Guardian Group rewrites Caribbean insurance code
From World Finance
Financial regulation is changing all over the world, but Guardian General Insurance, which pre-empted the crisis by focusing on good governance before it hit, now has a head start on its industry rivals
Financial regulation is changing all over the world, but Guardian General Insurance, which pre-empted the crisis by focusing on good governance before it hit, now has a head start on its industry rivals
As the financial crisis squeezed credit out of the world’s larger economies, most economic theorists predicted a rough time for smaller, less advanced economies. In some cases that failed to materialise. Many of these less mature economies found themselves surprisingly well positioned to protect themselves domestically with slight but well-informed policy manoeuvres. The Caribbean is one such region that reacted well and provided a stable environment for firms to continue to perform in. One such firm is the Guardian Group, which has reacted well to changes in its domestic market, reaffirmed its strategy, and is looking to the future. World Finance spoke with Richard Espinet, CEO of Guardian General Insurance, which secures the group’s general insurance portfolio. Espinet talks about the importance of reacting at the right time, drawing on experience, and the group’s key commodity: its customers.
In what ways has the Caribbean market for financial services changed in recent years?
The substantive change in the Caribbean’s financial services market has definitely been in the area of regulation, particularly as it relates to governance, risk management and solvency.
What challenges has this change posed to Guardian Group?
This has been more of an opportunity than a challenge for Guardian. We have always focused our operations on proper governance structures, risk management practices and adequacy of capital. We have been operating this way for a number of years, so much so that some of our producers/clients complained that we were too bureaucratic, inflexible and asked too many questions. It was difficult in the early days, to be different from the competition, but we believed that it was the right way and maintained our focus. It was bitter medicine at the time, but we wanted to apply a ‘first world’ approach to insurance in the Caribbean, as we felt this was the way to go and it would only be a matter of time before the legislation became more stringent.
Now that legislation is rapidly changing around us, what is second-nature to us, is now a challenge for competitors. They will also find that their organisations are not geared for the cultural changes that will result from the way financial services need to be managed in the near future.
In what ways have you differentiated the company from its competitors?
In the English-speaking Caribbean’s general insurance market, both international and regional companies compete for the business of five million customers. In this market, each of the countries has different levels of regulatory stringency. It is possible for general insurance companies to take a roguish approach to the provision of services by having inadequate capital resources, limited reinsurance coverage, offering low rates and taking risks that inevitably leave the customer exposed.
At Guardian General Insurance (GGI) we have adopted a responsible approach to the provision of general insurance. We focus on three core aspects to differentiate ourselves from the competition. The first is Red Carpet Service. We believe that this is our unique differentiator and is embedded in our core values of trust, integrity, quality and serving people. These core values translate to the development of long term, responsible relationships with those we serve and those who serve us. In 2009 we trademarked our Red Carpet Service for customers and set this as a GGI standard across the region. Our staff orientation includes training in the GGI Red Carpet Service because we understand that staff are the ultimate brand ambassadors.
We also focus on having a strong reinsurance programme. GGI partners with the world’s best reinsurers – all rated A by either AM Best or Standard & Poor’s – to ensure that the quality of coverage we extend focuses on serving the client while maintaining shareholder value in the event of disaster. In Grenada and Jamaica, in the aftermath of hurricanes Ivan and Emily, we made good on the financial promises made to our customers. We also supported the wider communities and were a symbol of hope until normalcy returned. At GGI we continue to negotiate with our reinsurers to provide robust coverage for our customers while juggling the cost of reinsurance.
Finally, there are AM Best ratings. In 2013, GGI maintained an A- Excellent rating from AM Best. This rating needs to be looked at in the context of the depressed economies of many of the Caribbean states that we operate in. In 2013, Standard and Poor’s lowered its foreign and local currency sovereign credit ratings on Grenada to ‘SD’ (selective default) from ‘CCC+/C’, Barbados’ long-term rating to negative and Jamaica’s foreign and local currency sovereign credit ratings moved to ‘SD’ from ‘B-/B’. GGI operates in all these territories, which suggests that our ‘Excellent’ rating is a testament to the financial strength in our capital base and our surplus. The rating also showcases our continued financial performance, which we know is a function of our underwriting philosophy and the discipline that allows us to manage the underwriting cycles that are part of the challenges of this industry.
What role has the Caribbean region played in helping decide the company’s vision?
Guardian General operates in over 21 countries in the region. We are very mindful of the individuality and needs of each island and the macroeconomic factors that pose challenges across the region. We developed a vision that recognises the diversity of our markets, and states our commitment to serve our communities.
That vision recognises our geographical footprint in the region, and our intention to maintain our leadership position. We insist that regardless of the cultural and economic factors within which our companies operate, our clients must experience the same level of service. Our vision directly refers to the warmth of the Caribbean people and the passion with which we live our lives. We encourage our staff to live this passion not only in the way that we serve external customers but also in the way that we treat each other internally and provide each other with the things that we need.
Tell us about your rebranding. What aspects of Guardian Group have changed?
GGI finds strength in being part of one of the largest indigenous groups in the region – the Guardian Group. The Guardian Group’s vision provides a unified front that tells the people of the Caribbean that whatever their financial needs are, they can ‘live easy’. Our communities are well serviced by the group, whose companies offer life and health insurance, pensions, annuities and other investment products, as well as general insurance.
The rebranding reflects a decision to extract synergies and so effect savings from the rationalisation and pooling of common support services such as human resources, marketing and communication, risk management and so on. As a result, the various companies throughout the region are free to focus on what is core to their portfolios. It is also a way to build and deepen skills capacity in these support functions to really add value to companies. At GGI we endorse this strategy and have seen the benefits of this approach. Guardian Group’s new single brand strategy also paves the way for the full integration of our services across insurance and asset management products and services in the future.
What were the reasons for the rebrand?
The group now has one goal, which is to ensure that each unit, in each location, has the same brand equity. Recently the group’s companies have all had different logos, names and marks. The new common logo ensures that customers can easily identify with and understand the size, strength and reach of the group.
The fact that our companies were leaders in their individual markets often went unsung. Now, with the entire brand portfolio under one umbrella, each company has experienced a boost in goodwill, because our brand is consistent and recognisable.
You’ve pursued inorganic growth to expand regionally. Why that strategy?
The Caribbean general insurance market is a very price-sensitive market, with international operators like the London facultative market making forays to pick off choice risk when opportunities present themselves. As a result, we focus more on differentiating ourselves through quality while maintaining prices. We are in a catastrophe zone and have to be very mindful of this. When you combine this strategy with the economic climate in the region you realise how challenging organic growth can be.
We made the decision that our opportunities for growth lie in mergers and acquisitions and the skilful management of the integration process to extract the synergistic savings that these opportunities provide. This strategy means that we are very discerning, and scrutinise opportunities that fit with our business model.
In 2012, we acquired Globe Insurance Company in Jamaica. This, combined with our original Jamaican operations, West Indies Alliance Insurance (WIA), makes the Guardian General Insurance Jamaica (GGIJ) the largest general insurance provider in Jamaica. The acquisition of Globe was a good strategic fit for GGI since there have been significant synergies both on the administration side and potentially on reinsurance purchasing.
What are your plans for the immediate future of the group?
For the immediate future the Guardian Group will continue to focus very selectively on inorganic opportunities. We were born out of mergers and acquisitions, we have been very successful at the integration process and this has taken us to a leadership position in all major markets and in the region as a whole. We will also be focusing on developing our information technology systems to take advantage of emerging opportunities to enhance our offerings to our clients.
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