Ravi Tewari, Group CEO, Guardian Group: Interview

Interview: Ravi Tewari

How will the new Insurance Act impact the sector?

RAVI TEWARI: The greatest impact from the Insurance Act is that it will allow insurers to deploy strategies on both the liability and the asset side of the balance sheet. This is in the interest of capital providers because it removes many of the arbitrary restrictions currently creating a drag on returns for policyholders and shareholders. However, more clarity needs to emerge on how assets can be invested, in order to avoid a situation where almost every decision must be cleared with the central bank. There also needs to be an understanding on how to channel institutional savings in terms of what is in the greater interest of the country over the next 20 to 30 years. Some aspects of the act look at long-term investment as though it should be evaluated in the short term. But, for instance, the average duration for when pension funds will be used can be over 20 years in a portfolio. So the act can be crafted so that those assets are invested with a 20-year view, because a lot of instruments that will be in the national interest still fall in this grey area. In many cases infrastructure like new roads should be built by the private sector but, under the act, exactly how institutional investors participate in such an investment is still unclear. Moreover, it is subject to a lot of interpretation by the central bank, making it difficult for institutions to come up with concrete funding packages for these projects.

With most players in the market reliant upon reinsurance, how can the industry in Trinidad and Tobago overcome foreign exchange shortages?

TEWARI: This is a case where we need to look beyond the Insurance Act to what is in the greater interest of the country. Insurers tend to pay reinsurance premiums in US dollars, so it is banked in US dollars outside of the country, and when there are claims it comes back into the country. One obvious solution is to allow reinsurers to open bank accounts in T&T, so the premiums can be paid and banked in T&T, removing this constant need for foreign exchange in good years with it flowing back in bad years. We have had discussions with an international insurer that wants to consider this model, but because of one particular clause of the act they are unable to. Unfortunately, the current interpretation of the clause has been detrimental to local insurers.

What opportunities exist for insurers to expand?

TEWARI: Insurers in T&T have always suffered a disadvantage in scale and geography, due to our small population and island-nation status. However, technology has developed to the point where scale and geography are becoming less relevant, so we are investing heavily in converting our operations to cloud-based systems.

Another big opportunity exists with software robotics, which do repetitive paperwork, leaving people to make the more subjective and judgemental decisions. For the first time in history, Trinbagonian firms have the chance to be ahead of the curve on a global scale by adopting this cutting-edge technology early. The next stage of growth must be in the smaller regional markets, in Central America, Dominican Republic and South America. To compete, local insurers need to establish world-class, global platforms, as we will compete directly with large multinational players. I am convinced that there is tremendous opportunity for the insurance industry in T&T, should the technology be embraced.

To what degree is the low interest rate environment, coupled with slowing economic growth, dampening investment returns for insurers?

TEWARI: It is improving, because the low interest rate environment over the past 10 years was good for the industry, having forced firms to become leaner and more efficient. Interest rates are slowly rising again, which will benefit both policyholders and insurance companies. Insurers have learned to survive with very low spreads and, as spreads start to increase, they will impact the profitability of the industry positively.