A report prepared by the International Monetary Fund (IMF) that reviewed the robustness of the operations of the Financial Services Commission (FSC)- specifically as it pertains to the supervision of Sagicor- has triggered alarm bells in the local and regional financial market. Although there is no evidence based on any public reporting Sagicor is not a well run company, the findings of the IMF report, commissioned by the FSC- supports the view that oversight body cannot conclusively give the green light to the good health of the Sagicor operations because it is under-resourced and therefore unable to execute a quality full scope review.
Based on recent reporting many have focused on the lack of adequate supervision of the insurance sector by the FSC, however, the BU household is acutely aware that the FSC ALSO has oversight for Credit Unions, Securities and Mutual Funds AND Pensions – see FSC website.
BU is very interested in the integrity of the pension slice of the market at a time when the National Insurance Scheme is ALSO under the microscope. It is no secret NIS expense will exceed revenue in the near future and necessitate drawdown on investments and possibly the need to extend the pensionable age to 70+ in the near future. Barbadians until recently were encouraged through tax breaks to open Registered Retirement Savings Plans (RRSPs) to supplement government pension in order to sustain a reasonable standard of living and create peace of mind in the golden years.
Relevant Link: IMF FSC Confidential Report
The catastrophic regulatory failure of another pan Caribbean insurance company is still fresh in the minds of a CLICO fatigued public. The findings contained in the IMF report leaked by Barbados Today should be the cause of worry for people of the region. It reveals that Barbados through its agent the FSC has not been aggressive in the post CLICO period to strengthen the oversight framework to efficiently mitigate risk in the sectors it has responsibility to supervise.
There is a large middleclass in Barbados with a significant number holding RRSPs with Sagicor AND the employer’s pension is ALSO managed by Sagicor. If there was a financial failure by Sagicor the impact on Barbados and Caribbean economies would eradicate personal wealth by greater than 50% in BU’s estimation. The fact that the CLICO meltdown occurred in 2008 and the quality of supervision continues to be deficient suggest heads need to roll.
The FSC and government owe it to the people they serve to be as strategic, efficient and transparent as practicable in this matter. BU appreciates this is a confidence sensitive issue, however, the regulator must publicly demonstrate that it has a grip on the issue. Given the deep penetration of regional markets by Sagicor and high contribution to GDPs, a catastrophic event must not occur because of weak supervision. Surely we learned from the CLICO mess?
By the way, why is June Fowler commenting on the matter? Does she possess the expertise or competency to comment with any certainty regarding the integrity of the regulatory framework?