Abstract
The clearest differentiating factor in the Caribbean insurance sector is the
marked absence of major global
players. AIG in Jamaica and Trinidad &
Tobago, and Spain’s MAPFRE, which has a presence in the
Dominican
Republic, are the only international insurers that have yet seen potential in
Caribbean
insurance markets.
They could be missing a trick with recent
progress on CSME, the CARICOM Single Market and
Economy. The 12 CSME
members include Jamaica, Trinidad & Tobago and Barbados, but not the
Bahamas or the Dominican Republic. The Dominican Republic has a free trade
agreement (FTA) with
Costa Rica, El Salvador, Guatemala, Honduras,
implying an intention to focus on doing business in
central and South
America rather than the Caribbean. The Bahamas has come under fire for not
signing
up to the treaty.
The first phase of CSME, implemented in
2008, enshrines the right of establishment, whereby any
business from a
signatory state has the right to establish and operate business in any of its
fellows under
the same terms and conditions as local companies. Presumably
it would allow global insurers to leverage
a legal presence in one
signatory state to a business presence in another, but if international
insurers
continue to ignore the Caribbean this is perhaps a moot
point.
The relative absence of global insurers is compensated for by major
regional groups, such as Guardian
Holdings, CLICO/Colfire, and Sagicor, as
well as a plethora of local insurers. The first group is in the
best
position to solidify their position in the sector with the advent of CSME, but
the treaty could also be
leveraged by high quality local insurers.
CSME could also unify a Caribbean insurance industry that is marked by wide
diversity, as outlined in
our previous reports.
Jamaica and the
Dominican Republic are lower income countries with a history of economic,
financial
and political instability and have under-developed insurance
sectors. Barbados, as the table below
suggests, is a substantial centre
for offshore captive insurance, although life insurance is not especially
prevalent. Authorities in the Bahamas, which it should be remembered has not
signed up to CSME, is
looking to rival its neighbour in the captive
insurance sector by leveraging its status as an offshore
banking, private
banking and trust centre. Despite being the second richest country in the
region (with a
GDP per capital of US$19,700 compared to US$21,300 in the
Bahamas), Trinidad & Tobago is has high
life insurance premiums per capita
but low non-life penetration.
The low penetration of insurance in the
region suggests that the industry has significant room to expand,
with
relatively high standards of regulation (led again by Barbados with its status
as a financial centre),
and low country-specific risk.
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