Projects to strengthen institutional investors’ resilience
WILLEMSTAD, PHILIPSBURG - Institutional investors in the monetary union weathered recent years’ shocks to a great extent. The current volatile financial markets and tighter financial conditions will put the local institutional investors’ health to the test. Intensive projects and reforms are underway to help boost resilience and robustness of institutional investors. This, and more, is analyzed and presented in the 2023 Financial Stability Report (FSR) of the Centrale Bank van Curaçao en Sint Maarten (CBCS).
The CBCS is rolling out a range of projects that aim to increase institutional investors’ fortitude and make insurance companies and pension funds resilient enough for oncoming challenges. Reform projects include the review of the investment rule, adjustment of the discount rate and an extensive review of the pension system, flanked by an updated pension supervision law that is currently under advice. The discount rate project will help achieve fair representation of the funding ratios and solvency positions of institutional investors. CBCS is looking into the investment rule, as institutions have indicated that they experience lack of viable, large local investments as restrictive.
Possible changes to the investment rule will be in line with the CBCS’ monetary policy of safekeeping the foreign reserves, while maintaining a balance with market opportunities. Furthermore, a thorough review of the pension system will look at whether the system is still sustainable and can continue to provide its core function. The new regulatory regime for pension funds is broad and offers space to accommodate and integrate future updates to the pension system.
The FSR covers forty-one institutional investors within the monetary union, namely ten life insurance companies, nineteen non-life insurance companies, and twelve pension funds. Findings over the year 2021 point to an overall stable performance of both insurance companies and pension funds, even though many are projected to be deeply impacted by the performance of international financial markets during 2022 and 2023. In the face of quite challenging global and local developments, the institutional investors have shown resilience and increasing adaptability.
