Cabinet has cleared the way for Jamaica's insurance companies to issue policies denominated in foreign currency, with oversight from regulator the Financial Services Commission (FSC), and opening up the market beyond a limited few already offering such products.

"After careful consideration, it was concluded that the impact of foreign currency-denominated insurance products under consideration would have limited impact on the foreign-exchange market and could assist businesses that require such insurance," Daryl Vaz, minister of information, said Wednesday at the weekly post-Cabinet press briefing.

The FSC says registered insurance companies can apply right away for approval to issue the policies.

"Once FSC approval is obtained, the policies can then be sold," said George Roper, deputy executive director of the FSC, in an email response to the Financial Gleaner.

According to Vaz, the concession to widen the pool of insurance products is in response to a lobby mounted by sector interests.

"We have been putting forward the proposal to get clearance to issue US-dollar policies for some time now," said Jacqueline Sharp, president of the Insurance Association of Jamaica (IAJ) and head of Scotiabank life-insurance subsidiary.

IAJ represents both general and life insurers.

"Some companies who were doing it for a long time were allowed to continue but others were not given approval," said Sharp.

"Prior to the FSC coming into existence, a small number of insurance policies had been approved," said Roper. The FSC was created in 2001.

Under the previous licensing regime, some general insurance companies were approved to issue foreign currency-denominated policies, while those in the 'life' market were restricted.

Now with Cabinet's approval, life companies, as well as other general companies, that are interested in issuing foreign currency-denominated policies will be given the go-ahead once they satisfy FSC guidelines.

One of the companies already in the market is American Home Assurance Company (AHAC).

"We don't have a lot (of policies), just a few, and at special request," said AHAC Managing Director Earl Codling.

"Some hotels, for example, want their policies in US dollars, and some individuals, especially those not residing here," he said.

General insurance products

Vaz on Wednesday said the foreign-currency policies approved for issue are general insurance products, other than ordinary long-term products or industrial life insurance products.

Ordinary long-term insurance products exclude equity-linked insurance products and sickness and health insurance policies.

Insurance companies are regulated by the FSC but foreign-exchange transactions fall under the ambit of the Bank of Jamaica.

The Bank of Jamaica Act stipulates that insurance companies can hold a maximum of 5.0 per cent of its asset base in foreign currency.

At the end of last year, assets for life and general insurance companies totalled $127 million and $43.3-million, respectively.

The central bank requirement remains in force but changes could be contemplated at a later date, said Vaz.

"This five per cent will remain with a view to make further adjustment if market conditions allow."

Together, general and life insurance companies last year earned net premium in excess of $37 billion, with life companies taking home the bigger chunk.

At the end of 2008, the total number of policies sold by life insurance companies increased by 1,690 to 121,951 with net premium income value of $25 billion.

The total number of policies in force as at December 2008 were 757,903.

Registered insurers will be allowed to issue foreign currency-denominated policies for all forms of insurance other than equity-linked and bancassurance policies, the FSC noted.

Bancassurance refers to the selling of insurance and banking products through the same channel, for example, banks that sell insurance products through their branch networks.

sabrina.gordon@gleanerjm.com