Industry Questions/Comments
[Section 92(3) Insurance Act 2018 (Act)]
Please provide specific guidance and clarification on what is required with respect to the policies for security interest, at minimum, in terms of content. If possible, please provide potential scenarios to which these policies would be applied since the application of the concept security interest is unclear.
Central Bank of Trinidad and Tobago
It must be recalled that a ‘security interest’ under the Act means a mortgage, lien, pledge or other charge or legal interest in property given in favour of a creditor/guarantor (Section 4(1)).
The Policy under section 92(3)(a)(i) of the Act concerns an insurer giving security over its assets in order to secure a loan/issue equity, a bond or other form of security.
On the other hand, the Policy under section 92(3)(a)(ii) of the Act applies to an insurer acquiring assets that are already subject to a mortgage, pledged or otherwise charged or taking a mortgage, pledge or charge over assets.
It is expected that insurers will not leverage their assets and grant security over them or purchase leveraged assets to extent that they cannot comply with capital adequacy, liquidity, reserving and other requirements of the Act.
To that end, insurers should consider including in these policies, at a minimum, rules to ensure compliance with any relevant requirement of the Act and Regulations, for example:
1. sufficiency of assets to support Trinidad and Tobago policyholder liabilities (sections 42(3) and (4), 83 and 85 and Paragraphs 4 to 8 and 12 of Part C of Schedule 5 of the Act);
2. prohibitions against directors, officers and members of a committee of an insurer having a beneficial or pecuniary interest over investments of the insurer (section 86(1) of the Act);
3. limitations on the transfers of assets and acquisitions (section 88 of the Act);
4. limitations on incurring credit exposures (sections 89 and 91 of the Act);
5. granting of mortgages to a director or officer of an insurer (section 90(5) of the Act);
6. capital adequacy and liquidity (section 82 and the Insurance (Capital Adequacy) Regulations, 2020);
7. prohibitions on borrowing and the use of shares as security (sections 92(1)(b) and (f) and 92(4) of the Act); and
8. claims reserving (section 212 and Paragraph 8 of Part C of Schedule 5 of the Act).
