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Interest Sensitive Policies

1. Lump Sum Interest Sensitive Policies
2.
Interest-Sensitive Savings Type Policies

1. Lump Sum Interest Sensitive Policies

Lump-sum, interest-sensitive policies are marked by minimal life insurance coverage and a large investment input. Primarily investment vehicles, they were funded usually by a single lump-sum deposit . The interest paid on these policies was unrelated to the performance of any investment.

The link to insurance came through a small amount of the deposit going into insurance coverage. In many cases the actuarial valuation of the insurance component was worth less than 1% of the investment component. For example, in the case of Mutual Life, of a total lump-sum portfolio liability of approximately $2,145 million only $1,486,431 or .07% went to insurance coverage for its 6,513 lump-sum policyholders.

In more than 90% of lump-sum interest-sensitive policies, the policyholder's life was insured for $60,000 or less compared to average coverage of approximately $250,000 in the savings-type interest sensitive policies.

Lump-Sum, Interest-Sensitive Policies are:

  • Asset Investor issued by Crown Eagle Life Insurance Company
  • Fortune issued by Dyoll Life
  • Mutual Investor Plus (MIP) issued by Mutual Life

 

The FINSAC /BNS Initiative

FINSAC has brokered an agreement with the Bank of Nova Scotia Jamaica Ltd. through which holders of lump-sum, interest-sensitive policies will get back all their investment in Asset Investor, Fortune and Mutual Investor Plus policies.

Under the initiative, 78.8% of policyholders would get back all their money as soon as their accounts were opened and others would get up to $200,000 in cash now and the balance later.

The arrangement requires policyholders to accept the FINSAC offer by signing an agreement to this effect. How quickly policyholders sign, determines how soon their funds become available.

The Schedule is as follows:

Date of Signing Date Account Opens
Feb. 24 - March 10 April 1, 1999
March 11- April 9 May 1, 1999
April 12 - May 10 June 1, 1999
May 11- June 10 July 1, 1999

The Initial Offer

Cash of up to $200,000 will be paid into an account opened in the policyholder's name at the Bank of Nova Scotia.

For the 21.2% of policyholders with over $200,000 in lump-sum, interest-sensitive policies, the balance of their funds would be placed on 7-year Certificates of Participation at Scotia Trust with the following terms:

  • Tax-free interest paid twice per year at BNS passbook rate.
  • The principal will not be available before the maturity in 7 years.
  • Certificates are tradable and may be used as collateral.

Improvements to The Offer

Pensioners

Many pensioners were affected by the fallout in the insurance sector. They had invested their pensions, or other savings accumulated for security in their old age, and were suddenly in position of not being able to pay their day to day expenses.

In a special consideration of their plight, the Ministry of Finance decided that pensioners who were 65 years old or older on March 31,1999 would receive monthly interest payments. This would allow them to meet their expenses on a timely basis until their Certificates of Participation matured.

Certificate of Participation

During the closing of the 1999 budget debate, the Minister of Finance & Planning announced a new 5-year savings instrument which if the principal was left untouched would earn tax-free interest.

Subsequently, the Government took the decision to reduce the maturity period from 7 years to 5 years on the Certificates of Participation, in the interest of equity.

 

The Process

Policyholders must:

  • Sign the FINSAC agreement at their insurance companies to indicate acceptance of the offer.
  • Complete all forms required to open their BNS accounts.

Mutual life policyholders may do this at the Mutual Life head office at the same time as they sign the FINSAC agreement.

However, policyholders of Asset Investor from Crown Eagle and Fortune from Dyoll Life will have to sign the FINSAC agreement at their insurance companies and the BNS forms at Mutual Life head office at 2 Oxford Road, Kingston 5. Dyoll Life policyholders are being serviced by Crown Eagle Life at Barbados Avenue and should sign the FINSAC agreement at that location.

Beneficiaries

Policyholders who named a beneficiary, may need him/her to sign the agreement accepting the FINSAC offer depending on whether or not the beneficiary is revocable or irrevocable.

Revocable beneficiaries

Policyholders with revocable beneficiaries do not need their beneficiaries' permission to accept the agreement.

Irrevocable Beneficiaries

Where policyholders named their child or spouse as beneficiary in policies issued before August 22, 1995, these beneficiaries are irrevocable and will have to sign the FINSAC agreement with the policyholders.

After this date, policyholders have the option of making their beneficiaries revocable. The policy will state whether or not a beneficiary is revocable.

Assignees

Where policyholders have assigned their policies, the assignees will have to sign the agreement as well.

The Judicial Manager

A Judicial Manager has been appointed by the Courts to oversee the management and possible sale of the insurance portfolios of Crown Eagle, Dyoll Life and Mutual Life.

The Judicial Manager is responsible for filing with the Court a report stating which of the available options is in the best interest of policyholders. A copy of the report should be filed with the Superintendent of Insurance and another be available for public scrutiny. Once a Court Order is received, the decision of the Court is binding on all persons.

On Thursday, April 29,1999, the Judicial Manager, filed a report with the Supreme Court regarding the lump-sum, interest-sensitive policies, following which the Court ruled that the FINSAC-pioneered scheme to pay out lump-sum, interest sensitive policies of Crown Eagle, Mutual Life and Dyoll Life is the best deal possible for policyholders, and congratulated Judicial Manager and the FINSAC Insurance Team on the fine quality of the report submitted to the Courts for approval.

STATUS

The following shows a breakdown of policyholders accepting the offer up to 24 June 1999:

Policy Size Number of Policies Percentage of Policies Liability as at March 31, 1999 Percentage of Liability
Less than or equal to $20,000 1,458 35.6% 11,244,979 0.4%
Greater than $20,000, less than or equal to $200,000 1,121 27.4% 89,691,114 3.6%
Greater than $200,000 1,512 37.0% 2,407,002,663 96.0%
Total 4,091 100% 2,507,938,756 100%

2. Interest-Sensitive Savings Type Policies

These are policies in which part of the monthly premiums was savings which earned interest, with the remainder being put towards life insurance. They are:

Dyoll Life Insurance Company

  • Money Tree
  • Universal Plan

Jamaica Mutual Life Assurance Company

  • Accumulator Plus
  • Group Investment Term

Crown Eagle Life Insurance Company

  • More 2000
  • Asset

 

Status

This kind of policy is subject to a court order which prevents Crown Eagle, Dyoll Life and Mutual Life from doing business in interest-sensitive policies.

These have been packaged, the actuarial value determined and put to tender by FINSAC. As soon as the best offer/offers has/have been determined, the Judicial Manager will take the offer to the Courts for approval. Once approved by the Court, the policies will then be transferred to the successful bidders.

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