor of Insurance controlled.
What do you consider the most rewarding part of your career as Supervisor of Insurance?
Greaves: Let me put it bluntly.
When I was Supervisor of Insurance I was like a judge in the insurance industry. Everybody came to me, so in that position you had authority over the entire industry. The Government supported me in terms of decisions that were made generally.
You oversaw the privatization of a Government entity that some people thought should not have been divested. What is your view of privatization of Government assets?
Greaves: I have no difficulty with privatization, none whatsoever. The entity though must have a social conscience. It cannot be all profit maximization; shareholder value is important. Now remember that before ICBL was privatized we used to pay into the Consolidated Fund every year, some of the surplus of the ICB.
When we were privatized, we were now called upon to pay corporation taxes; we were called upon to pay the withholding taxes out of everybody’s dividends, so that in actual fact Government got more out of ICB in the privatized state than before.
There is a perception that Wismar Greaves was one of the most difficult insurance administrators to deal with. How do you respond to this?
Greaves: A lot of people felt so, that I was a difficult man to deal with. I was never an easy walkover. People wanted an insurance person who was an easy walkover whom they
could twirl around their fingers. I will admit that I am a no-nonsense person and in insurance you get a lot of people who are afraid to stand up on their legs . . . . I stand up to reinsurers and argue that the premiums they charge us are too high.
I am not a difficult person, I am a fair person. You need in the insurance industry people
who understand the industry and who are going to speak up and shut up.
What are your views on the current state of the insurance industry?
Greaves: I think the life insurance industry in the whole Caribbean is the weakest that it has ever been.
How so?
Greaves: Recently Guardian and Sagicor got capital injections from the World Bank. That is unheard of for the insurance industry. The insurance industry mobilizes capital.
. . . My question is, why do they need to bring
in World Bank capital? So something has to be fundamentally weak that they needed that capital.
Could you explain that for me?
Greaves: I feel that the interest rate assumptions, the expenses for managing these companies, need to be reviewed. I think that the expenses for some of the companies in the Caribbean are too high.
The life insurance industry was warned many, many years ago by a company that did reinsurance
for them – the Mercantile & General – that the expense ratios of the companies far exceeded the expense ratios anywhere else in the world and
they needed to get those ratios down.
Those expenses are being paid for out of the premiums of the policyholders; so that when
you have interest rates as low as they are and management expenses that continue to rise,
the benefits of policyholders are virtually miniscule.
Speaking about expense ratios and reinsurers’ warnings, during your tenure as Supervisor
of Insurance, did you not notice any red flags with CLICO insurance company in Barbados?
Greaves: No. I registered CLICO International Life and CLICO International General. When
I registered CLICO International Life, [it] was selling the traditional life insurance contracts. The hybrid contracts that they came with, came afterwards.
I don’t believe that I would have approved them anyhow, because when I look at those contracts
I would have wanted to know whether it wasn’t banking, because we had stopped some insurance companies before from assuming deposits.
Some insurance companies used to take in deposits and pay interest to the policyholders
like banks, and I remember Bradshaw [a former Supervisor of Insurance] stopped them.
He said: “Sorry, that is the role of a bank. You are not a bank. Your role is to assume risk.”
On the assumption of those risks, if the perils appear, you pay.
Is that your position as well?
Greaves: Of course. I feel that is the correct technical position. Those products were not genuine life insurance products. There was no problem with CLICO in my time. There some smaller companies in my time that were I wouldn’t say problematic because we took action
and protected the policyholders.
I remember at one point in time seizing the assets of a company. They did not like
it, but that was to protect the policyholders. The difficulties that we face now are
of a different magnitude.
How so?
Greaves: When CLICO in Trinidad went into the methanol business to construct the methanol
plant, that is where I saw difficulty. The supervisor of insurance and the director of finance in Trinidad – he had his views that it was wrong and I think he was technically correct.
When CLICO was building the methanol plant, they took money from the methanol plant and promised the fund something like 12 per cent which was a high interest rate, and then the methanol prices on the world market plunged very low. By the time the plant was completed the methanol prices were so high, they were able to pay off for the plant the first year, but the life insurance company did not benefit from those windfalls.
CLICO under the founder Mr Duprey and Mr Monsanto was an excellent company. It was
a well run company. But the problem with insurance companies is these holding companies.
So you need holding company regulations to ensure that the holding companies abide with the Insurance Act and that there is no transfer of funds from the insurance companies to the holding company, and the holding company then goes off and gets involved
in activities not sanctioned by the Insurance Act.
What solution do you see for the CLICO problem in Barbados?
Greaves: That is a difficult problem to solve because the assets cannot support the liabilities.
The underfunding of the liabilities is the problem. Bahamas has gone the route of liquidating, so in my view some kind of liquidating has to occur in Barbados and the Eastern Caribbean.
As much as the Government will want to help the policyholders, the policyholders, and I am not talking about the traditional policyholders, I am talking about the annuity holders, they have themselves to blame because a lot of those people were greedy.
Somebody has to get a haircut. If the policyholders don’t take a haircut, then you want the Government to take a haircut on the revenues. You put that on to the taxpayers, you have to ask yourself the justice of doing that.
Why must the taxpayers have to carry that burden? How have the taxpayers benefited from CLICO’s operation in the country?
Trinidad is a lot different because Trinidad took over assets. I feel that the solution should be one region-wide, at the CARICOM level, with Trinidad, Barbados and the OECS coming up with one solution for CLICO.
