By Natan Levy From BN Americas

The island nations of the Caribbean must face up to the reality that the status quo will not provide the much needed boost to further develop the region’s insurance markets.

As the region welcomed participants from local and multinational insurers for the 34th annual Caribbean insurance conference in Curaçao at the start of June, it faced up to the necessity of ever greater regulatory integration among the multitude of regulators, with calls rising to go even further.

With regulatory costs in the global financial industry adopting an ever rising trend, in line with complexity and legal implications, there is no reason for the region to exacerbate an issue that can be simplified.

The withdrawal of several large players from the region’s markets in recent years has served to shine a torch on the regulatory costs required for operating across multiple jurisdictions and dealing with a multitude of regulators, in what individually are small markets with at times high rates of penetration.

The presence of the larger and more attractive market of Mexico on its doorstep makes it even more difficult for the region’s insurance industry to compete for the attention of the larger international players.

Their withdrawal has left the market to a smaller number of participants with lower competitive pressures in certain areas, but the regulatory costs and administrative burden remain an obstacle for development and innovation.

Furthermore, innovative solutions considered by the vanguard of the industry, from mobile applications to the use of big data, are at present unavailable in the Caribbean, where the necessary technology and industry knowledge have not yet reached a sufficient level to enable its use.

TRUST

While P&C insurance continues to represent good business for many, given the annual hurricane season and the real threat it poses, the region’s life insurance industry is suffering from a loss of trust that followed the collapse of Trinidad and Tobago-based Colonial Life Insurance Company (Clico) in 2009.

That no reform has taken place, more than five years on, is a testament to the overcomplicated regulatory environment in the region. It also points to an apparent disconnect between insurers, regulators and the governments of the region.

The lack of presence at the conference of any of the region’s regulators, which were all meeting in Barbados at the same time, makes it clear that for any serious reform to succeed, political pressure must be applied. That, however, is a whole new ball game.

The immediate reality is that unless the region tackles its regulatory deficit head on in a timely manner, developments will continue to be held back, eroding its markets and presenting a continually unappealing proposition not only to international players but also to its own consumers.

For more on this story go to: http://www.bnamericas.com/news/insurance/editorial-comment-caribbean-insurers-continue-to-suffer-from-regulatory-complexity

IMAGE: www.sva.edu