Insurance Regulation in the Commonwealth Caribbean has emerged from custom, based on the principles and policies of the English Common Law. Insurance allows for the protection of an event or thing against risk of loss or damage, by another party, such as an insurance company, which agrees to compensate its equivalent in occurrence of the event. The importance and relevance of its regulation, sourced in legislation, judicial decisions, and regulations issued by insurance commissions, are clearly shown in the protection of policyholders through provisions to maintain insurer solvency and the enforcement of sanctions in breach of these provisions. The need for insurance regulation arose in England from the collapse of large insurance companies in 1870 that required the financial assistance of the state. Similarly, in the Commonwealth Caribbean, lack of or poor regulation has seen fluctuation in rates, liquidity and insolvency crises, and even bankruptcies of insurance companies that required government intervention. This had caused loss of state funds, severe effects on policyholders, and financial instability in states such as Jamaica, Barbados, the Bahamas, and Trinidad and Tobago in the mid-1990s, that affected the Gross Domestic Product (GDP), increased public sector debt, and slowed economic growth. As such, insurance regulation has necessitated the legal framework of insurance (and regulation) legislation, to fill in the gaps that arise from the Common Law and to formally establish the stance of the legal system on insurance issues. (Fordyce v. American Life Insurance and Transport and Harbours Department, 1970)
Consequent to these crises, many states sought to implement financial commissions, such as the Financial Services Commission (Jamaica) and the Office of the Commissioner of Insurance (Guyana), to amend domestic legislation to include provisions to supervise and sanction insurance companies, and to introduce minimum standards of operation. There...
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