IMF advises tighter regulation for Barbados insurance sector

BRIDGETOWN, Barbados, February 26, 2009 – The International Monetary Fund (IMF) has warned that Barbados’ insurance sector needs tighter regulation.
In a report released this week, after an IMF mission for the 2008 Financial System Stability Assessment, it was noted that the lack of adequate supervision of the insurance sector exposes the sector to material risks.
“Single negative events may significantly damage the reputation of a jurisdiction in an increasingly regional and global market. Although the mission noted the introduction of on-site inspections, the sector remains largely self-regulated owing to continuing shortages of qualified staff, inadequate regulation, and out-of-date financial reporting,” the IMF said.
“Greater cooperation and exchange of information, particularly with the authorities in Trinidad and Tobago, are necessary to facilitate effective assessment of financial soundness and the protection of Barbadian policyholders by the supervisor.”
The good news, though, was that the IMF found that the domestic banking sector appears as “sound profitable and continues to dominate the financial system”.
“The financial system has benefited from the strong economic expansion, which has boosted credit demand while contributing to a steady improvement in banks’ asset quality. Capital adequacy for locally incorporated banks remains above the minimum required, and profits remain at healthy levels,” it said.
It noted, however, that prudential oversight of the banking sector could be strengthened by enhancing supervisory capabilities, accelerating the transition to risk-based banking supervision, tightening supervision of large exposures and exposures to related parties, improving the criteria for asset classification and provisioning, improving consolidated supervision for banking groups and regional financial conglomerates, and establishing more active home-host supervisory cooperation arrangements.