Industry Questions/Comments
[Section 87 of the Insurance Act 2018]
Please define necessary services. Also, please explain how this requirement applies to a group of companies where the insurance company currently has subsidiaries whether insurance companies in other territories or other types of business entities. Is it that the group structure will have to change to relieve the insurance companies of their ownership/majority shareholding of these subsidiaries?
Central Bank of Trinidad and Tobago
‘Necessary services in support of the activities of the insurer’ are services which are ancillary, essential to, and which support the insurer in carrying on its principal activity i.e. insurance business. These necessary services must not be prejudicial to policyholder interests. Some examples which may be considered as “necessary services in support of the activities of the insurer” include printing services and information processing services. The Central Bank will not issue a fixed and finite list of these necessary services.
To this end, insurers were in all cases required to complete the “Shareholding and Ownership Report” by March 26 2021. In this report, the insurer should have specified all existing shareholding or ownership interests in entities which are providing what they consider to be necessary support services in support of its activities. The Central Bank will consider these reports and liaise with insurers accordingly.
For a proposed new acquisition, insurers must first write to the Central Bank for confirmation and approval that any service they seek to conduct, whether through a subsidiary or other entity, constitutes ‘necessary services in support of the services of the insurer”.
In considering an application for shareholdings in a company conducting ‘necessary services’, documents required by the Central Bank will include:
(a) the insurer’s rationale for classifying the company as a provider of ‘necessary services’, together with a detailed description of the nature of the business of the company;
(b) audited financial statements for the company for the 3 years immediately preceding the date of the application;
(c) constituent incorporation documents filed with the Companies Registry;
(d) a copy of an executed service agreement between the company and the insurer for the ‘necessary services’;
(e) the business and strategic plan of the company; and
(f) any other information requested by the Central Bank.
Insurers that are part of a group will be assessed individually by the Central Bank to determine whether restructuring is required to facilitate consolidation supervision under sections 47 or 48 of the Insurance Act, 2018.
