Industry Questions/Comments
Please provide clarification on these activities in which insurers are allowed to engage, particularly any aspects of the activities in which they must not engage and what level of activity constitutes conducting the particular type of business.
Also, please provide guidance on how these activities are to be conducted, whether via a separate unit/division/department, a subsidiary and the expectations re separate transaction activity from the insurance transaction activity, e.g. separate receipts and payments functions or just separate record keeping, bank accounts etc.
Central Bank of Trinidad and Tobago
1. Insurers can conduct the additional business activities referred to in section 30(6) of the Act directly. These activities are:
(a) establishing, distributing and selling collective investment schemes. This is, of course, subject to regulation by the Trinidad and Tobago Securities and Exchange Commission;
(b) the business of a mortgage institution or trust company as described in the First Schedule of the Financial Institutions Act Chap. 79:09 (“FIA”). [An exemption from registration is provided to insurers under the FIA];
(c) subject to the prior approval of the Central Bank, holding, managing or otherwise dealing in real estate; or
(d) forms of business ‘associated’ with the insurance business, i.e., business activities which support or have clear synergies with the insurance business.
2. Due to the dynamic nature of insurance activities, the Central Bank will not have a fixed and finite list of the forms of business associated with insurance business. Insurers are, therefore, in all cases required to first write to the Central Bank for confirmation that any activity they seek to conduct constitutes a form of business associated with insurance business. Furthermore, since the Act prohibits an insurer from acting as an intermediary, save as provided for in sections 30(9) to (12) for a period of 5 years from commencement of the Act, the form of associated business should not constitute the business of an agency, the business of an insurance brokerage or the activities of an adjuster.
3. Importantly, even though an insurer can conduct these additional forms of business in section 30(6), the Central Bank can require an insurer to discontinue the business where there is risk to policyholders. It is critical for insurers to inform the Central Bank before adopting any type of new business activity or amendment to the activity which the insurer believes to be associated business.
4. Where an insurer conducts the business activities listed in section 30(6) directly, the insurer must maintain separate books, registers and records for each type of business from its insurance business.
5. Note: Insurers are not permitted to engage in or issue any product that involves banking business or business of a financial nature as defined in the FIA.
Section 87 (4) (c) - Permissible Real Estate
What are the CBTT's requirements for submitting an application for approval for permissible real estate? Also, is there a due date for first submission for such a request?
Holding, managing, or otherwise dealing in real estate
Many insurers may own a property or 2 that they either use for their insurance business or that they rent/lease, whether in whole or in part, to external parties or a combination of the two. Would this constitute holding, managing or otherwise dealing in real estate? And if not, what is the threshold and/or criteria for same?
Restrictions on Activities of Insurers - Permissible Real Estate
The following addresses the comments posted above:
A “permissible real estate entity” is a real estate entity that is a subsidiary or other entity controlled by an insurer or is a real estate joint venture approved by the Central Bank.
Please refer to section 4(1) of the Act for the definitions of ‘subsidiary’, ‘real estate entity’ and ‘real estate joint venture’ and section 6 for the definition of ‘control’.
The following documents should be included in the submission to the Central Bank for its consideration in relation to the permissible real estate entity:
1. A description of the nature of the business of the entity;
In the case of a subsidiary, certified copies of its certificate of incorporation/continuance and the annual returns filed with the Companies Registry;
2. In the case of a subsidiary, the beneficial shareholding report;
3. In the case of a firm/partnership, a certified copy of its certificate of registration, statements of change of particulars (if any) and partnership agreement; and
4. In all cases, a copy of the audited financial statements of the company/entity certified by a director.
Upon review of these documents, the Central Bank would be entitled to ask for more information as the Bank considers necessary.
The Central Bank will issue further guidance to the industry on what constitutes holding, managing or otherwise dealing in real estate as contemplated in the Insurance Act 2018. In the meanwhile, those insurers that currently hold real estate assets directly (i.e. not via an entity or partnership), whether for its own use or for rent/lease, and not as a separate line of business, the status quo will remain and those insurers will not be considered to be carrying on the business of holding, managing or otherwise dealing in real estate. Insurers can seek further clarification from the Central Bank individually, on their particular situation if needed.
