Insurance companies mobilize risk from individuals and companies through insurance contracts and therefore reduces an economy’s exposure to risk. They form a critical component of the stability of our financial system. Their main functions include the payment of claims which may arise should insured events occur; underwriting of new and existing risks; premium rating based on varied risks; business development; investment of funds; purchase of reinsurance and management of risks.
Insurance companies operate within the St Lucia jurisdiction as subsidiaries, branches of regional companies or indigenous companies. Financial institutions such as banks have also expanded into the insurance business offering limited classes of insurance to their customers. As at March 31, 2017 twenty-seven (27) insurance companies were operating within the space; nineteen (19) registered general insurers and eight (8) registered long-term insurers.
Insurance services have been offered for a long period in St Lucia with some companies being established at least one hundred (100) years ago. Those companies have undergone significant structural changes over the period which is reflected in the complex nature of products currently being offered.
In the St Lucia financial services sector, insurance companies sell long term and/or general insurance products. Composite companies sell both lines of insurance products. The long term insurance class offers various life insurance policies such as ordinary life, industrial life and annuities.
General or non-life insurance business include pecuniary insurances, personal property or homeowners insurance; commercial all risks, business interruption; pubic liability; motor vehicle; personal accident; directors and officers liability etc.
New trends in insurance practice include online quoting for specific classes of insurance, parametric and mobile insurance.
Insurance companies must manage their risks by adopting risk management practices. One such requirement is the transfer of risk through reinsurance. Reinsurance is a form of insurance whereby an insurance company transfers some of its liabilities to another insurer. This form of risk transfer is beneficial to insurers as it provides some form of protection against loss of profitability or insolvency of the business, due to major claims or losses. Insurance companies operating within the space transfer a large percentage of their risks to reinsurers.
Legislation which governs insurance companies
Insurance companies are required to comply with the following insurance legislation;
- The Insurance Act, Cap 12.08
- Insurance Companies (Registration) Regulations – Section 167, Statutory Instrument 77/19954 of December 9, 1995
- Insurance Companies (Accounts and Forms) Regulations – Section 167, Statutory Instrument 36/1996 of July 13, 1996
- Insurance Companies (Reinsurance) Regulations – Section 167, Statutory Instrument 80/1995 of December 9, 1995
Requirements for Registration
Any insurance company which proposes to undertake insurance business in St. Lucia must apply to Financial Services Regulatory Authority (FSRA) for registration under the Insurance Act of St Lucia, Chapter 12.08. The Insurance Act provides the provisions applicable to both long term and general insurance companies.
The company must complete Form GR 100 and refer to Part 3, section 13 of the Insurance Act which provides the requirements for the application process.
A company wishing to carry on insurance business must take note of the limitations imposed under Section 15 of the Insurance Act (Regulation of Companies). The section states that a company shall not be registered to carry on insurance business unless it has
· Deposited with the Registrar the deposits required by the Act
· It has made arrangements and continues to have in place such arrangements for reinsurance of its business
· The Registrar is satisfied that the company is solvent under Section 34 of the Insurance Act
· It has paid the licence fee stipulated by Section 161 of the Act
· The Registrar is satisfied that the company has in place adequate knowledge and competence to carry out the functions
The Insurance Act stipulates the conditions applicable for registration of foreign companies in Section 16, as well as the obligations required from those foreign companies. The fees applicable for registration vary based on the classes of business the company intends to underwrite.
It should be noted that the Insurance Act Chapter 12.08 imposes a number of requirements on insurers at and subsequent to registration including:
- An appropriate deposit must remain in place for the period of registration. Section 80 of the Act provides details of the deposit requirements applicable to local and foreign insurers.
- An insurance fund must be established and maintained by an insurer which is equal to its liabilities and contingency reserves in its class of business. Section 88 of the Insurance Act provides details of the requirements of the fund.
The FSRA ensures that insurance companies operating within the space satisfy the statutory obligations stated above. Companies are required to place in trust to the order of the FSRA, the insurance fund for motor and long term insurance business. The ultimate objective of this is to ensure that the policyholders’ interests are protected.
Developments in Regulation and Supervision applicable to insurance companies
Recent developments in regulation and supervision include:
- The use of Risk based supervision of insurance entities
- Insurance Appeals Tribunal Regulations
- Requirement for submission of annual business plans
- Plan of Arrangement (BAICO) Bill