##ntial norms and regulations. the finsac head also blamed the crisis on jamaica ’ s failure to adequately regulate and supervise the financial sector. he noted, in particular, that the office of the superintendent of insurance, was not adequately staffed and as a department within the ministry of finance did not appear to have the stature needed to deal “ at eye level ” with the moguls of the insurance industry. this was the jamaican situation in the 1990s. it may not be our present circumstance, but let ’ s be frank, we have our own skeletons and we should learn from the jamaican experience and seek to put our house in order. in the context of the integrated supervision project conducted by the lawrie savage group, diagnostic studies on several insurance companies were conducted. the data obtained from these studies, as well as information from the office of the supervisor of insurance, suggest that while several companies operate in conformity with the statutory requirements, there are too many cases, similar to the jamaican example, where the prudential norms and regulatory requirements are flouted. the evidence suggests that there are far too many cases of chronic statutory fund deficits, late filing of returns, inadequate reinsurance and other areas of non - compliance. the diagnostic studies also indicate that the investment strategy of some companies requires stricter regulatory attention, in part because of limited portfolio diversification and related party transactions. the latest insurance industry report makes reference to the need for companies to upgrade corporate governance and risk management structures. it also identifies market conduct in the industry as another matter of concern. in this regard, there are clearly too many instances of inadequate and delayed settlement of legitimate claims of policyholders as well as questionable, if not, unfair and deceptive marketing practices. the capacity of intermediaries to competently fulfill their role is also an issue that reportedly comes up with some frequency. specifically, there is a perception that the training of intermediaries does not always keep pace with the evolution of products offered by some companies. these are but some of the issues that call for stronger regulation and more focused supervision. and so, what are we doing? as you know, cabinet has approved that the supervision of insurance companies and pension funds be integrated with that of banking institutions under the authority of the existing bank inspection department of the central bank. the legislation to effect this transfer is currently being finalized and is expected to be presented to parliament by the end of july or early august. in the meantime preparations for the transfer are proceeding apace. internal

, operating in several fields, and spread over 20 countries – in the caribbean, central and north america and europe. the official data showed that cl financial was an extremely strong and profitable conglomerate and that clico was the centerpiece of the group. it was clear that the group had major vulnerabilities, the most notable being the excessive amount of related - party transactions. from the beginning, we recognized that regulation of the insurance industry, which was accustomed to being unregulated, was always going to be a major challenge. and we knew that clico, being the biggest company, would be in the forefront of this process. financial regulation is most effective when you have the confluence of a number of factors including an adequate legislative and regulatory framework ; an effective supervisory system ; including highly trained regulators ; a regime of supporting and supportive institutions such as the accounting and auditing profession and support from an informed and vigilant investor community – or market discipline. even with all these pieces in place, any licensee who is committed to exploiting loopholes, to taking excessive risks with policyholders ’ and depositors ’ funds, and to bending the system could go undetected for a while and in so doing could do a lot of damage. our insurance legislation dates back to 1980 and is very archaic. by way of example : • clico, with assets in excess of over $ 24 billion, only requires capital of $ 3 million. this compares for example with banks which must have capital equivalent to a minimum of 8 per cent of its assets. thus, a bank of clico ’ s asset size would have at least $ 2. 0 billion of capital ; regulatory capital requirements for the insurance industry is only now being developed. • even when the central bank formally took over regulation of the industry, the legislation had limitations with respect to on - site supervision ( and formally it still does not ) ; • while the legislation did not restrict related party transactions, there were significant deficiency or loopholes and this was, perhaps clico ’ s greatest vulnerability ; and • it is silent on the issue of actuarial methodology, which allowed companies to use their own standards which could result in a lower statutory fund requirement. as the bank and the industry proceeded to work on a new insurance act, we tried to achieve, by moral suasion, what would have been mandatory under appropriate legislation. thus for instance : • we insisted on on - site inspections of clico ; • in the face of concerns