Chapter 1. Insurance Regulation

• Pages: 9-27

CHAPTER 1

INSURANCE REGULATION

1.1 INTRODUCTION

The Commonwealth Caribbean insurance industry is regulated by statute, associated regu-

lations and the common law. Statute vests responsibility for insurance administration in the

regulator – historically described variously as Supervisor,

1 Registrar or Commissioner

2 of

Insurance, depending on jurisdiction. This arrangement for oversight of fi nancial services rep-

resents a sectoral approach, which in the modern era has been abandoned in favour of con-

solidated super-regulators known as Financial Services Commissions. Variance in descriptive

title notwithstanding, regional Insurance Acts bestow on the regulator powers relating, inter alia ,

to registration of insurance companies and qualifi cation of insurance personnel

3 for which

regulatory approval must be had. The Bahamian decision Commonwealth General Insurance Co. Ltd

v The Minister Responsible for Insurance et al . 4 illustrates this. The issue was whether the company

was transacting life insurance business for which it had no licence. Applying Section 2 of the

Insurance Act

5 and Prudential Insurance Co. v I.R.C ., 6 the Court found that appellant did indeed

carry on life insurance business for which it had no licence. The action failed. More recently,

actions of regulators and governments were addressed by the Privy Council in United Policyhold-

ers Group et al. v Attorney General . 7 The Privy Council decision stands atop an unsettled environ-

ment, triggering jurisprudence with assertions of guarantee and legitimate expectation. This

places regulators under the microscope while refl ecting the signifi cance of the CLICO collapse

in the Commonwealth Caribbean.

1 Prior to regulatory consolidation in the sectoral approach to oversight of the fi nancial services sector, Barba-

dos Insurance Act No. 32 of 1996, Cap 310 and St Vincent and the Grenadines Insurance Act 45 of 2003,

for instance, referred to a ‘Supervisor of Insurance.’

2 T he Guyana and Jamaica Insurance Acts refer to the ‘Commissioner’ of insurance: Guyana Insurance Act

No. 20 of 1998; Jamaica Insurance Act No. 26 of 2001. Section 5 of St Kitts and Nevis Insurance Act No.

22 of 2009, Cap 21:11 empowers the Registrar of Insurance to have responsibility over the general admin-

istration of the Insurance Act. Section 4(1) of The Bahamas Insurance Act No. 23 of 2009, Chapter 347

states that:

there is hereby established for the purposes of this act, a body corporate to be known as the insur-

ance commission of the Bahamas. (2) the commission shall be a body corporate, having perpetual

succession and a common seal, with power to purchase, lease or otherwise acquire and hold and

dispose of land and other property of whatsoever kind. (3) the commission may sue or be sued in

its corporate name, and service up of any document of on whatsoever kind.

3 See further J. Hellner, ‘The Scope of Insurance Regulation: What is Insurance for Purposes of Reg-

ulation?’ (1963) 12 Am. J. Comp. L . 494; C. Bowyer, ‘The Concept of Economic Law in England:

Revisited to Consider the Regulation of General Insurance’ [1995] Anglo-Amer. L. Rev . 259; R. Brophy,

‘Development of Insurance Regulation in Ireland,’ (2012) 2 Journal of Financial Regulation and Compli-

ance 3, 249.

4 BS 1998 SC 8.

5 Section 2 of the Insurance Act, Chapter 317 defi nes ‘life assurance business’ as

insurance of human lives and insurance appertaining thereto or connected therewith and

includes the granting of annuities, endorsement benefi ts, sinking fund benefi ts and benefi ts in the

event of death or disability by accident or sickness, provided that such insurance against disability

by accident or sickness is included as additional benefi t in a life policy.

6 [1904] 2 K.B. 658.

7 [2016] UKPC 17.

10 Insurance regulation

1.2 CARIBBEAN LAW INSTITUTE INSURANCE BILL

The Caribbean Law Institute’s Insurance (CLI) Bill, adopted throughout the Caribbean in

varying versions, has strengthened the regulatory regime. The preamble to the Barbados Insur-

ance Act captures the object and intent of CLI’s reforms:

An Act to revise the law regulating the carrying on of insurance business in Barbados in order

to strengthen the protection given to policyholders under the existing Act; to increase the capital

and solvency requirements of insurance companies; to expand the existing regulatory frame-

work to include the regulating of all insurance intermediaries; and to give e ect to matters

related thereto.

E ectively, response to the CLICO collapse expands the regulator’s power in many jurisdic-

tions by incorporating CLI’s position. Far more expansive than earlier Insurance Acts, the cur-

rent Acts exhibit, inter alia , increased fi nancial requirements, more robust corporate governance

safeguards and recognition of spousal relationships. The latter, if not for pur poses of insurable

interest, then certainly for recognition of the distinction between revocable and irrevocable

benefi ciaries. Undoubtedly, in light of disputes surrounding the validity of ‘policies’ such as

Executive Flexible Premium Annuity (EFPA) as true insurance contracts and not fi xed inter-

est deposits, some jurisdictions have made provision for variable life products. Mindful of life

insurance companies’ creativity, Section 152 of the St Kitts and Nevis Insurance Act 2009,

8 for

instance, describes a ‘variable product’ as meaning ‘a variable life insurance policy, a variable

annuity contract, or a universal life insurance policy.’ Such a concept was foreign to Insurance

Acts of the 1960s.

1.3 STATUTORY REQUIREMENTS

To mitigate the risk of corporate failure, recent regional insurance legislation imposes more

robust regulatory and fi nancial obligations, the underlying objective being maintenance of

solvency – solvency of course being the prerequisite for insurance companies’ ability to honour

obligations when, as probabilities dictate, they shall become due. Regulatory oversight therefore

provides added policyholder protection.

9 The regulator’s function ensures requirements are

met as conditions precedent to registration. The Act in most jurisdictions expressly stipulates

that ‘no person other than a body corporate may carry on insurance business.’

10 T he regulator

must be satisfi ed that the entity is a company before authorising registration of an insurance

company. This is not the case, however, in St Vincent and the Grenadines Insurance Act No.

45 of 2003, which recognises an Association of Underwriters and further makes provision for

unathorised insurers to conduct insurance business.

11 Apart from the latter category, in order

to be registered the insurer must have a minimum paid-up capital which varies in accordance

with the nature of the insurance business being conducted (i.e. whether long-term, general or

motor vehicle insurance business). For instance, the Barbados Insurance Act stipulates that the

8 St Kitts and Nevis Insurance Act No. 45 of 2009.

9 Antigua and Barbuda Insurance Act, Cap 218; the Bahamas Insurance Act Chapter 317; Belize Insurance

Act Chapter 208; Trinidad and Tobago Insurance Act Chapter 84:01; Guyana Insurance Act of 1998; St

Lucia Insurance Act No. 6 of 1995.

10 Section 9(1), Barbados Insurance Act, Cap 310; Section 6, Jamaica Insurance Act No. 26 of 2001; Section

11, Trinidad and Tobago Insurance Act Chapter 84:01.

11 Section 9, St Vincent and the Grenadines Insurance Act No. 45 of 2003.