This article appeared in the August 11th, 2003 edition of the Cayman Net News. A special thanks goes out to their editor and staff, for allowing me to reprint it here.
A report appearing recently in another local publication seems to defend the Cayman Islands Monetary Authority (CIMA), dismissing "media speculation" and "negative press" in both local and international coverage of the Cayman Islands-based National Warranty Insurance Group (NWIC) insolvency.
The CIMA, the article suggests, has not been too soft in its regulatory duties, and in fact they were "on the case from May" and helped bring about the closure of one of what was the largest warranty insurers in the United States.
Cayman Net News was one of those media outlets carrying such "negative" reports, as well as Fairbanks (Alaska) Daily News, The Wichita (Kansas) Eagle, The Nebraska Journal Star, The Akron (Ohio) Beacon Journal, The Automotive News, and the NBC affiliate in Birmingham, Alabama, and this is not anywhere near an exhaustive list of the media covering this story in the United States.
As an independent newspaper, Cayman Net News is duty-bound to report the news, and bringing good order will come from openness, not secrecy. We would have also gladly reported what the (CIMA) had to say, and we were desirous of so doing, but despite numerous requests and messages left, they were not cooperative in responding.
The CIMA has advised us that their statement would come through the Government Information Services (GIS) in due course. While we at Cayman Net News still await what may or may not be an enlightening news release on the matter from GIS, CIMA has proceeded with a private press briefing with another local newspaper.
CIMA is quoted in the other publication's report as saying that NWIC had been a very strong company in the years it was here, and the article goes on to say that the company held an A-minus rating from AM Best (AMB), the industry-standard US-based insurance rating company, when it closed.
Our research, which can be verified by anyone with Internet service, shows that NWIC was headed for trouble from at least 11 March of this year, when AMB lowered their rating from A-minus (Excellent) to B++(Very Good). An AMB spokesperson was quoted at the time saying they "remained concerned with the adequacy of loss reserves and believes NWIC could still encounter more difficulties in the near term."
In fact, NWIC was indeed downgraded again to B (fair) on 23 May, which is coincidently around the same time that the CIMA conducted their "routine" audit that eventually started the chain of events that led to the court-ordered liquation of the company on 1 August.
The main issue at hand with the CIMA in regard to NWIC is whether or not they were strict and alert enough in their regulatory scrutiny of the failed insurance company.
Since AM Best's downgrading process started as early as March, and the CIMA claim that they were first "on the case" in May, perhaps CIMA was not as alert as they needed to be.
And while the other publication suggests that "thousands" of US car owners might be affected, over 5,000 US auto dealers where selling upwards of 15,000 warranties a month, putting most estimates in the hundreds of thousands of people who could be affected.
The CIMA claims that the "lure" of Cayman is strict regulation. This is exactly the opposite of the impression conveyed in the international press where, at best the Cayman Islands are portrayed as "friendly" or "lenient" when it comes to proper regulation.
Efforts to whitewash this public relations disaster with euphemistic phrases, vague numbers and diversionary arguments simply will not work. It is time to face the music and deal with this disaster so the healing process can begin.