IMF Asks Barbados To Strengthen Insurance Legislation

by Jason Gorringe, Tax-News.com, London

12 March 2003

Following an inspection visit to Barbados, the International Monetary Fund (IMF) has called on the local Government to step up supervision of the financial services sector and to tighten enforcement of existing laws that deal with the industry, notably in the insurance market.

In the absence of official statistics the IMF concluded that it was "virtually impossible" to make an accurate assessment of the industry's profitability, or the adequacy or otherwise of its capital base. Describing the local domestic life and general insurance market as 'stable' it hedged its conclusions by stating: "The insurance sector is an important part of the financial system and limited availability of official data make profitability and capital adequacy difficult to assess."

"The insurance supervisory and regulatory standard in Barbados has, hitherto, relied primarily on the good faith of industry participants. This approach exposes the sector to important risks. Single negative events may significantly damage the reputation of a jurisdiction in an increasingly regional and global market.

"Steps to formalise and improve regulation would help to protect the reputation and the charter value of the insurance business in Barbados from negative shocks," said the IMF, concluding that "On site inspections (by the Supervisor of Insurance), need to be conducted and supported by a more analytical rather than compliance oriented off-site analysis."

In acknowledgement of the Government's recognition of potential problems the IMF disclosed that "A proposal is under consideration by the Ministry of Finance to amend the insurance legislation to enhance, among other things, capital adequacy, and solvency requirements."

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