LEFT OF CENTRE: FSC yet without teeth
Very little appears to have been done to prevent another insurance company failure in Barbados, and the degree of complacency evident in the matter is both worrying and perplexing.
The most important response to date has been the establishment earlier this year of the Financial Services Commission (FSC) which now has responsibility for supervising insurance entities in Barbados.
However, the commission does not yet have the resources to effectively police the insurance sector, and regulation of the sector is arguably weaker now than it was prior to the establishment of the FSC and prior to the failure of CLICO Life Insurance and British American Insurance.
We have also to date not made any serious attempt to review and modernize our insurance legislation and regulations, as responsibility for this has been left to the FSC.
As a result, Barbados now lags behind the rest of the Caribbean as most of our neighbours have recently updated their insurance legislation or are at an advanced stage of doing so.
It is also noteworthy that the directors of CLICO Life and British American have not come under greater scrutiny or been asked to explain and defend their own actions, whether in the court of public opinion or any other court.
Did the companies each have an audit committee, and did either company’s auditors report any relevant concerns to the directors?
Did each company engage an actuary to perform annual reviews of the company’s insurance reserves, did the actuary express any concerns over the years, and if so, were such concerns discussed and acted upon by the board of directors?
The fact that the High Court, at the request of the judicial manager, has approved a forensic investigation into the affairs of CLICO Life is promising news.
However, I have not seen any published information about the terms of reference of the investigation or the extent to which these terms were dictated by the FSC – which is, after all, the body on whose behalf the judicial manager is acting.
Furthermore, would a forensic investigation also be appropriate for British American, and will there be a restructuring plan for British American (as announced for CLICO Life) that involves an injection of funds by regional governments?
It is to be hoped that the forensic investigation will enable the recovery of some or all of the funds which were advanced by CLICO Life to related parties, and further, that these recoveries will exceed the cost of the investigation (and indeed the fees of the judicial manager).
But it is not clear if the forensic investigators will also have a specific mandate to seek out evidence of wrongdoing that might lead to criminal or civil prosecution.
It should be obvious that an independent investigation is required to reveal the factors contributing to the failure of CLICO and British American, so that the necessary measures may be implemented to reduce the probability of similar failures in the future.
Barbadians have become accustomed to commissions of enquiries and other investigations that do not lead to any significant action, and therefore may be forgiven for a degree of cynicism.
Maybe someday we will accept not simply that we can and must do better, but that it is our personal inaction that maintains the status quo.