Nov 2013 Financial News

Central Bank Governor: Insurance Bill not in limbo

Nov 08, 2013

The Insurance Bill is not in limbo. So said Central Bank Governor Jwala Rambarran yesterday as he sought to clarify the situation with the long anticipated legislation. Speaking at the launch of National Services Week in Port of Spain on Wednesday, he said: “A major weapon in the building of our regulatory fortress is the Insurance Bill 2013. New insurance legislation is coming. I want to stress the Insurance Bill is not in limbo, it is not collecting dust on a shelf in a government office.

“The Central Bank has been championing the Insurance Bill 2013, which is a meaningful and substantial piece of legislation. It contains a modern approach to insurance regulation and supervision, calls for strengthening corporate governance of insurance companies, and establishes more effective protection of policyholders. The Insurance Bill will address fundamental prudential deficiencies and will include important requirements for insurance companies which are consistent with international best practice.”

Rambarran said Finance Minister Larry Howai “is expected to lay the Insurance Bill before a Joint Select Committee of Parliament before the end of the year.” He also said that regulation of systemically important financial institutions (SIFIs) is at the top of the Central bank’s agenda. SIFIs are what would be colloquially known as companies that are “too big to fail” because they can bring down economies with them.

He said the Central Bank has identified five SIFIs in T&T—the Unit Trust Corporation (UTC) the Home Mortgage Bank (HMB), the Board of Management incorporated under the National Insurance Act (the NIB), the T&T Mortgage Finance Co. Ltd (TTMF) and the Agricultural Development Bank of T&T (ADB). In the case of the UTC, its asset size ($23 billion) is about one-tenth the assets of the financial system.

“This is twice as much as the total assets of all institutions licensed to conduct the business of a financial nature under the Financial Institutions Act,” said Rambarran. “The UTC is the country’s largest mutual funds provider. A collapse of UTC would threaten the smooth functioning of both the financial market and the local economy.”

He recalled that his budget statement of 2011, former Finance Minister Winston Dookeran has said that the regulatory framework governing the Unit Trust Corporation is to be strengthened by, inter alia, placing the Corporation under the regulatory oversight of the Central Bank.

Rambarran announced that Central Bank is spearheading a green paper on financial reform. He also made a case for consideration of a single regulatory authority for the financial sector: “We have reached a critical juncture in which it is important to consider whether a single financial regulatory authority is the optimal model of financial regulation in Trinidad and Tobago.”

He said the Clico crisis was partly due to regulatory arbitrage across the two main regulators—the Central Bank and the T&T Securities and Exchange Commission (TTSEC). “I fully understand and appreciate the merit in having checks and balances and healthy tensions across multiple regulators. However, a single financial regulatory authority can facilitate co-ordinated and comprehensive oversight of the entire financial services industry in the interest of promoting financial stability and more orderly markets,” he said.

Since the global financial crisis, the issue of integrated financial supervision has been engaging the attention of policymakers worldwide. Unfortunately, there is no global consensus on the best model for financial regulation, Rambarran said.


Source:
Aleem Khan
Trinidad Guardian
Friday November 8, 2013

https://www.guardian.co.tt/business/2013-11-08/central-bank-governor-insurance-bill-not-limbo