Motor Vehicle Insurance Act on Montserrat: Is Supervisor of Insurance, FS Colin Owen, Doing Enough to Raise Payout Ceilings?

FS Owen did not address the issue of the adequacy of reinsurance cover held by local insurance companies.

Motor Vehicle Insurance Act on Montserrat: Is Supervisor of Insurance, FS Colin Owen, Doing Enough to Raise Payout Ceilings?

Vehicle Accident at Fogarthy Hill in 2010. Police measure spot where vehicle overturned after hitting wall at left | mage Credit to TMR

On March 8th, 2019, MNI Media wrote a piece on concerns raised by the President of The Montserrat Bar Association, Attorney-at-Law Jean Kelsick, to Montserrat’s Honourable Financial Secretary, Mr Colin Owen regarding concerns to do with the current ceiling for payouts under the Motor Vehicles Insurance (Third-Party-Risks) Act on Montserrat.

Read the full article published then by clicking here.

However, by way of a brief recap, the main concern in the letter sent to FS Owen outlined that the ceiling for insurance payouts was last raised on Montserrat in 1982. Thus, Attorney Kelsick was pointing out that those ceilings for motor vehicle payouts on the island are now too low.

Section 4 (1) (b) (v) and (vi) of the Insurance Act, where section 4(1) (b) (v) states that “an insurance company is not required to pay more than $50,000 to a third party for any one claim by any one person arising out of death or bodily injury. Section 4(1) (b) (vi) states that an insurance company is not required to pay more than $250,000 in total in relation to any number of claims for any one accident for each vehicle concerned arising out of death and bodily injury. “

As a follow up to that letter written by Attorney Kelsick, after much delay and further submissions for a reply, FS Colin Owen replied stating the legal advise he was given indicated otherwise to what Attorney Kelsick had quoted, as outlined above from the Insurance Act.

FS Owen mentioned that following the legal advice he received, he understands that the “provision to be setting out what satisfies the requirement for an insurance policy under the Act. The two elements to be satisfied in 4(a) and (b) are in respect of (1) the person who must issue the insurance and (2) the liability that must be covered.”

FS Owen went on to state that firstly, section 4(b) describes the liability to be covered very widely – “any liability which may be incurred by him or them in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle on a public road including any passenger carried on or in such motor vehicle". Then, the Proviso to 4(b) narrows the previously broadly stated scope of the liability that is required to be covered in the policy by stating that "the policy shall not be required to cover" (as opposed to a prohibition such as "shall not cover") certain liability.

Furthermore, the FS mentioned that in some instances "the proviso excludes liability incurred by certain persons (e.g. non-paying passengers) and in other instances it excludes the requirement for the policy to cover liability over a certain amount ($50,000 and $250,000)” said FS Owen.

He further mentioned;

“These figures are the minimum coverage a 3rd-party insurance policy can provide. They are not a cap or ceiling on the coverage that may be provided for in a policy or paid to a person.  However, the point is taken that some insurance companies may offer and some vehicle owners/users may opt to purchase the minimum required insurance coverage to the potential detriment of third-party who is injured.”

In response, Attorney Kelsick pointed out to the FS that the legal advice the FS received was incorrect. Kelsick pointed out to the FS that:

 “Section 4 (1)(b), of the Insurance Act, which prescribes the ceilings, must be read in conjunction with section 7(1). Of particular relevance in the latter are the words “such liability as is required to be covered by a policy under section 4 (1)(b)”. In the following decisions these words were interpreted to mean that the most an injured/third party can recover directly from insurers (irrespective of the ceiling stated in a policy of motor insurance) is the statutory minimums prescribed by section 4 (1)(b), hence the importance of their being maintained at realistic levels.’

What was noticeable also, was that FS Owen did not respond to a key matter as was raised by Attorney Kelsick, as it pertained to the adequacy of reinsurance cover held by local insurance companies.

On this point Attorney Kelsick outlined to FS Owen that he noticed that FS Owen did not address the issue of the adequacy of reinsurance cover held by local insurance companies.

Kelsick noted that this was of "equal and probably greater importance as it affects all holders of property insurance……and in particular, whether the Financial Services Commission has the ability to evaluate the reinsurance treaties local insurers are required to have and ascertain if their local exposure is adequately reinsured.”

A further communication was sent to FS Owen on April 9th, 2019, towards which no response was returned. Thus Attorney Kelsick once again wrote to the FS indicating he is yet awaiting movement on the matter, but more importantly that the “relevant sections have been conclusively and unequivocally interpreted by the Privy Council in a number of decisions.”

Attorney Kelsick also pointed out that it would appear as if “the Attorney General has ignored these decisions and attempted her own interpretation of the Act. It may be prudent for you to obtain an independent legal opinion from a lawyer with expertise in insurance law.”

It was at this stage that the Governor of Montserrat, Andrew Pearce, got involved, asking for patience on this matter.

Attorney Kelsick indicated to Governor Pearce that it has been a year since he raised the issue of lifting the ceilings under the Insurance Act with the Commissioner of the Financial Services Commission, Mrs. Dulcie James, as President of the Montserrat Bar Association; yet nothing was done.

Accordingly, it was pointed out to Governor Pearce that due to a misinterpretation of the law, Financial Secretary Owen wrongly took the view that there is no need to raise the ceilings in order to bring them in line with other Caribbean jurisdictions.

Attorney Kelsick pointed out that this would inevitably result in injustice and hardship to members of the public. He was very specific on this issue in stating: 

“People suffer in real terms when regulators fail them. In the aftermath of hurricane Hugo in 1989, 2 local insurers could not pay their claims because of inadequate reinsurance cover. The then Financial Secretary and regulator of insurance were responsible for this and the hardship many policyholders endured. When I was on the FSC’s board I also requested at a board level that it, and by extension the then Financial Secretary, take steps to regulate the solicitation and acceptance of deposits by CLICO and BAICO. Nothing was done. When a long time after they both collapsed, there was a flurry of activity by the FSC but too little too late. The loss to Montserratians exceeds I believe EC$100 million. Sadly, it appears no lessons have been learnt.” Stated Attorney Kelsick.

In response to the concerns raised by Attorney Kelsick regarding the duties of the Financial Services Commission on this matter, Head of the FSC, Mrs Dulcie James responded in stating;

“The Financial Services Commission requires all licensed insurance companies to submit annually copies of the reinsurance treaties they have in place covering all classes of insurance business they conduct in Montserrat. The treaties are examined to ensure that the treaties specifically include Montserrat and that all the reinsurers are rated by the rating agencies S & P and A.M. Best.

We can confirm that all licensed companies conducting insurance business have been assigned ratings ranging from A- to A+ by the rating agencies S & P and/or A.M. Best for the year 2019.”

In reply to Mrs James’ response Attorney Kelsick noted  that Commissioner James’ explanation of how reinsurance treaties are vetted by the FSS was “superficial and bears out the concern that the FSC has neither an appreciation of what is required nor the requisite expertise.”

Attorney Kelsick further noted that he made this point on the insurance irregularities many years ago when he was on the FSC’s board and recommended to Mrs. James that an overseas specialist assistance be sought.

Specifically, Attorney Kelsick stated to FS Owen that he was unaware of regulators relying on the opinion of financial rating companies to discharge their regulatory duties.

Attorney Kelsick viewed this practice as being neither an “acceptable or recognized method for evaluating the adequacy of reinsurance. In fact, Mrs. James’ explanation demonstrates that not even basic checks are being done.”

Attorney Kelsick also noted very strongly that “by licensing an insurance company to sell policies in Montserrat, the supervisor impliedly assures consumers that it is safe to purchase insurance from that company, it has the ability to pay its claims and it is being properly supervised.”

So where to now on Montserrat for re-evaluating the Insurance Act and vetting reinsurance cover for motorists on the island?

MNI Media will be staying on top of this matter going forward.