ewart s williams : preparing enhanced insurance regulations for trinidad and tobago speaking notes by mr ewart s williams, governor of the central bank of trinidad and tobago, for the “ public consultation of the draft insurance bill & accompanying regulations ”, port - of - spain, 10 december 2009. * * * introduction good morning ladies and gentlemen. my role is to make a few introductory remarks to get the main discussion going. obviously we all would like this to be a serious working session and not an opportunity for speechmaking. let me start by saying how delighted i am to be with you this morning as today ’ s public consultation which marks the final phase of a process that started roughly five years ago. as you would recall the regulation of the insurance sector was transferred from the office of the supervisor of insurance in the ministry of finance, to the central bank in 2004. the process of preparing a new insurance act has been a collaborative approach between the central bank and a stakeholders ’ committee, comprising members of attic, the brokers association and other industry consultants. this collaborative approach bears testimony to the firm commitment of the central bank to ensuring that the legislation for the sector strikes the right balance between international best practices and local market conditions and circumstances. prior to april 2004, the central bank had oversight of 6 commercial banks and 15 non - banks. after the shift in regulatory authority, the bank took on responsibility for 51 insurance companies, and 256 registered pension plans. this was a major undertaking and necessitated a significant increase in staffing and infrastructural requirements, including training. the insurance sector, as you know, is a major contributor to the domestic economy. it accounts for close to $ 40 billion, second only to the $ 88 billion for commercial banks. the sector is a major repository for private savings and by covering risks and unexpected developments ; it facilitates private and public sector activity. in short, the industry is one of enormous economic and social value and critical to our developmental efforts. the legislation that underpins insurance activity in trinidad and tobago is grossly outdated. the basic act dates back to 1966 and was modified in 1980. as all of you know better than i, the insurance industry of today bears little resemblance to that of 1966 or even 1980. as i am sure you know, inadequate financial regulation or regulatory failure has been widely cited as one of the factors behind the international financial crisis of 2008 – 2009. as a consequence of this global financial crisis comprehensive reforms are underway to address the weaknesses which were exposed

action, a disciplining device. thus, for instance, if a country was not likely to meet the fiscal criterion, strict monitoring as well as peer pressure forced the country to take measures to come back on track. you would also remember that under the exchange rate mechanism ( erm ), countries were required to intervene in foreign exchange markets to keep their floating currencies within the agreed band. in short, the convergence criteria had “ teeth ” and carried sanctions. in the case of the caribbean, the convergence criteria seem to be purely for information purposes ; they have certainly not been seen as a guide to policy ; there is no official monitoring ; there are no sanctions ; and none of the participating countries seem anxious to yield sovereignty over economic policy. on this issue, prime minster arthur of barbados who has lead responsibility for the implementation of the csme commented as follows : “ our caribbean community has been conceived to be a comm unity of sovereign states. each sovereign state in such an arrangement retains exclusive powers in relation to the implementation of community decisions. there is also no provision for the transfer of sovereignty to any supranational regional institutions and there is no body of community law that takes precedence over domestic legislation ”. consequently, prime minister arthur noted ( in a speech to the trinidad and tobago chamber of commerce in june 2005 ) “ the convergence project “ will go nowhere unless there is substantial political engagement on the matter of monetary convergence. this is precisely because the issue of sovereignty hangs over the subject of monetary cooperation and the adoption of a regional currency. the matter ( he continued ) therefore has to be addressed also as a political issue requiring as much political commitment as it does a technical and economic foundation ”. in addition to political will and commitment, the literature on monetary union also emphasizes the importance of communication with the various publics who need to be weaned off the uncertainties and apprehension about relinquishing their national currency. another major challenge could be the distrust and suspicion between member states – the smaller states fearing domination by the larger states or the richer states concerned about bearing too much of the financial burden. monetary union or some kind of intensified monetary co - operation may indeed be the way of enhancing integration of the caribbean region. however, we need to re - examine our approach and in particular, we need to summon up the political will and achieve public buy - in to make this initiative a success.