THE Financial Services Commission (FSC) has indicated that it will be moving to draft a proposal for legislative changes in order to facilitate the Government’s pending adoption of the International Financial Reporting Standards (IFRS) 17 as part of efforts to advance the regulatory framework for the insurance industry.

In its 2020/21 annual report which is now before Parliament, the FSC notes that the changes will enable it to carry out its mandate to effectively regulate and supervise the insurance industry in a timely manner.

FRS 17 is aimed at standardising insurance accounting in order to improve comparability and transparency, and to provide information which will facilitate comprehensive understanding of the financial status, performance, and risk exposure of insurance companies, internationally.

The FSC notes that it is working with relevant stakeholders to finalise ammendments to the Insurance Act (2001) and its regulations, including in the areas of asset liability management, group insurance, change of ownership, investment regulations, and market conduct regulations.

The commission advises that in consideration of the adverse impact of the novel coronavirus pandemic on the insurance sector, it has given special consideration to the timing of submissions for some statutory filings, had to modify how it conducted on-site examinations, and moved to remote processes, but shared that those, at the time of reporting, had been successful.

It pointed out that five of 10 general insurance companies met the FSC’s solvency ratio of 25 per cent in 2020. The solvency ratio assesses insurers’ capital adequacy and measures their leverage by examining the companies’ capital, surplus and reserve, relative to their total liabilities. The companies assessed were out of a total of 12, two of which the FSC reported as not being fully operational, explaining that, “One ceased underwriting new business whilst the other operates on a much smaller scale.”

Further, the commission advised that at the end of December 2020, general insurance companies reported writing 514,101 policies, the 429,586 majority for motor vehicles. The insurers saw total revenue of $23.9 billion compared to $24.6 billion in 2019, while their underwriting expenses slipped slightly to $20.3 billion from $20.6 billion.

At the same time the industry reported an aggregate underwriting profit of $0.9 billion in December 2020 compared to $0.7 billion for the end of 2019, representing, a 28.6 per cent increase in underwriting profits year on year.

Motor vehicle insurance continued to account for more than 90 per cent of claims in the industry during the review period, a pattern over five years consecutive, the FSC noted. That class of insurance business totaling 93.7 per cent of the total net incurred claims for 2020, a (preliminary) value of $11.853 million.

Meanwhile, the FSC says that at the end of the 2021 fiscal year there were six registered life insurance companies in the island, and one voluntary cancellation in 2020. The companies’ total gross premium written at the end of 2020 was $68.7 billion, which represented a 0.6 per cent increase over the comparative period of 2019.

That segment of the insurance industry reported total net income of $25.9 billion at the end of 2020, an increase of just over six per cent compared to 2019, while policy benefits amounted to $41 billion in 2020, of which combined claims accounted for 57.6 per cent.