Suitcase insurance trade a ‘no no’ for TT

Last week, Trinidad and Tobago were hosts to the 15th meeting of the Trade Negotiating Committee of the FTAA. That meeting was supposed to prepare for the November meeting of trade ministers in Miami to arrive at an agreement on the scope and schedule for the completion of negotiations for a start-up in 2005.

There are 34 countries within the FTAA and Trinidad and Tobago is bidding to have the Secretariat located in Port-of-Spain. While it is widely touted that Trinidad and Tobago is only a few votes shy of securing the Secretariat there is now a view that the location should be determined by consensus as there are strong lobbies by other contenders — in particular Miami. There are some people who believe that the FTAA will not become a reality in view of the disagreements and the short timeframe but the more likely outcome could be a less ambitious agreement and a longer lead time for its implementation. Therefore the future of the FTAA would hinge on the outcome of the Miami meeting and what deal could be brokered in finding a compromise between those who are championing the agreement in its present form and those who are realistic regarding scope and longer timetable.

Earlier this week, a regional financial services stakeholders meeting was convened under the auspices of the Bankers Association and representatives of the OECS, the Regional Negotiating Machinery (RNM), credit unions, banks, insurance companies, securities and Unit Trust attended. The focus was the status of the negotiations in Financial Services and the Text proposed by the USA. The insurance industry through its representative body — the Association of Trinidad and Tobago Insurance Companies (ATTIC) had  invited Mr Larry Placide of the International Trade Negotiation Unit (ITNU) of the Trinidad and Tobago Chamber of Industry and Commerce to update its members on the state of the negotiations with specific focus on insurance and insurance-related services. The insurance industry like the banking industry has taken a pro-active stance by being an active member in the ITNU and is following the negotiations with a view to ensuring that its interests are safeguarded and at least its position is articulated to the negotiators. It must be noted that agreements are reached between countries since it is the government that negotiates — not the private sector.

In terms of Caricom, the regional governments have established a mechanism to negotiate on their behalf — the Regional Negotiating Machinery — so that there can be some degree of consistency in the positions adopted by the governments. However, difficulty arises since countries have different interests and priorities. In the case of Trinidad and Tobago, we are probably the most advanced economy in the Caribbean with vibrant manufacturing and financial services sectors.  It is for this reason that companies involved in financial services have to maintain a keen interest in the ongoing negotiations in the GATS and the FTAA. It is clear that some Caricom countries have little or no interest whatsoever in the financial services sector negotiations except in some cases, offshore business. Trinidad and Tobago companies therefore must assume a lead role otherwise their interests will not be properly represented. Trinidad and Tobago had already made a commitment in the GATS in respect of reinsurance and retrocession business. Unlike some countries even where there is free entry, Trinidad and Tobago is not placing any conditions although some prudential rules could be applied in view of the ongoing difficulties and the downgrading of some reinsurers.

However, the USA position is that they want an opening up of the Trinidad and Tobago market whereby they can conduct cross border trade in retail life and general insurance and the very least that they would accept is cross border for marine, aviation and transit business. In short, they want their insurers to be able to write business in Trinidad and Tobago without establishing a presence or what is commonly termed the “suitcase trade” and without having to be licensed by our regulators. The insurance industry position is that cross border mode should not be permitted and if anything there must be registration, establishment and commercial presence for foreign service providers. Trinidad and Tobago is not asking for any special treatment since establishment and commercial presence is the accepted mode in most countries. However, the USA has always been advocating liberalisation by way of cross border trade and that in itself is a quantum leap.

In treating with FTAA issues, it is clear that our present legislation is outdated and requires a complete overhaul addressing not only capital requirements and best practice but must now deal with the trade imperatives. One way to deal with the suitcase trade is the use of a differential tax treatment in respect of business placed with unauthorised insurers. With respect to auxiliary services that are insurance related, there may be opportunities for local providers in certain services since foreign providers already access our market but there is a distinct lack of interest in the negotiations shown by consultants and professionals who are in this area of the insurance business. For the un-informed, the USA market is viewed as open without barriers but there is nothing further from reality. There are high entry requirements that will effectively rule out our insurers. In addition there are restrictions as regards the composition of the board of directors and ownership and control. Insurance is regulated at State level and not federal level and therefore each State has its own rules and requirements. There is a view that until there is uniformity and harmonisation as between State laws, market access should not be freely allowed. What must be accelerated is the Caribbean Single Market and Economy (CSME) which will create a single space of six million persons. Trading within the Caribbean is a difficulty and a single market is the best way to prepare for the challenges of the FTAA and other trade groupings. E-mail: daquing@cablenett.net