Friday, March 29, 2024

Supervisory college bid

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The Financial Services Commission (FSC) is examining the prospect of introducing a new layer of supervision for the insurance industry.

However, the regulatory agency says the idea of establishing supervisory colleges for insurance groups would require a number of steps before it became reality.

The FSC’s research department has produced a working paper on the matter and the state entity has circulated it “for public review”.

Supervisory colleges were “an important regulatory tool which allow for more effective and efficient supervision of insurance groups or insurance conglomerates”, said the FSC document.

“An effective supervisory college allows for the supervisors to acquire a better understanding of the insurance group with respect to: risk exposures and inherent risks, financial position and soundness, capital adequacy, business activities, and, risk management and governance systems,” it added.

The FSC’s rationale for examining the establishment of supervisory colleges for insurance groups and insurance conglomerates was based on “recommendations arising from the Financial Sector Assessment Programme (FSAP) report”; “the FSC’s Risk-Based Supervisory Framework, and its mission statement.

The FSC was told that if it wanted to improve its rating under the “International Association of Insurance Supervisors Insurance Core Principles 231 and 252” it should take several steps.

These were to: “proactively manage the supervisory colleges for those groups for which it would be the group-wide supervisor and utilise that forum to develop group supervisory activities for those groups”; and “enhance the role of the supervisory college for the Sagicor Group and maintain an active engagement with the colleges for other entities where it is a host supervisor”.

Another recommendation was to “develop a defined understanding of the entities and group structure and definition, including insurance and non-insurance entities, ensure communication protocols between supervisors are effective, and examine how the group assesses group-wide solvency, governance, risk management and internal control”.

The FSC working paper identified several steps necessary for its “implementation of supervisory colleges and by extension effective consolidated supervision”.

“The first step in the process is an evaluation of the current legislation to ensure that it contains provisions which support information sharing and the other requirements necessary to support group-wide or consolidated supervision”.

“If there are deficiencies these should be addressed through amendments to the legislation. This is a very crucial step which must be completed with regard to the establishment of a supervisory college.”

Other steps were “identification of the insurance companies/groups for which the FSC is the group-wide (home) supervisor”, and “to identify the regulatory authorities responsible for the supervision of the entities which comprise the insurance group, as well as the relevant frameworks that may be applicable to the supervisory activities of the group”. (SC)

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