Best’s Commentary: New Trinidad & Tobago Insurance Rules, a Decade in the Making, Heightens Regulatory Oversight

New insurance regulations have been passed in Trinidad & Tobago after a decade of consideration. Some market participants believe this potentially could lead to some companies becoming acquisition targets in the long term, according to an AM Best commentary.

The new rules, which took effect at the start of 2021, include a significant minimum capital requirement increase, as well as guidelines aimed at strengthening internal controls, risk and capital management and corporate governance. The initial draft of this legislation was introduced in 2011.

The Best’s Commentary, “New Trinidad & Tobago Insurance Rules Finally Implemented in 2021,” notes that the new rules set a five-year transition period for existing insurance companies to meet the required guidelines, which will moderate the impact of the increased capital requirements. The new required minimum stated capital for all companies is TT$15 million, and companies also must also maintain a minimum regulatory capital ratio of 150%. Under the old regulations life insurance companies were required to have share capital of TT$3 million, while insurance companies writing short-term insurance business (i.e., general insurers) were required to have capital of TT$1 million.

Given that the more-stringent measures could stress balance sheets and test the ability of some companies to enhance capitalization, some companies ultimately could become involved in merger and acquisition activity. For the Trinidad & Tobago-domiciled insurers that AM Best rates, the 2020 Act will not be impactful, as these companies maintain capitalization levels well in excess of the new required minimum threshold, and have already implemented enterprise risk management programs that appropriately address corporate governance and internal controls.

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=306913.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts:

Ricardo Longchallon
Senior Financial Analyst
+1 908 439 2200, ext. 5676
ricardo.longchallon@ambest.com

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