The Financial Services Commission just changed the rules for the insurance industry. But why? And what does it mean for you and your money?

The FSC just changed the amount of money insurance companies need to have in reserve. 

Back in January, Jamaica adopted International Financial Reporting Standards 17, which is exactly what it sounds like – an international standard for reporting.

So essentially, IFRS 17 is a change in the way insurance companies report certain numbers. 

Because of that change, the FSC had to update some of its rules for insurance companies, to balance things out.

Under the FSC’s previous standard, insurance companies had to have in reserve, more than 150% of the total amount of money they would need to meet their obligations to policyholders and withstand possible losses. 

So, for example, if they need $1,000 to be able to pay policyholders if something goes wrong, then they need to have at least $1500 in reserves. 

But with the new standard, companies now only need to have over 100% in reserve. So that drops the $1500 down to $1,000. 

The FSC based this new standard on the one Canada used in 2018.

But Kalilah, why should I care about any of this? Well, if you watched this video- (Insurance Rates Up 50%!) then you know general insurance rates are up 50% and even 60% this year. 

And that’s because local insurers were under a lot of pressure. Interest rates kept going up, plus the rates from reinsurers were going up, then consider the over 150% that they had to have in reserve. All of that added up to insurance companies charging YOU more money every month to cover their bases.

So, this change in capital adequacy requirements means a little less pressure on insurers, and hopefully no further premium increases for you.

Now this is just one factor that contributes to premium costs, but it’s a step in the right direction.

And that’s the bottom line. 

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