It would probably be a little unfair, if not alarmist, to say that the insurance industry in Barbados is under stress.
Yet, the collapse of CL Financial, parent company of the CLICO group, raised issues concerning the viability of the industry, but thankfully, the problem appears to have been isolated to that firm and its associated companies.
This is just as well because in small economies, and even in larger ones, the contagion affecting one company within the industry can have adverse spin-offs for hitherto uncontaminated companies; confidence being a matter rooted oftentimes more in psychology than reason.
It must therefore be a massive confidence vote for the industry as a whole and for the Sagicor group of companies, in particular, that the International Financial Corporation has made an investment of US$100 million in Sagicor Financial Corporation.
Now when we consider that the IFC is the private sector arm of the World Bank and that it is the largest single investment that institution has made in the insurance sector – and in a single Caribbean entity – then a clear message of extreme confidence is being sent to investors and other interested stakeholders.
It is also a signal that local regulation may not be as lax as might appear from other developing issues, since there can be no doubt that Sagicor would have had to satisfy the appropriate due diligence for such a significant investment to have been approved by the investors. Moreover, it also speaks volumes for the internal corporate governance procedures of Sagicor.
This country has a good reputation in the banking and financial sector generally, and this has been a boon to the maintenance of financial stability in the wake of problems in the metropolitan centres; and we have weathered the storms of Trade Confirmers and the BCCI international collapses without undue damage to our economy.
Local regulatory authorities therefore owe it to companies like Sagicor and others, who carry on their businesses in keeping with the highest standards of fiscal propriety and proper governance, to so regulate all players in the industry that any ‘bad apples’ do not spoil the good name of the industry.
In this regard, some attention must be paid to the cross border implications of financial transactions between related companies because contamination with unregulated entities may create problems not only for local regulators but for the stakeholders and investors in companies affected by the adverse fallout.
Even in the absence of the report on the commission enquiring into the CLICO collapse, we must draw such lessons as we can from that episode, for without ascribing any blameworthiness on anybody’s part, situations have arisen and actions have been taken which we must ensure are never repeated.
In this respect, we ask that some urgent attention be now paid to the matter of the Great Northern Insurance Ltd., a general insurance company which ceased to write business to the chagrin and discomfort of several people with outstanding claims.
