by Marlon Madden

With aspects of the National Insurance Scheme (NIS) coming under pressure from the effects of the COVID-19 pandemic, Government is being urged to disclose the true state of the social security scheme.

Democratic Labour Party (DLP) spokesman on business Ryan Walters and leading investment manager Roger Cave issued the call on Tuesday, insisting that the people of Barbados have a right to know.

The last actuarial review, the 15th one, was made public in 2017 and dealt with the 2012-2014 period.

Walters said that in light of the recent higher than usual unemployment claims in the COVID-19 environment, estimated loss of $1 billion as a result of government restructuring, pending disbursements for severance payments and a decline in investment and contributions to the various funds, Government should come clean on the sustainability of the NIS.

“The Democratic Labour Party is calling for the Government to practise good governance of the affairs of the NIS relating to timely financial disclosures. It will be prudent for the Government of Barbados to perform an actuarial valuation on the [National Insurance] Fund now that it has been negatively impacted by rippling financial losses. It may be also time that the NIS is regulated by the Financial Services Commission so that there is regulatory oversight for the benefit of the masses,” Walters said in a statement.

“The Barbadian people, who are the investors and shareholders by way of contributing via taxes each month to the various funds, need to be given a look into the real financial situation at the state-owned National Insurance Scheme.

“Clearly, the asset base and revenue-generating capacity warrant independent financial review, scrutiny and transparency to the stakeholders who are the citizens of this country,” he added.

Last weekend, NIS Chairman Leslie Haynes said the fund had assets in excess of $4 billion, making it one of the richest institutions on the island. At the same time, Prime Minister Mia Mottley indicated that should the Unemployment Fund of the NIS needed capitalisation, her administration was prepared to facilitate such.

The NIS is said to have paid out some $135 million to date in unemployment benefits.

It is not yet clear how many severance payments claims have been made or how much that would equate to.

Stating that there was need for constant independent regulatory and financial oversight of the NIS, similar to other financial institutions, Walters said urgent clarification was needed on several areas.

Pointing to the ease of access to information on other insurance schemes in the region, and the published financial statements of the Central Bank of Barbados and the Financial Services Commission annually, Walters queried why the NIS was not doing the same.

“It is customary that similar funds receive an actuarial review at least every three years. In light of recent developments that have affected the fund, namely the estimated loss of $1 billion from the debt restructuring under the BERT [Barbados Economic Recovery and Transformation] programme, the above-average drawdowns from the fund and the decline in investment and contributions to the fund due to the impact of COVID-19, how has the Government measured the sustainability of the fund? When last was there an actuarial valuation done on the fund, and can this report be published?” he said.

The DLP spokesman also questioned why some people were still facing delays in receiving their unemployment benefits, while querying the outstanding number of claims due and the equivalent dollar amount.

Walters said it was also the duty of authorities to say how much would be needed to recapitalise the Unemployment Fund, when it would take place, and how the Government would fund it.

“Does the Severance Fund have the liquidity to deal with the windfall of pending severance payments in the event that companies are unable to pay severance and do not opt into the Barbados Employment Sustainable Transformation programme?” he added.

With fewer people currently in the workforce, it is expected that the contributions to the various funds would have dwindled
since March when several companies started laying off staff.

Cave, Managing Director of Fortress Fund Managers said there would definitely be some impact on the Pension Fund as a result.

He was speaking with business reporters virtually on Tuesday, during the final Fortress Fund Managers lunch and learn session
for 2020.

Cave said while Barbadians should be thankful there was a national security safety net with a strong asset base that continued to benefit many people, there was still cause for concern about the lack of information surrounding the fund.

Pointing to the importance of actuarial valuations, Cave said: “The NIS would have been hit with the Barbados debt restructuring and also with the impact of the recent [happenings in] financial markets and then the COVID-19. So you are facing severance and unemployment.

“So there would be pressure there, and I think it is important that we get the up-to-date information on the status of the scheme so that if there are adjustments and initiatives to be taken that information is received timely….
We all contribute to [the NIS] so all our pensions are in it. So we should all have an interest in knowing exactly what is the status of that one,” he said.

At the end of 2014, the assets of the NIS fund stood at $4.7 billion. Government retrenchment in 2013/2014 resulted in a significant drop in overall contribution to the fund to $532.1 million, compared to the $598 million in 2013.

The Unemployment Fund had fallen to $41 million at that time, and that was estimated to be about eight months’ worth of benefit payments.

The Mottley administration recently made amendments to the Financial Management and Audit Act, requiring state entities to improve their reporting to allow for better monitoring of operations and timely intervention
when needed.

The amendments, which were passed in the middle of 2018, required state entities to provide annual reports three months after the close of the financial year to allow for greater discipline in public finances.

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