Following a lengthy debate in the House, Government on Thursday passed the Insurance Bill 2016 despite petitions from the Opposition that the bill ought not to be rushed and instead sent to a select committee.
Shadow Finance Minister Irfaan Ali
The Opposition argued that whilst the Bill was much needed there were still some fine-tuning necessary for its passage into law. Shadow Finance Minister Irfaan Ali assailed the Bill, pointing out a number of discrepancies. He stated that although the piece of legislation will ensure the further amplification of the financial architect of Guyana, the Bill has to make certain it allows local companies to have fair competition since they would now be contending under unfamiliar guidelines beside larger companies, which might have the upper hand in achieving the requirements of the bill laid out in the legislation.
He told the Assembly that Section 12 needs to be strengthened in order to sustain consumer protection. “This section provides a very weak position for consumer protection,” he said, noting that it gives room for the insurers to take advantage of consumers. In addition to other inconsistencies, Ali urged the House to have the Bill sent to a special select committee.
Finance Minister Winston Jordon, who tabled the legislation, asserted that the Bill was important and timely. He stated that the Financial Sector regulatory standards comprise the essential principles for well-functioning regulatory systems and so the assessment of the quality of institutional and regulatory structures form an integral part of the overall assessment of the financial sector carried out under the Financial Sector Adjustment Programme (FSAP).
He pointed out that the joint World Bank-International Monetary Fund forms international standards and codes initiatives provides the overall context for the work relating to financial standards and thus assessments are based on internationally adopted regulatory standards using the assessment methodology prescribed by the standard setters.
According to Jordon, Guyana as a member country has seen its fair share of assessments, including the recently completed assessment in May 2016. Prior to this the last assessment was done in 2005-2006. The report from that assessment highlighted several gaps in the insurance regulatory regime, pinpointing: “The insurance sector in Guyana is underdeveloped relative to its potential and compared to its neighbouring countries.”
These sentiments Jordon said, were echoed by an industry diagnostic conducted by the World Bank First Initiative in 2012.
The programme found that while there was an institutional legal framework in place it did not satisfy international best practice, particularly in the areas of licencing, solvency margins, governance, and transparency and investments.
It was recommended that clear and prudent licensing criteria, including minimal capital levels, shareholder eligibility requirements, management skills, and governance rules should be issued in order to ensure quality companies into the market.
The present legal framework for solvency reserve requirements and early intervention did not cover the same potential issues when compared with contemporary equivalents elsewhere, he said.
Guyana’s analysis of financial statements as part of ongoing supervision was described as primitive owing to a lack of onsite inspection programme, he said.
According to the report the Office of Commissioner of Insurance suffers from the lack of exchange of information among the regional supervisory bodies. The problem the FSAP faced in collecting information from CLICO accounted for 70 per cent of total premiums in Guyana and is part of the Trinidad-based CL financial group composed of companies that provided ample evidence for the need for better information sharing.
It also highlighted the lack of implementation and enforcement of legislative requirement, which it pointed out created the most important obstacle for the development of the insurance sector and the establishment of environment trust.
Jordon stated that the Anti-Money Laundering and Countering the Financing of the Terrorism Act 2015 amended the current Insurance ACT by the insertion of Section 23 B, empowering the regulator to share information with “supervisors in a foreign country for their lawful supervisory and regulatory purposes”.
This he said is also reflected in the Insurance Bill with the requirement of a MoU exchange agreement between Guyana and that of foreign jurisdiction.
The bill also allows the regulator to share information with any domestic government agency for enforcement purposes.
Apart from this amendment, regulations pertaining to financial reporting and registration of insurance companies, no major changes were made to the regulatory infrastructure in line with international best practices and the FSAP team.
The Insurance Bill follows international best practices for insurance regulation, including a risk-based approached to supervision, under which insurers with higher risk receive more stringent scrutiny and intervention.
The bill seeks to improve corporate governance and internal control, impose risk-based capital requirement and raise professional standard in the insurance industry.
It is envisioned that this bill will replace those sections of the current Insurance Act Chapter 9102 that pertain to insurance issues but the sections dealing with pensions will be retained until a Pensions Act comes into effect.
“The objective of the Bill is to promote the maintenance of a fair, safe and stable insurance market for the benefit and protection of policy holders by establishing a legal framework for insurance and insurance groups which: facilitates the monitoring of the safety and soundness of insurers; enhances the protection of policy holders and potential policy holders; contributes to the stability of the financial systems in general” he asserted.
He said it also satisfies those regulatory gaps identified by the last IMF-World Bank FSAP in 2005.
Also for the first time Central Bank will be empowered to periodically verify data and risk management systems by conducting onsite inspections in addition to its usual reliance on third parties such as external auditors.
The bank can also impose fines and penalties for failure to comply with the bank’s directors and other offenses under the ACT.
