Press Release:– The National Insurance Corporation’s most recent investment has generated much discussion and concern.
The purpose of this statement is to reassure all our stakeholders, in particular, our contributors, that the NIC at all time acts within the parameters of its Investment Policy and Guidelines which has been in effect since 2002.
The propriety, rigour, and independence of our investment process are such that the NIC emerged from the financial crises of 2002 and 2008, the latter being the most devastating since the crash of 1939, as well as the unraveling of CLICO, without incurring any losses.
Investment decisions are made by the Investment Committee, after the Investment Manager has assessed a proposal from an interested party.
This assessment includes rigorous due diligence. When the Investment Manager is satisfied that the proposal is worthy of consideration, a recommendation is made to the Investment Committee, which further analyses the proposal.
The Committee may require further information and then it makes its recommendation to the Board, which may or may not accept the recommendation.
In respect of the particular investment in question, discussions and negotiations exceeded one year and the board gave its final approval only after all its concerns were addressed, the primary one being the security of the investment to be made.
This process is followed for each and every investment opportunity without fail.
The NIC’s Investment Portfolio is valued at EC$2.3 Billion. These investments are in the following assets:
|Loans & Fixed Income||333,605,996||14.7%||10 – 20%|
|Fixed deposits||236,341,437||10.4%||10 – 15%|
|Properties||278,631,618||12.3%||10 – 20%|
|Gov’t Lending||485,717,362||21.4%||20 – 30%|
|Regional Investment||266,563,636||11.7%||10 – 15%|
|Extra-Regional Investments||294,976,416||13.0%||5 – 15%|
|Cash on Call Accounts in Banks||224,184,016||9.9%||0 – 1%|
The above does not include NIC’s planned affordable low-cost housing project with a preliminarily cost estimate of EC$ 51 million.
The NIC’s authority to invest comes from the National Insurance Corporation Act and its Investment Policy and Guidelines.
Section 21 of the Act charges the Investment Committee with the investment of surplus monies in
(a) acquisition of Land
(b) purchase or construction of Buildings
(d) Government bonds and securities
(e) Shares and Debentures in bodies corporate
The Investment Policy and Guidelines and any revision to it is approved by the Investment Committee, the National Insurance Board and the Minister responsible for the NIC or social security (traditionally the Prime Minister).
The following is extracted from the NIC’s Investment Policy and Guidelines.
The text is identical to that of the Investment Policy and Guidelines throughout the years from the first policy approved in 2002.
In addition to the raison d’etre as legislated, the National Insurance Fund serves a secondary but equally important role; it serves as a financial intermediary in that it mandates savings which can be channeled into the productive sectors of the economy. Given that tourism is the one major area whose development can have the greatest positive effect on the local economy it is imperative that we emphasize investment therein. Allocation to this (and the other productive) sector(s) is indispensable in stimulating growth which is essential if the Fund is to perpetuate itself. To remain viable, the fund must grow, both in terms of registered contributors, and assets to support claims. Investment in this area should influence positively the attainment of that goal. It is important however that we keep in mind the nature of the Fund, being a pension fund, and that the assessment of all investment opportunities therein must be carried out under consideration of our investment objectives in order of safety, liquidity and yield. Investments will depend on the availability of suitable and safe opportunities.
In the event of mutually exclusive investments involving the tourism sector and any other sector or category of instrument, everything being equal, investment in the tourism sector will be preferred. Direct investments in the tourism sector should not exceed 10% of total investment at cost.
EXISTING COMPANIES (Tourism related)
Therefore, for Fixed Income Investments viz. Loans and Bonds, the factors as per (C) above, and for Equities as per (F) above should first prove satisfactory.
NEW COMPANIES (Tourism related)
The NIC should not participate in the equity of a start-up company. However, the NIC can participate via fixed income instruments (loans, bonds) which should be appropriately secured and which would ordinarily have first claim on the company’s assets. The NIC can contribute to start-up equity of small hotels/concerns by contributing to a Venture Capital Fund or a Development
Fund, an amount not exceeding 1.5% of the total portfolio at cost which would circumscribe the NIC’s exposure to that asset class.”
The Report on the recent 11th Actuarial Valuation Review of the National Insurance Fund conducted by the Actuarial Services Unit of the International Labour Office (ILO) states in respect of Investments – “Given the limited range of opportunities for investment in St Lucia, the current uncertain economic and investment environment around the world, and the good returns achieved so far, no change in investment policy is recommended at this stage”. The same representation was made in the reports of the 9th and 10th Actuarial Reviews.
The mission of the NIC as embodied in its Mission Statement crafted in 1999 mandates the NIC:
“To ensure that every St. Lucian enjoys social and financial protection and to assist in the development of our nation through the efficient collection of contributions, payment of relevant benefits, prudent management of assets, use of cutting edge technology, and a cadre of highly skilled staff.”
The Vision Statement provides greater clarity in maintaining NIC as “An effective, transparent and financially sound institution which is customer focused, provides social protection to the St. Lucian population and plays a leading role in national development.”
The “Cabot project” involves the development of a world class golf course, construction of a hotel, villas, a beach club and sale of lots. This is expected to generate employment locally as well as provide St Lucia with additional visibility internationally.
The NIC’s recent investment in Cabot (St Lucia) Inc. meets the requirement of the Act, the Investment Policy and Guidelines, and its Mission and Vision statements.
In addition, the investment was rigorously assessed by the NIC’s in-house team, its Investment Committee and the Board; the returns were negotiated at a rate higher than the average returns on the current portfolio and security was obtained which value is three and a half times NIC’s investment.
The NIC is confident in its decision. The Corporation has always acted and will continue to act “for the benefit of us all”
Matthew L Mathurin