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Framework for Insurance Sector Restructuring

Following the diagnostic review revealing the impact of the interest-sensitive products, a government policy decision was taken to refocus the industry on its core business and away from quasi-insurance products and non-insurance business that had contributed to the liquidity problems and mitigated against viability in the industry.

The initial strategy was to restructure and merge the portfolios of the failed companies under a new company - Independent Life - followed by divestment. However, the divestment goal of the intervention was accelerated by a subsequent decision to sell the insurance portfolios through a tender process, rather than forming and operating a new company with its resulting expenses.

Importantly, the problematic lump-sum, interest-sensitive policies would be removed from the portfolios of the three companies, thus making the remaining business more attractive to potential buyers.

The advisability of this strategy was borne out by the fact that eight companies from Jamaica and the wider Caribbean entered the bidding process for the remaining portfolios on the invitation of FINSAC.

 

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