existing legislation requires insurance companies carrying on long term insurance business to have share capital of a mere $ 3 million, which if strictly observed, robs them of the needed buffer to meet adverse circumstances. for general companies, share capital of only $ 1 million is required. this has not changed since 1980. • the statutory fund, which is meant to protect policy - holders, is only effective if it was funded on an on - going basis. prior to last month, strictly speaking, the law only required companies to meet its statutory fund requirements for one - month, after the end of their fiscal year. • in the case of non - life companies there are far too many complaints regarding the timeliness and adequacy of claims settlement. • the truth of the matter is that the insurance industry has not been subject to formal regulation for a long time and as such, has not internalized a regulatory culture. consequently there are challenges in getting some companies to meet normal regulatory requirements such as : • filing statutory returns within the stipulated time frame. • complying with recommendations resulting from on - site examinations. • topping up their statutory fund within the required time frame. • complying with their own internal audit recommendations. fortunately things are improving and the introduction of new legislation would contribute to enhancing regulatory compliance. before i end, let me briefly address the cib / clico issue. if the financial sector was in such good shape how does one explain the clico affair? my simple answer is that clico / cib was an aberration. as you know clico and cib were subsidiaries of the conglomerate cl financial group, which covered some 60 subsidiaries in the financial sector, in energy, real estate manufacturing and distribution. the financial institutions in the group, if you include the commercial bank, has assets of equivalent to about 37 per cent of gdp. on paper, cl financial has assets of over $ 100 billion. in a financial system which, could be described as well - capitalised and generally conservative, clico / cib were isolated cases of an overly aggressive and risky business model. this model was characterized by : • excessive related - party transactions which carry significant contagion risks. this high level of concentration is not specifically prohibited by the present legislation ; • an aggressive high interest rate resource mobilization strategy to finance equally high risk investments, much of which were in illiquid assets ( including real estate both in trinidad and tobago and abroad ) ; and • a very high leveraging of the

group ’ s assets. in this model, the flow of deposits and policyholders ’ funds, through rollovers and new business, masked the limited profitability of many of cl financial ’ s investments. then came the recent international crisis, methanol prices ( a major source of dividends ) declined ; real estate values plummeted and in a climate of uncertainty, the rate of roll - overs and new deposits slowed markedly. this led to liquidity and perhaps solvency problems, the real impact of which is now being assessed. i would want to suggest that the clico / cib crisis represents a case of “ systemic failure ” from which we all can take invaluable lessons. clearly we need to upgrade our legislation as a matter of urgency. it is hoped that the recent international financial crisis as well as the recent stresses in both the credit union and the insurance industry would convince industry participants of the need for modern legislation to cope with a modern financial sector. two, directors and management need to take seriously their fiduciary obligation to protect depositors ’ / policyholders ’ funds. independent directors have a special obligation to provide checks and balances and play a “ whistle - blowing role ”, if necessary. three, external auditors must also recognize their fiduciary responsibilities and must be held accountable. the self - regulatory bodies must set and enforce the highest auditing standards. that ’ s the legacy of enron and world com. four, as regulator we need to continue to upgrade our skills and quickly achieve the level of competence in the insurance and credit union regulations as we have achieved in bank regulation. of course, we have been in bank regulation for close to fifty years whilst we have only recently been doing insurance. the clico / cib crisis is a major setback for the financial sector in the region. we have been able to contain the contagion but the challenge of strengthening market confidence and ensuring that the cost to taxpayers remains minimal in the medium term is ongoing. the clico / cib collapse should be a lesson that serves to strengthen our financial system for the next several years.