This is a short story of an insurance company that was described as
"well-known and highly respected" and one that would have "a very bright and
prosperous future." It is as much a story of being open, honest and
straightforward not only with the regulators but with everyone else as it is
about the practice of good corporate governance and how the courts and the
regulators interact. Insurance companies are special and insurance contracts
are of a special genre called uberrimae fidei, meaning the 'most abundant
good faith' according to Black's Law Dictionary which is not known for
Insurance companies could also be seen as part of the financial services
and public interest companies. These directly affect members of the public
and not only are they normally licensed and regulated, but their failure can
have direct consequences for their policy-holders and implications for the
economy. Yet even with regulations insurance companies have from time to
time run into financial difficulties as a result of bad governance,
under-capitalisation and major natural and other disasters.
Public confidence plays a major role in the success of an insurance
company and explains why companies like GTM, Hand-in-Hand and Demerara Life
love to market their origin and ancient heritage even as they adapt to a
modernised and competitive world. While there is no guarantee of survival
let alone success in business, with age come strength, trust and confidence.
Yet failure can also visit sometimes with little notice shattering the
front door and the image. When Jamaica went through its travails of the
eighties and nineties, the government was forced to intervene to prevent
losses to policy-holders in no less than nine insurance companies and five
This story is not about history repeating itself, for despite the trauma
of hurricanes and floods insurance companies in the region seem to have
avoided the worst, even though growth in Guardian Holdings and other
regional companies has slowed considerably.
The story is about the Dyoll Group Limited (Jamaica), an insurance
company listed on the Jamaican Stock Exchange. The episode for the purposes
of this story began in February 2004 when the National Commercial Bank
Jamaica Limited announced that it had invested in approximately 45 per cent
of the outstanding shares of Dyoll Group Limited.
In seeking to justify its investment decision, the bank described the
company in terms quoted in the first paragraph of this article. Yet one year
later the bank announced that "the Group made a full provision during the
second quarter for the impairment of the investment in Dyoll Group Limited
of $536 million." The Jamaican public was stunned at the dramatic
turnaround, and things got worse when trading in shares of Dyoll was
suspended on February 15, 2005 as the company had failed to provide
information which the Jamaica Stock Exchange considered material.
Here it is impossible to resist the temptation to interrupt the narrative
and contrast the Jamaican response with what happens in Guyana. The sad
experience here is that companies run for cover under orders of the court,
gagging the regulator and exposing the ill-informed public.
When penalties are imposed on public companies in the developed
economies, the companies quietly pay and go to great lengths and expense to
reassure the market and their stakeholders of the action to prevent a
recurrence. In Guyana, the injunction operates almost as a licence, since
the regulator is barred from entering the door and the law effectively made
For all the omissions and commissions, the directors of Globe Trust never
sought to block the regulator once the regulator had followed the law, even
though many consider Globe Trust as much a regulatory failure as a
governance failure, a point which the administrator appears to have
completely ignored. When a company decides to operate in a regulated sector,
it implicitly agrees to being regulated and there seems to be something
wrong when having been granted a licence it turns around and wants to shut
out the person holding the umbrella over its head.
But let us not stay in Guyana for too long. After it became clear that
the Jamaican company's exposure had continued to increase, new investments
were not forthcoming and the information provided by the company was
misleading, the Financial Services Commis-sion (FSC) sent in its examiners
assisted by Office of the Superintendent of Financial Institutions of Canada
providing expert guidance.
Less than one month after the suspension of share trading, a temporary
manager was appointed, pursuant to Section 8 of the Financial Services
Commission Act, effective March 7, 2005 in order to:
* Establish the true position of the company
* Address the matter of settlement to its claimants
* And ensure that its policies would remain in force
And one week later, Grace Kennedy came to the rescue of the
policy-holders when through its subsidiary Jamaica International Insurance
Company Limited (JIIC) it entered into an agreement with the company to
provide insurance cover to the motor and accident policy-holders.
How did the problem arise? It seems that Hurricane Ivan, the storm that
devastated Grenada was responsible for the company's failure - huge claims
came from policy-holders in the Cayman Islands and, to a lesser extent,
The first interim report of the Temporary Manager placed the deficit of
the company at approximately $1.146 billion. On November 29, 2004 the
company's share price peaked at JM$28 - at its last trade on November 1,
2005 - the price was JM$1.35. Trading in the company's shares resumed in
October 2005 after the company submitted its outstanding financial
That, then, should have been the end of the story. But look a little
closer at the governance issue involved, the relatively innocuous vagueness
in statements from the company in respect of the impact of Hurricane Ivan
and promises of funding which did not bear fruit.
On the day that the Jamaica Stock Exchange (JSE) suspended trading in the
company's shares, a statement issued by the Chairman of the JSE read "The
JSE has required that the Company make a public announcement in response to
rumours that Dyoll Group has experienced material financial losses.
This information has not been reported to the JSE in accordance with
Appendix 8 (of the Stock Exchange Rules). The Exchange in seeking to
establish whether such rumours and speculation were factual or not, was
informed by the Managing Director of Dyoll Group, Mr. Stephen Thwaites that
he was stopped by the Acting Chairman, Mr. Peter Lawson from providing any
information and was therefore not able to respond to the Exchange's
requirement that an announcement be made immediately by the Company. The
Exchange advises that the suspension will remain in place until the relevant
information has been disclosed."
That is how a regulator needs to act and be allowed to act - promptly and
decisively. In Guyana for whatever reason, regulators - and they include the
PUC, the Registrar of Companies, the Bank of Guyana and the Commissioner of
Insurance, the GGMC, the Forestry Commission as well as the Registrar of
Co-operatives - either do not act or act far too late.
Such failure constitutes an abdication of their statutory
responsibilities and duties, but then who cares that the public and its
interest are left exposed and endangered? It is therefore ironic that the
one regulator who has shown a willingness to act promptly is in fact accused
of shooting from the hip and who sooner rather than later will start
second-guessing the regulated and the court before taking any action.
As we reduce our dependence on agriculture and shift to services
including financial services, trust and confidence in the regulator's
ability to administer the regulatory laws will become increasingly
Our private sector needs to understand that the society will only succeed
if the law works and is seen to work.
While the role of the court must be to protect everyone under the law, it
needs to guard against unsuspectingly becoming instruments of self-serving
businesses. Intervention in what are often governance and regulatory issues
can set precedents which might not be intended.