Rehabilitation Activities
As has been stated earlier, FINSAC's approach has been to negotiate an agreed rehabilitation plan with the owners and management of companies in which FINSAC intervenes.
This ensures that rehabilitation measures to aid the process of recovery start immediately after intervention, in pursuit of the objective of sustaining depositor and policyholder confidence in Jamaica’s insurance and banking sectors.
In general terms, FINSAC's agreed rehabilitation plans with distressed banks have required strengthening credit evaluation systems and loan portfolio management, and implementation of stricter internal accounting controls.
FINSAC has also negotiated agreements concerning the non-performing loan portfolios purchased. Since the banks themselves were to be the initial collections agents for these loans, they agreed to step-up their collections and workout efforts in this area, in order to maximize FINSAC's return on its investment.
It has already been observed that non-performing loans are of uncertain value and difficult to manage, and that FINSAC's goal in purchasing them has been to remove their inherent uncertainty from the balance sheets of banks, replacing this with the certainty of FINSAC bonds, which are guaranteed by the Government of Jamaica, and therefore have predictable values. In this context, it should be emphasized here that FINSAC has never intended to relieve non-performing loan debtors of their obligations to repay. Rather, it is FINSAC's intention to pursue these debt obligations vigorously.
In the area of regulatory reform, FINSAC launched a major initiative to reform Jamaica’s insurance sector supervision. Supported by a US$740,000 grant from the Inter-American Development Bank (IDB), FINSAC began work on a project to rationalize and upgrade Jamaica’s Office of the Superintendent of Insurance (OSI). The project plan includes the drafting of new laws to regulate insurance companies and pension funds, and the computerization of financial reporting by insurance companies and pension funds. Ultimately, the OSI will be able to conduct regular computer-based analyses of the financial health of insurance companies, and to detect early warning signs of financial instability. With new and graduated enforcement procedures, the OSI will be in a position to respond quickly and appropriately to deteriorations in the liquidity or solvency position of the country’s insurance companies. The IDB insurance project is scheduled to be completed in the year 2000.
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