By Rohan Walters
Permit me to respond to an article published in the commentary section of the Labour Spokesman of March 20th 2009, appearing at page 18 and coming “From the Desk of” G.A. Dwyer Astaphan Parliamentary Representative.
Mr. Astaphan opened his argument by stating that “some years ago he learnt that a certain Insurance group through its offices here in St. Kitts & Nevis was accepting Certificates of Deposits or ( CDs)”
The question I would pose to Mr. Astaphan is what are CDs? Certificate Of Deposit - CD
What Does Certificate Of Deposit - CD Mean?
A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs are generally issued by commercial banks and are insured by the Federal Deposit Insurance Corporation (FDIC). The question is, are Certificates of Deposit insured here in St. Kitts &Nevis as is the practice in other jurisdictions? The term of a CD generally ranges from one month to five years.
Investopedia explains Certificate Of Deposit - CD
A certificate of deposit is a promissory note issued by a bank. It is a time deposit that restricts holders from withdrawing funds on demand. Although it is still possible to withdraw the money, this action will often incur a penalty. http://www.investopedia.com/terms/c/certificateofdeposit.asp
Having answered Mr. Astaphan, we must now clarify what “certain insurance companies here in St. Kitts &Nevis” have been offering to customers. The Group of Companies offers a product called Annuities
The question is, what are Annuities or what is an Annuity?
Annuities have been in existence for well over two hundred years. The very first mention of Annuities in the United States was the use of these products by the Presbyterian Church in 1740 to provide security for the clergy and widows. Annuities allow you to accumulate tax-deferred funds for retirement and then, if you desire, receive a guaranteed income (this process is called Annuitization) payable for life or for a specified period of time: generally a term of five or ten years.
Annuities are offered by insurance companies and sold through licensed agents. The insurance company must be evaluated and licensed in your country. The state scrutinise insurance companies to ensure they have reserve funds, commonly referred to as State Legal Reserve Pools, in place to protect investors before granting them licenses.
Annuities are very similar to CDs offered by banks. Just like banks, insurance companies offer different rates and returns on annuity investments.
Advantages of Annuities
All annuities have three primary advantages: Tax Deferral, Avoidance of Probate, and a Guaranteed Income (optional) for a fixed period of time, or income for life.
More specific reasons to invest in fixed and immediate annuities:
• You need to safely create wealth for your heirs;
• You need tax-deferred growth;
• You need your principal and interest guaranteed;
• You need your heirs to avoid probate upon your death;
• You need an increased death benefit;
• You need stock-market linked gains without the downside risk;
• You have money that is designated for inheritance; and
• You do not need more than 10% liquidity annually
• http://www.annuity.com/annuity_answers.cfm
The annuities sold by these groups can be assigned to a financial institution against a loan while the client attracts a higher return. The annuities offer double protection, in that if the client dies by accidental the company pays double their investment, not exceeding One Hundred Thousand Dollars.
Having distinguished both CDs and Annuities, it is clear that Mr. Astaphan was and is fundamentally mistaken as to the nature of the contract offered by these companies. Or was he mistaken at all? The former minister claimed he got wind of this information some five or so years ago. Is Mr. Astaphan suggesting that he never researched or examined a contract from any of these companies as a Minister of Government as he was then?
Did he not see the need to expose these companies before? We say then that the good Minister knowingly condone the “unfair” and “unlawful” acts of these companies for over five years when he, as he said, first became aware of these acts. Instead, he waited until the horses have bolted. Or is that his strong objection falls on the heels of him now running an insurance company?
Insurance companies over the years have made tremendous progress in the line of products offered to clients. Previously, policies were mainly company focused. Today, polices are streamlined so as to offer clients the highest yield on their premium dollar.
Conversely, commercial banks are now engaged in questionable practices such as holding customers at ransom. When offering mortgages the banks dictate which lawyer prepares your Certificate of Title or Mortgage Deed. The bank retains that lawyer at the customer’s expense; in that the customer pays the bank’s lawyer, notwithstanding the FACT that that same lawyer cannot represent you in court on a matter relating to that said mortgage because he is the bank’s lawyer.
The commercial banks are now offering Life and Property Insurances when selling their mortgages… the notion of captive market. I do not think Mr. Astaphan is aware of these things. I hope Mr. Astaphan would use his influence to encourage the Finance Houses to offer higher returns on their CDs as oppose to the beggarly rate being offered.
I wonder what is the nature of the fraud committed by executives of these companies? However, the former minister failed to say whether they are local or regional executives, but as he said, “He was told”, as the learned audience would know, this would amount to here-say and, as such, cannot be admitted as evidence in our court of law.
If fraud is committed and proven, certainly the perpetrator(s) must bear the full extent of the law.
However, one must be careful not to spark a fire and not have enough water to contain that fire before it destroys elements that might be acutely aligned to it.
As Goldsmith said, “There are some faults that are so closely alienated with virtue that you can scarce weed out the faults without eliminating the virtue.”
I do agree with the former minister that this is indeed a difficult and testing time for the hard working people of the region regarding their investments. All efforts are being explored to ensure that the people’s hard earned monies are secured.
With hindsight, having examined the corporate structure of these companies and the way in which they are interconnected, the Regulators, Leaders and Stakeholders alike of the Eastern Caribbean Islands may want to consider rebranding the affected group, sever all ties with their regional offices, incorporate an EC island Public Insurance Company with a Health Insurance arm, set up a EC island hospital, where the insured of each territory would pay premiums into their local offices. With the passing of the 2009 Insurance Act in St. Kitts, (therefore the framework is there to allow the companies to continue offering their annuities to the public. The market needs all the players so as to minimise any monopolistic operations from other finance houses whose sole criterion for operation is profit at all cost and market domination. The intention is to have the insurance sector normalised within the EC grouping. Of course, any form of collaboration hinges on strong political will, our history would starkly remind us of our efforts to integrate.
I would therefore end with a quote from a renowned speaker as he aptly and cogently puts it, “Some men are content to remain as kings of their shacks instead of being prince of an empire.”
