The following is a response from the Financial Services Commission to an editorial published in The Gleaner on January 26, 2006.
THE EDITOR, Sir:
WE WRITE in response to your editorial of January 26, 2006 entitled "A misguided act".
Your editorial, which lacked factual basis and was devoid of legal content, branded the Financial Services Commission ("FSC") and the Supreme Court as making nonsense of the contractual commitment made to many of the policyholders of Dyoll Insurance Company Limited (Dyoll).
The Insurance Act requires all registered insurance companies to maintain a prescribed deposit with the commission at all times. The amount of the deposit may be increased by the commission as it deems fit. The regulatory rationale and purpose for the deposit is to satisfy insurance claims against the insurer by all policyholders, local or otherwise.
You charge that the FSC's instructions to Dyoll to increase its deposit were intended to be applied so as to exclude non-Jamaican policyholders from benefiting from the prescribed deposit. This charge is unfounded and no doubt misguided. The decision by a prudent regulator to exercise its discretion to increase the prescribed deposit is taken in the context of given relevant circumstances. Such were the circumstances in which the FSC prudently exercised its discretion.
UNAMBIGUOUSLY EXPRESSED
The provisions of the Insurance Act dealing with the application of the prescribed deposit on the winding up of an insurance company are unambiguously expressed and do not afford the FSC a discretion in the determination of how the prescribed deposit is to be applied in such circumstances. The ruling of the court in this matter is therefore not surprising. The FSC is required by law to hand over the deposit to the liquidator.
The FSC has discharged its responsibilities in this regard. The liquidator is in turn required to apply the deposit firstly to the discharge of liabilities in respect of local policies. As can be understood from the court's ruling and the terms of the contract between Dyoll and its agent in the Cayman Islands, this may include some policyholders who reside in the Cayman Islands.
The law in Jamaica regarding the prescribed deposit and its use is by no means novel and is in line with the laws and practices of many other jurisdictions in both emerging and developed markets. The example of the United States used in your editorial is indeed very relevant to this discussion as insurance laws in that jurisdiction stipulate that unless a policy is purchased and issued in the state in which the insurer is licensed, the insured will not be treated equally in the winding up of the relevant insurance company. Canadian law has a similar effect. Provisions similar to the law in Jamaica with respect to the requirement for and application of the deposit can also be found in regional insurance legislation.
NO EVIDENCE
Contrary to your assertions in the editorial, we have no evidence that this internationally accepted policy has hindered overseas expansion of insurance businesses and this is, in our view, unlikely, given that states employing modern standards for insurance supervision usually apply some means of protection for residents policyholders who are insured with overseas companies. In Jamaica, for example, the legislature has seen it fit to include provisions in the Insurance Act requiring companies that wish to do business in Jamaica to establish a place of business in Jamaica, to be registered by the FSC and to hold assets equivalent to their liabilities in Jamaica. It is very much in the interests of customers to ensure that the persons from whom they purchase insurance are registered by the FSC.
We would like to stress that under the Financial Services Commission Act the FSC is obliged to protect the interest of customers of financial institutions and in this instance all policyholders. As a prudent and responsible regulator all of our actions with regard to Dyoll have been guided by this mandate.
We recognise that, due to their special nature, insurance insolvencies in a modernised regulatory environment, particularly those involving cross border creditors, are complex and new to the Jamaican experience and that this may lead to our actions being misconstrued. Hopefully, from this letter, the concerns of the writer of the editorial and the wider public regarding the carrying out of our mandate will be allayed.
I am, etc.,
BRIAN WYNTER
Executive Director
Financial Services Commission
