Its work regulating insurance and other aspects of the non-bank financial services sector was highlighted recently when the Financial Services Commission (FSC) held its annual lecture. Here, Minister of Foreign Affairs and Foreign Trade Senator Maxine McClean (left) listens to FSC chief executive officer Randy Graham, as Minister of Finance Chris Sinckler (third left) and FSC chairman Sir Frank Alleyne peruse documents. (Picture by Nigel Browne.)
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THE FIGHT FOR market share in Barbados’ already highly competitive insurance industry is set to intensify.
That’s because the Financial Services Commission (FSC) has given CIBC FirstCaribbean and a company called Colonial Medical Insurance Company Limited permission to get involved in the sector.
FSC chief executive officer Randy Graham announced the development in a March 1 notice issued by the regulator.
“The commission has issued a certificate of registration as an insurance agent to CIBC FirstCaribbean Insurance Agent to transact insurance business on behalf of Massy United Insurance Ltd, effective February 2, 2016.
“As a result, FirstCaribbean International Trust and Merchant Bank (Barbados) Limited can no longer conduct business as an insurance broker in Barbados,” Graham said.
He added: “Colonial Medical Insurance Company Limited has been issued with a certificate of registration of an insurance company to conduct insurance business from within Barbados, effective February 9, 2016. The company is authorised to conduct ordinary life insurance business, industrial life insurance business, accident and sickness insurance business and group life insurance business. Please be guided accordingly.”
While the date of Colonial Medical’s official entry into the market could not be confirmed, CIBC FirstCaribbean will tomorrow officially launch the CIBC FirstCaribbean Home and Auto Insurance programme, which includes other categories of insurance, in partnership with Massy United Insurance.
The insurance, which will be offered to the bank’s customers in Barbados, will also be launched in several other Caribbean markets.
These new insurance developments come at a time when some aspects of the industry have been challenging. In the recent Financial Stability Report 2015, the FSC said “the main challenges for the insurance industry in 2014 arose from the general insurance sub-sector”.
“Concerns about widespread underwriting losses, significant declines in investment income and the overall low levels of profitability on the general insurance side were the main areas of concern.
“Investment income declined sharply in 2014 from the prior year and this significantly impacted profitability for many of the medium and smaller general insurers,” the report said.
“The industry had already been facing low returns from its core underwriting business and it relies heavily on investment income to supplement its overall profitability. The medium and small general insurers were also under pressure from aggressive underwriting by larger general insurers and from life insurers writing general insurance business and offering non-life insurance products. Many of these smaller insurers have faced losses for at least the past three years,” it added.
The FSC said the life insurance industry here was “a small, concentrated market” and noted that “the main components of general insurance business remain property and motor insurance but life insurers are not in the business of selling these types of policies”.
“However, the general insurance business written by the life insurers is concentrated in accident and sickness insurance, which is typically a one-year contract and therefore not categorised as long-term insurance. Some insurers prefer to specialise in specific lines of insurance business which have their own inherent risks and preferred performance metrics,” it said.
In terms of profits, the report said “the net income of the life insurance industry appeared to have recovered in 2014 and was almost twice as high as in 2013, though it was just below its 2012 performance”.
The general insurance industry, on the other hand, “remained profitable in 2014 but experienced a significant drop in profits from 2013 income levels”.