Strengthening of the regulatory framework to assure greater policyholder protection,modernisation the legislation to effectively supervise the insurance industry and facilitation of the Central Bank in its promotion of efficient, fair and transparent insurance markets and financial stability of the sector are among the key objectives of the New Insurance Act which were detailed in a webinar hosted by the Central Bank yesterday.
Manager of Insurance at the Central Bank Natalie Roopchandsingh said that administrative fines can be issued for specified offences under the new act.
“There are about 88 offences for which administrative fines can be issued. There were no administrative fines in the old act and prescribed fines were based on summary convictions.
“The criminal penalty for a breach of the old act was a maximum fine of $5,000 however, under the new act criminal penalties range from $30,000 to $10,00000,” she explained.
Inspector of Financial Institutions Patrick Solomon noted that currently capital is in the vicinity of $1 to $3 million for a general and life company.
“But the new act we are increasing this to $15 million. What we call that is deterministic type of capital,” Solomon said.
Asked whether the new capital requirements increase the cost of insurance for consumers of insurance Solomon said with respect to the structure of fees for intermediaries the bank always look at the requirements to pay annual fees and this is included in the new act.
“But insurance fees is a combination of international experience. If you look at the international market we recognise that reinsurance rates are increasing and since reinsurance rates are increasing to cover the losses it is only natural that if the fees are increasing internationally we will have some increase locally. So it’s not necessarily associated with the Insurance Act,” Solomon said.
The Insurance Act of 2018 and the Insurance (Amendment) Act, 2020 (new Act) came into effect on January 1, 2021.
The primary objective of the Central Bank under the new act is “in respect of registrants, is to maintain confidence in, and promote the soundness and stability of, the financial system in T&T.”
The bank said close collaboration between general and a life company/ bank and all stakeholders will further increase and strengthen public confidence in the insurance sector.
It noted that major enhancements to the insurance legislation will improve corporate governance for policyholder protection, stronger supervisory powers and tools for the Central Bank, greater safeguards for policyholders’ funds, preservation of the integrity or soundness of the financial sector and improved standards of market conduct to ensure greater transparency in the marketing and sales of insurance products.
Regarding improved corporate governance Patrick Solomon, Inspector of Financial Institutions said enhanced corporate governance is a critical pillar of financial stability.
He said a strong corporate governance framework ensures that the relationships between an insurer’s board, management and shareholders are transparent, fair and balanced, resulting in prudent management and protection of policyholder interests.
Examples of objectives that are achieved by the enhanced corporate governance requirements in the new act include independent and objective oversight, defined responsibilities/accountabilities related to risk management, transparency and integrity and prudent management.