Simon Young CCRIF Supervisor

By Tad Stoner
tad@caymannetnews.com

The Caribbean insurance company that offers storm protection policies to governments throughout the region is seeking a new manager in the Cayman Islands – prompting some concern on the part of the Cayman Islands Monetary Authority (CIMA).

“We are the regulators… and if we find there are changes in any service provider which might be detrimental to that organisation, then we can say something to prevent it or change it or otherwise,” said Gordon Rowell, head of Insurance for CIMA.

The Caribbean Catastrophic Risk Insurance Facility (CCRIF) has called for “expressions of interest” in its $65,000 Insurance Manager contract, currently held by Sagicor Insurance Managers Ltd.

Both the CCRIF and Sagicor deny the move indicates problems. However, the facility’s “good governance” rules require a management overhaul every three years (as stipulated by its World Bank sponsors).

Speaking on Friday from her offices in Kingston, CCRIF Group Communications Executive Marsha Smith said she was unaware of any problems, but that the World Bank “had asked that we tender this.

It’s the process. They have specific guidelines and procedures for selecting consultants, so we are staying in line with the guidelines.”

Sagicor Insurance Managers gained the management contract within three months of the CCRIF’s February 2007 creation by the World Bank -- with US$47 million in pledges -- and one month before its formal June 2007 launch, ensuring the facility and its bankers remained similarly located.

The same year, the Cayman Islands government paid its first annual $2 million premium for a CCRIF policy, which offered a novel system of instant payouts -- based on wind speeds and other weather benchmarks -- to countries hit by natural disasters, enabling them quickly to restore telecommunications, administration and business infrastructure.

The facility’s additional $2 million entry fee essentially doubled Cayman’s initial costs to join the fund.

Widespread outrage followed, in November last year, when CCRIF coverage was not extended to the Sister Islands. While conceding the damage to the communities on Cayman Brac and Little Cayman, Facility Supervisor Simon Young said, since the two islands were not recognised as the economic hub of the Cayman Islands, central administration had suffered only minimally.

As for the new tender, CCRIF Project Development Officer Ekhosuehi Iyahen said World Bank rules required a tender “every two years to three years”, but that requests had gone out only in the Cayman Islands.

Tenders will close on 8 May, she said, and will be followed by the 16-member board’s examination of the submissions.

“They will decide within a week or two and then we’ll go back to [those selected] with formal documents and a ‘request for proposals’. We’ll have to give them a month at least for that,” said Ms Iyahen.

She was unable to say when a final decision would be made, but James Rawcliffe, the president of Sagicor Insurance Managers, said he fully expected to tender for the contract.

“Of course, of course,” he said. “I have been expecting this, and as the incumbents, we already know the business and they know us and the fees and the contracts, and so we don’t have to resubmit all of that.”

“I would like to think we had performed well, and that CCRIF believed Sagicor has been splendid and the fees reasonable. “This tender,” he pointed out, “does not automatically lead to replacement.”

One captive insurance specialist, speaking anonymously, said, however, that the World Bank, as a provider of financial and technical assistance to developing countries, had never before run a commercial operation, and that its regulations frequently conflicted with practicality.

“The bank has never established a corporation and one of the frustrations is that they apply their protocols to everything, and they are often just not applicable to the real world,” he said.

“They want to tender the Insurance Manager every three years, the Facilities Manager and potentially even the Chairman of the Board. In another year they may want to do the Investment Manager. It’s highly unusual. Do you want to trade continuity and no disruptions for someone else who might come along and say they’ll do it for $50,000 less?” he asked.

“The sensible thing would be to stick with it, though, and of course Sagicor will re-tender; they have a track record, have been with the organisation for two or three years and know the players and the processes. It might not be the best thing to chop and change every three years.”

CIMA’s Mr Rowell said it was difficult to regulate something already overseen by the Word Bank or the International Monetary Fund, and with funding largely from abroad.

He feared rapid management changes could compromise long-term client relationships and accountability, but said, “Yes, we do regulate it and will be keeping an eye on it.”