Cen­tral Bank Gov­er­nor, Ewart Williams says the In­ter­na­tion­al Fi­nance Cor­po­ra­tion (IFC) in­vest­ment of US$75 mil­lion in­to Guardian Hold­ings Lim­it­ed (GHL) should re­dound to the ben­e­fit of the fi­nan­cial ser­vices in­dus­try, es­pe­cial­ly the in­sur­ance in­dus­try in T&T, and the Caribbean. Williams said, "This new part­ner­ship should not on­ly strength­en GHL's bal­ance sheet, but should re­dound to the ben­e­fit of the pub­lic by in­creas­ing the avail­abil­i­ty of in­sur­ance prod­ucts to mar­kets that are not cur­rent­ly well-served." He added the list in­clude small busi­ness­es, mi­cro-fi­nance in­sti­tu­tions and agribusi­ness­es. He stat­ed that IFC's de­ci­sion to part­ner with GHL through eq­ui­ty par­tic­i­pa­tion demon­strates its tremen­dous con­fi­dence in the lo­cal fi­nan­cial ser­vices in­dus­try, de­spite the chal­lenges the sec­tor cur­rent­ly faces.

Williams was speak­ing on Wednes­day, dur­ing the of­fi­cial sign­ing of IFC's in­vest­ment of US$75 mil­lion eq­ui­ty in­vest­ment in­to GHL at the Hy­att Re­gency ho­tel, Port-of-Spain. Williams stat­ed that over the past sev­er­al months the in­sur­ance in­dus­try has been over­run by a cho­rus of bad news in­volv­ing in­sti­tu­tions in which the Cen­tral Bank has in­ter­vened. Un­for­tu­nate­ly, Williams added that even with its po­ten­tial for con­ta­gion, the cur­rent tur­moil ob­scures an in­sur­ance in­dus­try with tremen­dous strengths and re­silience. "But the sub­sidiaries of GHL are an in­te­gral part of this struc­tural­ly strong and re­silient in­sur­ance sec­tor," he said. He not­ed that Guardian Life, the flag­ship com­pa­ny of the Group is a ma­jor play­er in the life in­sur­ance sec­tor ac­count­ing for 38 per cent of the mar­ket's con­tract li­a­bil­i­ties.

Guardian Gen­er­al which has be­come the re­gion's largest in­dige­nous prop­er­ty and the largest gen­er­al in­sur­ance com­pa­ny in T& T, holds 26 per cent of mar­ket share and 21 per cent of to­tal as­sets of the sec­tor, Williams said. He said is with this great track record, GHL, in June, re­ceived a rat­ing of A (ex­cel­lent) for the fi­nan­cial strength of both Guardian Life and Guardian Gen­er­al by A.M Best.

In the case of GGIL, William said the rat­ings were due to the sup­port and com­mit­ment of the par­ent com­pa­ny (GHL), its his­tor­i­cal prof­itabil­i­ty and its ad­e­quate cap­i­tal­iza­tion. "Thus, from our van­tage point, as reg­u­la­tor, this agree­ment sends pre­cise­ly the right mes­sage to the in­sur­ance in­dus­try, and that is, the im­por­tance of ad­e­quate cap­i­tal­iza­tion," Williams said. He ex­plained that with "our leg­is­la­tion" dat­ing back to 1966, T&T is one of the few ju­ris­dic­tions in the world that does not have ro­bust cap­i­tal re­quire­ments for the in­sur­ance in­dus­try.

"With­out doubt, this de­fi­cien­cy con­tributed great­ly to Cli­co's prob­lems. Ad­e­quate risk-ad­just­ed cap­i­tal would not on­ly have pro­vid­ed a buffer to ab­sorb loss­es but more­over, would have act­ed as a dis-in­cen­tive to risk-tak­ing since the greater the risk, the greater would have been the need to al­lo­cate scarce re­sources to cap­i­tal," Williams said. How­ev­er, he said he was pleased to state that the Bank is well ad­vanced in the de­vel­op­ment of a new leg­isla­tive frame­work for the In­sur­ance in­dus­try. This new frame­work, he added would in­clude a ro­bust risk-based cap­i­tal regime, a stan­dard­ized ac­tu­ar­i­al method­ol­o­gy, tighter pru­den­tial arrange­ments, en­hanced cor­po­rate gov­er­nance and reg­u­la­to­ry and su­per­vi­so­ry prac­tices, con­sis­tent with in­ter­na­tion­al best prac­tices.