The Central Bank, the commercial banks regulator, is launching an investigation into claims that some banks are illegally conducting insurance business, Governor Cleviston Haynes announced today.
The development emerged during today’s monthly meeting of the Barbados Association of Insurance and Financial Advisors (BARAIFA) – the body that represents insurance agents and investment advisors – at the Lloyd Erskine Sandiford Centre (LESC).
During the meeting, which was addressed by Haynes, some BARAIFA members complained to him that commercial banks were threatening their market by carrying on insurance business.
“What I will do is I will have to investigate what you have drawn to my attention. Our role is to protect the depositors. I understand your concern but our role is to protect the depositors . . . there are restrictions in terms of what they [commercial banks] can do. I know that in some of the instances they use agents,” Haynes responded.
But he also warned banks against dictating to customers which insurance companies they should use when making transactions with the banks, such as taking out mortgages.
“The point here is that what you don’t want is for someone to go into a bank and mandate that you must use firm X or firm Y in relation to insurance and I think that is one of the reasons why the restriction is in place,” he said.
Sagicor financial advisor Collis Sealy, who first raised the issue during the meeting’s question and answer segment said that local banks now even have insurance departments and he fears that “the more they can get they would take. So I just want to have you [Haynes] on guard for our protection, so that they don’t completely erode our market.”
Guardian General’s Branch Manager Amado Marcano elaborated on his colleague’s claims.
Marcano, a Trinidadian, went so far as to admit his complicity in training private bankers to sell insurance on behalf of two named banks in his native Trinidad.
“I know personally because I am from Trinidad. When I was in Trinidad, I trained Scotia Bank and RBC private bankers to sell insurance. I was hired, because, at that time . . . . I am part of the culprits, I accept that. At that time, Guardian Life who I worked with had an interest in RBC. We owned a great portion of RBC at that time, so we were creating bank assurance,” he told the meeting.
He drew attention to the international market with firms such as Axel Financial which he suggested created a “very viable” bank assurance business.
For Barbados and the Eastern Caribbean, Trinidad and Jamaica, Marcano told the central bank governor, “the banks have taken a great portion of the life insurance business money, and I do not think that it is monitored, regulated the way that it should be . . . and it has to be, because we have one pie that we are dealing with right now”.
He contended that one of the things the insurance business suffers from is that the regulators, especially in Barbados, stipulate that the sector can only invest a particular percentage outside of the Caribbean Community (CARICOM).
“And I think that is one of the challenges we have in the insurance business. We need some space . . . some freedom. We need to bring money into Barbados. We need some freedom to operate as insurance companies as far as being able to make investments because we can bring a greater return for the people of Barbados,” he argued.
When Barbados TODAY reached out to Manager of Insurance with the Financial Services Commission (FSC) Paul Griffith, he said he would need to get more details about the claims to make an informed comment.
But Griffith stressed that commercial banks and insurance companies are licensed to conduct business in a different manner.