Independent lawmaker urges wider insurers’ investment portfolio

Independent Senator Andrew Mallalieu has urged the government to broaden financial services industry reform by liberalising investment rules governing insurance companies, warning that Barbados remains vulnerable if insurers’ investments are concentrated here.

In Wednesday’s debate on the Protection of Depositors Bill, the real estate executive said the legislation highlighted an important principle of risk diversification that should also apply to the insurance industry.

Referencing the start of the Atlantic hurricane season, Senator Mallalieu noted he was encouraged by prayers offered in the Senate for Barbados to be spared from storms, but said the country also needed practical measures to strengthen its financial resilience.

He said: “I worry that the same assets that the insurance companies in Barbados who are insuring us against a hurricane, they themselves are limited with what they can invest in.”

He argued that insurance companies should have greater scope to invest outside Barbados to reduce exposure to the same risks they insure against.

He pointed out that insurers already spread much of their underwriting risk through overseas reinsurance, suggesting that a similar approach should be taken with their investment portfolios.

“When those insurance companies get $100 in premium, they might be reinsuring $90 of that overseas, so they’re spreading the risk overseas,” he said. “It might be useful for us to think about what are the investments that those insurance companies should hold.”

Drawing a parallel with the Protection of Depositors Bill, Senator Mallalieu said the legislation recognised the importance of separating insured deposits from the risks they were intended to protect against. He argued that insurance companies should adopt the same principle.

“Don’t tell me that we are insuring a house in St George and backing it by a house that we have an asset for in St Philip, because when a hurricane hits Barbados, all the assets are hurt the same way.”

He called on policymakers to view the bill as part of a wider opportunity to strengthen the country’s financial system: “I’m encouraging us to look broadly, see the greatness of this bill and extend it to insurance companies and all forms of insurance.”

(SB)