Minister in the Ministry of Finance Ryan Straughn has called on regional insurance regulators to urgently restore public confidence in the industry, warning that unresolved claims, failed insurers and capital outflows are fuelling deepening mistrust among Caribbean citizens.
He told the Caribbean Association of Insurance Regulators’ conference at Hilton Barbados there was growing scepticism among ordinary Barbadians about the true value of insurance.
“We talk about trust and people not having trust in insurance and all these kinds of things. And I believe that we have it within us to be able to turn that around and to demonstrate to people that insurance can actually make a meaningful difference in people’s lives,” he said.
“We had an instance a few years ago where an insurance company failed and it took too long—at least here in Barbados it took too long—for a resolution to come for those persons who were impacted.”
Though Straughn did not name the company, his remarks echoed the long shadow cast by the collapse of CLICO Barbados and its parent company CL Financial in 2009, which left thousands of policyholders in financial limbo and significantly weakened public confidence in life insurance and pensions.
He called on regulators to act decisively in the interest of policyholders.
“People continue to have a level of distrust as it relates to insurance because it remains unresolved for so long, and that public trust is the very thing that you as regulators must guard very highly,” the minister said.
“You must ask yourself, how is this helping to build and enhance trust amongst the Caribbean citizens, amongst the policyholders in the region?”
Straughn also criticised what he described as a longstanding overreliance on international reinsurers which has resulted in significant capital outflows from the region.
He said: “Year after year we are paying some $750 million in reinsurance across the region, with claims at approximately an average of about $250 million a year. Then we must ask ourselves, ‘are we really achieving the objectives for our citizens?’”
Straughn charged that the Caribbean has been too passive for too long.
“We have not shaped our own destiny…. We’ve been programmed to believe that we are only price takers in the market, which is true to some degree. But when we look at the amount of money that this region is exporting in capital as reinsurance premium, it is mind-boggling.”
The finance minister questioned whether regional insurance regulators were inadvertently perpetuating a form of neo-colonialism.
“Because as you look around the world, as we export this capital, we are seeing others build resilience with the premiums paid by our citizens. But our citizens in the region are not benefiting from that,” he pointed out.
Straughn acknowledged the importance of reinsurance but argued for a fundamental rethink of its role: “Reinsurance is important… but the cumulative export of capital means that over the course of a decade, on average, we could have deployed those monies, those resources to satisfy the needs of our citizens, building resilience.”
Straughn called for a regional captive insurance company that can keep more premium capital in the Caribbean.
“We must now think about how do we evolve these mechanisms to a true regional captive insurance company, to better utilise those insurance premiums that are flowing out of the region, financing other people’s development,” he said.
The minister cited the performance of the Caribbean Catastrophe Risk Insurance Facility (CCRIF) following Hurricane Beryl, questioning how similar levels of damage in Grenada and Saint Vincent resulted in wildly different payouts.
“In Saint Vincent, last year, approximately US$230 million, 22 per cent of GDP, was the approximate damage… but the payout from CRIF was just $1 million. In Grenada, it was US$219 million in damages and the payout was $55.6 million. How is it that you’re having similar levels of damage but different payouts?” he said.
Highlighting underinsurance and mis-selling as persistent issues, Straughn urged regulators to be more proactive in protecting consumers. “Underinsurance is a problem because people believe that they could trick somebody. But of course, when that risk materialises, there’s a problem.”
The minister urged Caribbean governments and regulators to work together on reform: “We have to walk with [citizens] to ensure that they understand why they have to put something in the pot.” (SZB)
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