Implementation of new insurance laws has implications – GTM Chairman

…as company records $1.93B profit in 2018

The recent implementation of the Insurance Act 2016 is causing major setbacks for local insurance companies, according to the Guyana and Trinidad Mutual Life Insurance Company Limited (GTM).
The Insurance Act of 2016 and its supporting Regulations of 2018 took effect mid-last year.
At the company’s Annual General Meeting on Wednesday, Chairman Ram L Singh spoke of the factors that have influenced the performance and operation of the company.
“The myriad of new requirements have had and will continue to have significant and profound implications for your company financially and operationally well into the future,” he told stakeholders at the Georgetown Club.
The Chairman pointed to Note No. 48 of the Insurance Act, which sets a limit on investments for statutory fund requirements. “Though the Insurance Act gives an implementation of five years from the date of the Act came into force, the implication for all companies carrying on long-term business in nonetheless far-reaching,” he noted.
Singh explained that a key investment requirement for any insurance company, especially life insurance companies, was viable, secure long-term investments. GTM currently has substantial investments in shares of large entities such as Banks DIH Limited; Demerara Distillers Limited (DDL); Republic Bank Guyana Limited and Guyana Bank for Trade and Industry (GBTI).
The Chairman noted that some of the equity in these companies was pledged towards the statutory funds.
“The new regulations seek to limit the equity pledged to a paltry 20 per cent of the statutory fund. If your company is to comply, it will need to dispose of millions of shares in companies that are considered in the investment world as ‘blue chip’ or reliable high- quality investments. With the unavailability of alternative sources of viable secure long-term investments, liquidating these shares means your company would now have billions of dollars in deposits earning far lower rates of return,” he told shareholders.
Singh went on to outline that beyond the issue of excess liquidity and unnecessary exposure to low-yielding returns, the sudden disposal of large amount of shares in a company would inevitably have negative repercussions for the company’s share price and value. Moreover, three or four insurance companies disposing of their shares in these large companies would, according to the Chairman, not only be devastating but catastrophic for those companies.
In fact, he disclosed that the 24 per cent appreciation in value of GTM from $10.31 billion to $12.78 billion at the end of December 2018 was a direct result of increased share prices from these investments. This, he added, contributed to the company’s “favourable performance” as reflected in its accounts.

Financial position
Turning his attention to the company’s financial position, Singh revealed that GTM’s total income for 2018 was pegged at $1.93 billion, which is $124 million more than the previous year. At the end of December 2018, the company’s asset base increased by $2.47 billion. This 23.97 per cent growth over 2017’s figure is as a result of the increase in value of non-current assets and improved share values of the local companies in which GTM invested.
Further, the company’s insurance premiums written, unlike 2017, recorded a growth of $133.76 million or 7.74 per cent in 2018. After the payment of reinsurance, GTM’s net premium growth was $121.67 million over 2017.
Meanwhile, of the company’s 1.86 billion insurance premiums written last year, Guyana continues to be the top contributor with $899 million or 48 per cent, followed by St Lucia with $589 million or 32 per cent and Grenada with $281 million or 15 per cent.
According to the Chairman, GTM settled some $568 million in insurance claims during 2018 compared to $461 million paid out in 2017.
“The increase is a direct result of claims association with routine health, car, surgeries and treatment of non-communicable diseases such as cancer, renal failure and heart-related illness. As opposed to being a cause for alarm at this stage, an increase in the use of health-care services is seen as the growing awareness of the importance of preventative health care which provides an opportunity to expand your company’s health insurance portfolio,” he told the shareholders.
On the other hand, Singh explained that concerted efforts were made to aggressively manage expenditures and as such, a decline in management expenses was recorded. Notwithstanding this, however, he noted that the new Insurance Act and its attendant Regulations required the introduction of additional positions at senior levels.
“Steep increases in insurance levies to fund operation of the insurance regulator’s office and charges that are not imposed by other regulators in other territories in which your company operates, run counter to the regulator’s call for cost efficiency. Nonetheless, the Board of Directors working in collaboration with management have taken steps to comply and have already established a fully functional Compliance Department and identified persons for the positions of Risk Officer and Client Ombudsman,” he added.
As customary at its Annual General Meetings, GTM also recognised its staff for their contributions and achievements over the past year.