-Insists that focus must be placed on performance gaps and overall profitability of the sector
Based on its analysis, the Central Bank of Guyana is of the view that there is a general confidence within the
insurance industry. In fact, it has found that there is continued stability in the sector. This, of course, has been seen as a very positive sign for the sector as it has spurred industry growth with moderate risk exposures that may not have any major destabilizing impact on industry performance.
According to Central Bank Governor, Dr. Gobind Ganga, it is important to note that the insurance sector which comprises long-term insurance and general insurance, accounted for approximately 6.4 percent of total financial assets and 26 percent of non-bank assets.
He said that the sector was adequately capitalized in keeping with the requirements of the Insurance Act 1998 at the end of June last.
Dr. Ganga noted that the insurance sector acts as a conduit for households and firms to transfer risks to entities that are better suited to handle them. In this way, he said projects can be undertaken that might not be otherwise possible, and this contributes to the growth and financial stability of the economy.
As for the performance of the sector thus far, the Central Bank Governor said that the insurance sector’s assets grew by 5.1 percent and accounted for 8.2 percent of the country’s Gross Domestic Product.
“Its soundness indicators signified a robust sector at the end June 2016. The long-term and general insurance sectors’ assets exceeded liabilities by 25.2 percent and 128.5 percent, respectively. Reinsurance (insurance bought by insurance companies) for the long-term insurance sector decreased marginally to 4.9 percent, indicating that fewer risks were transferred to reinsurers.
In contrast, reinsurance for the general insurance sector increased to 30 percent from 19 percent. Potential risks to which the industry was exposed were prudently managed resulting in no adverse effect despite the volatility of the global financial conditions,” expressed the Central Bank Governor.
Dr. Gobind Ganga also stated that the systemic failures by CLICO have reinforced the need for enhanced regulation in the insurance sector.
In this regard, Dr. Ganga recalled that the Insurance Bill 2016 was passed in Parliament and is now awaiting the President’s assent. He said it is expected that the introduction of a new regulatory regime would lead to improved resilience in the sector to withstand any adverse shocks, which in turn, will serve to strengthen the sector’s financial stability.
As for the way forward, the Central Bank Governor said that the Bank will seek technical assistance to provide additional resources to implement regulations and other subsidiary rules when the laws comes into effect, especially the much needed new solvency and capital adequacy requirements.
He said that the development of a crisis management resolution plans would also be pursued. The Bank of Governor also highlighted that there is need for continued focus on identified performance gaps while seeking to enhance insurance inclusion, penetration and overall profitability.
He believes that the road ahead is full of opportunities that the industry should exploit.
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