Has National Insurance Fund Managers Ever Followed Actuarial Recommendations?
Data issues delayed the preparation of this report and also affected the quality and reliability of some data that was provided. In some instances, data relationships noted from previous actuarial reviews helped determine current data assumptions. Revisions made to financial statements that were provided for the preparation of the 14th Actuarial Review resulted in some amounts presented in this report being different from those presented in the previous report – 15th NIS Actuarial Review.
A repeated criticism made of government reporting by international agencies is the questionable integrity of data collection and reporting. A similar observation was made by the Bahamas based Actuary that conducted the 15th NIS actuarial review. It is worth mentioning that the next report is due at the end of December 2017. It is therefore fair comment to make that successive governments have not managed resources to ensure the most effective financial management of the National Insurance Fund (NIF).
With questionable data identified as an underlying issue by the actuary, BU is forced to question the quality of decision-making by those responsible for the management of the NIF. If there are ‘data issues’ at play which affected the preparation of the actuarial report, logically management decisions based on questionable data must concomitantly be questioned.
The other observation arising from the 15th NIS Actuarial Review was effectively summarized by BU commenter NorthernObserver:-
Dr Robinson speaks
Alas,[how silly of us all] the problem is the NIS cannot find anywhere else to invest its money. The Fx reserves are too low to be wasted on NIS foreign investments. So the best it can do in this small island economy is to invest in GoB fixed investments.
The figures quoted in the BT piece are correct, but irrelevant. Why? another titbit from the 15th Review:
“The portion of combined investments held in government and quasi-government securities increased from 68% to 75%. This increase is contrary to both the Investment Policy and previous actuarial advice.”
previous actuarial advice??… this was 3 years ago….”Increase investment diversification with goals of reducing the portion of the Fund held in Government of Barbados to 50% over 5 years and increasing the portion held in overseas investments.”
And from the 13th Annual review some 7 years ago
“the National Insurance Board should limit additional lending to government
to amounts that will not allow the percentage of the Fund now held in government securities (57%) to grow any further.”
My point… Forget the reference by Dr JR to actuarial recommendations, the NIF have never followed them anyway. Was Forex low in 2008-09-10-11? Did the NIS alter their investment mix then as advised, or did they load up even more on GoB Debentures/Bonds? Would the NIF be better off today with cash or nearly junk bonds? The wussest part, is the primary reason the Bonds are nearly Junk, is because the NIS bought more, against all advice.
Another tidbit from the Review…After falling behind on its contributions and rental payments, the Government of Barbados covered some of its arrears by issuing Treasury notes and debentures to the NIF….so even though the NIS is lending the GoB millions, the GoB don’t have the money to pay NIS????? More paper.
You see Worrell? You see what happened to him after he towed the line, until he couldn’t take it any more? From the moment you hear the barber IS IN TOWN, catch the first flight you can.
If we are to listen to Minister Denis Kellman and Darcy Boyce before him, the government’s policy is to use the NIF to fund local ‘projects’. Although the holdings in government securities was less under BLP governments, there was no stark deviation in the investment policy of the NIF. Under the tenure of the last BLP government there was a healthy forex reserves yet there was no aggressive position taken to improve the investment mix. The point to register, although the government will never be able to apply the recommendation of the actuary to increase its foreign holding by 20% because the forex chest is virtually empty, it does not address the rising concern driven by market and sovereign risk.