A recently published Caribbean Insurance Report 2010 has described the region as “something of a backwater” as far as the market for insurance goes.

The report said that except for life insurance in Trinidad and Tobago and non-life insurance in Jamaica, insurance remains underdeveloped.

“Perhaps for this reason, the major multinational insurance companies have little representation on the ground”, it said, noting that while the American International Group (AIG) has small operations in Jamaica and Trinidad and Tobago and Spain’s MAPFRE owns substantial businesses across Latin America, those are the exceptions.

“In general, it is local institutions — like Seguros Banreservas in the Dominican Republic, Jamaica International Insurance in Jamaica or RoyalStar in the Bahamas — or regional groups such as the Trinidad and Tobago-based Guardian Holdings or the Barbados-based Sagicor Financial that dominate,” it added.

The report also contended that the competitive landscape “has been complicated by the financial problems of the Trinidad and Tobago-based Colonial Life Insurance Company (CLICO) and British American Insurance Company (BAICO)”.

It said that as the major ratings agencies have downgraded the outlooks of countries in the Caribbean, the values of the insurance companies’ bond portfolios have suffered. It noted that Sagicor Financial, for example, has itself been downgraded because of the cutting in Barbados’ sovereign risk rating.

Of the five countries profiled in the study, the report said, Jamaica and the Dominican Republic have not enjoyed the long-term political and financial stability that is necessary to develop a substantial offshore financial services sector. And it said that while Trinidad and Tobago has been sufficiently stable for large indigenous institutions, such as CLICO and its parent CL Financial to flourish, economic development has been driven overwhelmingly by the energy and related sectors.

By contrast, it said, the Bahamas and Barbados have enjoyed significant success in developing financial services.

“The Bahamas is a long-established leader in offshore trusts and private banking and a successful (if newer) player in hedge fund administration and domiciliation. Detailed estimates of the size of Barbados’ offshore captive insurance community are few and far between, but indicate that annual premiums amount to about US$2 billion,” the reported.

But it continued that both those countries face significant competition from nearby centres that are well established such as the Cayman Islands and the British Virgin Islands, in fund domiciliation and offshore banking, and Bermuda, in insurance.