Central Bank takes over

Placing insurance companies under the jurisdiction of the Central Bank of Trinidad and Tobago merely accepts the reality that not only are insurance companies financial institutions, but that increasingly since the 1980s some of the more high profiled have acquired large shareholdings in banks. As such the involved insurance companies have become part of the banking landscape. Holding companies, which are outgrowths of what were originally wholly insurance companies, have been established. For example, Guardian Holdings Limited and C L Financial, which have developed “strategic alliances” with banks, with each (that is insurance company and bank) contributing to the growth of the other.

Insurance companies were traditionally restrained from investing their clients’ premiums, and while the restriction appeared reasonable, once the holding companies were created. the investing of the relevant monies both in Trinidad and Tobago and other CARICOM Member States, contributed to the strengthening of regional economies. In the process, many holding companies obtained not insubstantial interests in or sometimes acquired outright regional banks and/or other insurance companies. The holding companies enabled the respective insurance companies and the banks in which they had invested to complement and impact favourably on each other’s growth potential. Insurance companies brought new business to the banks which were now identified, while the banks brought new business to the insurance companies, eg when customers applied for mortgages and what have you.

So that insurance companies no longer simply had a general insurance perspective, but rather a broad based vision and financial interest which embraced not only banks, but housing and other investments. When Guardian Holdings and RBTT Financial of Trinidad and Tobago formulated their strategic alliance, with each having a 20 percent shareholding in the other, there was an understandable blurring of traditional images. Each became an Associate Company of the other, so that to the casual observer one had what amounted to a 20 percent portfolio in insurance, the other a 20 percent portfolio in banking.In turn, C L Financial had a substantial shareholding in Republic Bank, and at one time it was felt in some quarters would have made a takeover bid.

It was inevitable that with the overlapping, the Central Bank, under whose jurisdiction banks fell, would have wished to extend this jurisdiction to insurance companies. There was another factor to the equation. Some of the smaller insurance companies, against whom complaints have been aired from time to time with respect to payment of claims, would benefit, ultimately, from the tightening of financial control which Central Bank jurisdiction inferred.