CARIBBEAN-INSURANCE-Report says Caribbean remains ‘a backwater’ market

LONDON, CMC – An international insurance report is describing the Caribbean as “something of a backwater” as it relates to a regional market for insurance.

The London-based CompaniesandMarkets.com, which analyses the region’s finance and banking markets, said in its Caribbean Insurance Report 2010, that, in many instances, non-life and life insurance remain underdeveloped in the region with a few exceptions mainly in Jamaica and Trinidad and Tobago.

“Perhaps for this reason, the major multinational insurance companies have little representation on the ground,” it noted, indicating that companies like American International Group (AIG) has small operations in Jamaica and Trinidad and Tobago.

“In general, it is local institutions,  like Seguros Banreservas in the Dominican Republic, Jamaica International Insurance in Jamaica or RoyalStar in the Bahamas, or regional groups,  such as the Trinidad and Tobago-based Guardian Holdings or the Barbados-based Sagicor Financial that dominate,” the report said.

It said the competitive landscape has been “complicated” by the financial problems of Trinidad and Tobago-based Colonial Life Insurance Company (CLICO) and British American Insurance Company (BAICO).

CompaniesandMarkets.com said these were “key elements” of CL Financial, the country’s largest conglomerate, which was “essentially nationalized by the Central Bank of Trinidad and Tobago in January 2009.”

“As the major agencies have downgraded the ratings, or outlooks, of regional countries, the values of the insurance companies’ bond portfolios have suffered,” it said, adding that Sagicor Financial, for example, has been downgraded “because of the cutting in Barbados’ sovereign risk rating.”

The report said of the five countries profiled, Jamaica and the Dominican Republic have not enjoyed the “long-term political and financial stability that is necessary to develop a substantial offshore financial services sector.”

It said Trinidad and Tobago, like Curacao, which is not profiled in the report, “clearly has been sufficiently stable for large indigenous institutions, such as CLICO and its parent, CL Financial, to flourish.”

However, it said economic development has been “driven overwhelmingly” by the energy and related sectors.

By contrast, it said the Bahamas and Barbados have enjoyed significant success in developing financial services.

CompaniesandMarkets.com said the Bahamas is a “long-established leader” in offshore trusts and private banking and a “successful, if newer, player” in hedge fund administration and domiciliation.

It said detailed estimates of the size of Barbados’ offshore captive insurance community are “few and far between,” but they indicate that annual premiums amount to about US$2billion.

However, the report said the Bahamas and Barbados face “significant competition” from nearby centres that are well-established, such as the Cayman Islands and the British Virgin Islands, in fund domiciliation and offshore banking, and Bermuda in insurance.

It said Catastrophe Risk Insurance of all five countries profiled in the report is “prone to hurricanes, notwithstanding that non-life insurers can and do lay-off risk with reinsurers.”

But as it noted in 2008, CompaniesandMarkets.com said “there does not seem to be a clear reason why life insurance should develop as a major channel for organised savings in the region”.

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3 Comments

  1. Big Bannan
    January 6, 2010

    Careful, if you dont mind please help me understand how we have bein “able to shield ourselves quite a bit from the global melt down, ponzy schemes, fraud, and our hard earned dollars dont have to be invested in whatever who knows wherever” When there are a large number of Successful Dominicans who have lost their money (including the Credit Unions) who Invested hundreds of thousands in that latest Insurance company that went Bankrupt. There are also repors in Dominica new archieve about several Dominicans who have lost Hundreds of Thousands in ponzy and Nigerian Scams. Is your statement looking good just because you know well we Dominicans do not read, instead we rely on here-say and thus your argument is valid?
    Instead of condoning or trying to pretend we are not affected, please educate us first.

  2. January 6, 2010

    People be wise, do not feel intimidated by these kinds of reports, which always highlight the success and prosperity of the same islands all the time, while we are treated and spoken about like the underdogs.

    Thanks to our underdeveloped insurance market etc. we were able to shield ourselves quite a bit from the global melt down, ponzy schemes, fraud, and our hard earned dollars dont have to be invested in whatever who knows wherever.

    We have well regulated small financial systems, a dynamic NBD, and a respected and sound ECCB. And we believe in our Credit Union Movement, the best insurance money can buy.

    So, our international insurance sector will grow as necessary and in due time if necessary as the government sees fit given the current pressure put on offshore centres.

    As the last line reads: But as it noted in 2008, CompaniesandMarkets.com said “there does not seem to be a clear reason why life insurance should develop as a major channel for organised savings in the region”.

  3. andy
    January 6, 2010

    Maybe we can get the Federation of the West Indies again. We would need a greater number of potential clients in order for there to be more interest in the region.

    Better insurance could translate to better access to credit from outside sources. In turn, Sustainable Development. All good for D/ca.

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