Tue | Dec 11, 2018

Cedric Stephens | ICWI shrugs off Category 5 hurricane and looks to 2068

Published:Sunday | June 24, 2018 | 12:00 AM
The ICWI building at St Lucia Avenue, New Kingston.
Chairman of ICWI, Dennis Lalor.
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"Creative and innovative solutions must be found to design appropriate risk mitigation, risk transfer, and risk financing tools ...," said Prime Minister Andrew Holness at the G7 Outreach Summit in Quebec, Canada, this month.

This comment was made against a Caribbean backdrop and in the same month of the year that The Insurance Company of the West Indies Limited marked the 50th anniversary of its founding.

It provides a context for this milestone in the company's history. Also, it offers evidence about the value that risk management must play in regional society. The ICWI (most persons incorrectly omit the definite article from its name) is a Jamaican-owned company that is involved in the business of managing risks and operates across the Caribbean.

Prime Minister Holness was speaking about the challenges that hinder small island developing countries from exploiting their resources and potential. In his address, to the leaders of some of the world's most-developed countries, Mr Holness implicitly pinpointed the role that companies like The ICWI and others must play if the region is to "take charge of its development and prosperity through economic growth".

The ICWI was formed in 1968. Even though the idea was not expressed at the time, subsequent events in the company's history suggest that the long-term performance of The ICWI was directly tied to the country's economic development.

The clarity of the founder's vision is clearly reflected in the name he chose. The omission of the definite article is inconsistent with that image. Professor Alvin G. Wint writes in his book Managing Towards International Competitiveness, Cases and Lessons from The Caribbean that the company was guided during its early years by visionary leadership; long-term orientation, where all profits were reinvested in the company for the first decade the period was later increased to 21 years; growth would be driven by acquisitions; and active support of government's strategy to Jamaicanise an industry that was dominated by foreign companies.

Few of the insurers life and non-life that were in operation when The ICWI was formed - are around today. Among those that have disappeared are the Jamaica Mutual Life Assurance Society, a 150-year-old institution sold to Trinidadian interests; the Jamaica Co-operative Fire & General Insurance Company, a 100-plus-year-old company its book of business was sold to local interests in the 1970s; The Insurance Company of Jamaica and Motor Owners Mutual Insurance Association, companies that were bought by The ICWI; and Dyoll Insurance Company, a locally owned company that was forced into liquidation the cause: claims from Hurricane Ivan that hit the Cayman Islands in September 2004.

Some of the local insurers that remain have undergone name and ownership changes. Only two of the locally owned companies operate outside of Jamaica.

The ICWI is still in operation today after five turbulent decades. Those years were characterised, among other things, by the absence of local economic growth; interest rates as high as 80 per cent; average annual exchange rates that moved from J$1.20 against the US dollar in 1969 to J$128.36 in 2017; a direct hit from Hurricane Gilbert in 1988; the collapse of the domestic banking and insurance sectors during the 1990s; claims of incompetence on the part of the local managers; and US$42.7 million in claims paid by The ICWI during the 2017 hurricane season.

The fact that The ICWI has expanded its operations beyond the shores of Jamaica, using internally generated funds, is evidence of the wisdom and competence of its leaders and managers and the correctness of its business strategies. Its strength should also be viewed against the spectacular failure in Trinidad of CL Financial, owners of regional insurance company CLICO, which controlled assets of more than US$100 billion and 65 companies in 32 countries.

This newspaper, in its editorial of June 5, 2018, "Disaster in the framework of fiscal responsibility", along with several recent statements by top Jamaican government officials, has now placed disaster risk management firmly on the public agenda. The ICWI's founder and Chairman, Dennis Lalor, brought those matters to public attention over 40 years ago, according to his book Visions for Nation Building. His comments are still relevant today.

What is The ICWI like in the second decade of the 21st century? The following highlights from the 2017 financial statements tell one part of the story. Total assets grew to $7.7 billion, from $7.4 billion the year before. Liabilities and shareholders equity stood at $5.9 billion, up from $5.5 billion. Net insurance premiums remained flat at $1.9 billion while net claims expenses moved from $990 million the previous year to $1.039 billion at the end of 2017.

 

INCREASED GROWTH

 

These data do not reflect the reinsurance security that stands behind the company's balance sheet. Three territories in which it operates were badly affected by Hurricane Irma the first Category 5 hurricane last year. The claims fell comfortably within the limits of the company's reinsurance treaties.

The staff complement of The ICWI has grown from four persons in 1968 to 280 in 2018. About 200 employees are based in Jamaica, and the rest are overseas. One of the key factors to The ICW1 longevity and success, according to Professor Wint, is an operating philosophy that included "an emphasis on human resource development". That belief is still being practised today.

Empowering women is another part of the company's HR strategy. The late Jennifer Cox, who was appointed managing director, was evidence of this. Today, most of the senior positions in the company are occupied by women.

The ICWI went against conventional wisdom and developed a motor insurance policy, backed by research, that was designed for female drivers in 1971. These drivers were referred to as Road Angels. The premise behind the product, which had a risk mitigation component an annual road safety competition for drivers was that members of the female gender were involved in fewer collisions than their male counterparts.

The idea was revolutionary. In many ways, it contributed to the development of The ICWI brand. The product and the company became household names in Jamaica. Since that time, the company has introduced other products. They include alternative transportation, accident forgiveness, and uninsured motorists. One measure of success of these products is that other insurers have imitated them. Other new products are in the pipeline.

The authorities in Jamaica have advocated a strategy of financial inclusion. This means that more persons in the society should have access to useful and affordable products and services. The ICWI supports this policy. The company is positioning itself to become a 'corner shop' for insurance. It plans to do so by leveraging its technological infrastructure and network of branches and well-trained insurance agents, who will complement the traditional intermediary channel.

"Insurers today are negotiating a unique and complex environment," according to The Record. They are using "new technologies to gain insights from their data and transform their business for the digital age".

The ICWI is aware of these trends and has designed an online platform to significantly improve the delivery of service to customers in Jamaica and across the other islands. Management is committed to seizing the opportunities that the digital age presents, remain a force within the environment in which it operates, and continue to contribute to the region's economic growth and development.

- Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com