WILLEMSTAD – The Central Bank of Curaçao and Sint Maarten (CBCS) launched a new risk-based supervisory framework in early 2025. This follows previous criticism regarding the effectiveness of supervision over insurers and pension funds, particularly concerning governance, reporting requirements, and enforcement of solvency standards. By implementing this new model, CBCS appears to be addressing some of these concerns, though according to Servaas Houben and Ronald Ketellapper, there is still room for improvement.
Houben and Ketellapper have advocated for several enhancements to further improve the quality of supervision. They emphasize that prudential supervision is meant to protect customers, policyholders, and pension participants from financial risks, rather than to target financial institutions. However, they acknowledge that strict oversight can be challenging for these institutions.
Regulations
The proposed measures include clear regulatory guidelines, timely and relevant reporting, and strengthened supervision and governance. One key recommendation is the adoption of rules-based regulations, which establish explicit guidelines instead of relying on open criteria. Additionally, they propose risk-based regulations, where rules are adapted according to the level of financial risk.
Another important suggestion is to clearly define supervisory responsibilities within the Central Bank, ensuring greater accountability within regulatory bodies.
To better manage solvency risks, institutions should be required to report unexpected solvency issues. This approach aligns with Aruba’s stricter enforcement practices, which serve as an example. Furthermore, governance must be continuously maintained to guarantee stability and reliability in the financial sector.
Finally, they stress the need for new minimum capital requirements, similar to the Solvency II framework. These combined measures aim to create a more robust, transparent, and well-regulated financial supervision system.
Rules-Based Regulations
“In one of our earlier articles, we advocated for rules-based regulation in Curaçao,” said Houben. “This is because, apart from the regulator, there are few other stakeholders—such as rating agencies, media, or consumer organizations—to provide countervailing power. CBCS’s new regulatory framework is risk-based but can still incorporate rules-based elements when regulations apply to the entire sector.”
CBCS’s annual report mentions that one of its key projects is the introduction of a risk-based approach to minimum solvency requirements for insurers. The basic regulatory framework was developed in 2023 and was presented to the sector for consultation in 2024.
The report also notes that effective supervision across various institutions is best conducted based on risks rather than rigid rules.
“CBCS highlights that risk-based regulation enables a comprehensive identification and analysis of risks, allowing for swift and decisive intervention by the regulator,” said Ketellapper. “Additionally, several Caribbean regulatory bodies have also adopted risk-based regulations.”
According to Houben, CBCS is making significant progress in this area. “We recommend setting minimum standards for risk assessments conducted by financial institutions. This could include mandatory stress scenarios, allowing for comparisons within the pension and insurance sectors. This would also reintroduce elements of rules-based oversight by enforcing prescribed stress tests.”
Relevant and Timely Reporting
The Central Bank has announced that, starting in 2026, the deadline for insurance companies to submit annual financial statements will be moved from May 31 to April 30.
“This will force institutions to streamline their year-end processes,” said Ketellapper. “For effective supervision, quarterly and risk reports are just as important as annual reports, as they indicate whether an institution remains financially stable.”
“Enforcement is crucial,” he added. “In the past, the CBCS engaged in discussions with institutions that missed reporting deadlines, allowing too many firms to submit late reports without serious consequences.”
Houben emphasized that timely reporting is critical for maintaining trust in the financial sector. “The regulator should aim for zero late filings,” he said.
Ketellapper agreed, adding, “This will also reduce the burden on CBCS, as there will be fewer reminders and discussions, and report reviews can be better planned.”
Standardized Reporting
While no changes have been made to mandatory reporting formats, Houben and Ketellapper anticipate that Solvency II capital requirements may introduce new standardized reports.
“Standardized reports are essential for comparing pension funds and insurers,” said Houben. “This allows customers and service providers to make informed decisions.”
“For regulators, standardized reports simplify supervision and make it easier to analyze trends and detect risks within the sector,” added Ketellapper.
Ownership of Supervision
Houben and Ketellapper argue that the highest level of responsibility for insurance supervision should lie with the statutory board of directors at CBCS.
“In CBCS’s current structure, the deputy director is responsible for supervision, but they are not a statutory board member,” Houben said. “We recommend that one director be explicitly assigned oversight responsibilities to prevent a lack of clear accountability.”
Timely Communication
CBCS acknowledges the importance of timely communication with the public.
“The Ennia and Girobank cases showed that policyholders were informed too late about financial problems,” said Ketellapper. “Meanwhile, foreign media were already revealing key issues.”
“In some cases, annual reports were not published for years after 2016,” Houben added. “There is still room for improvement in transparency.”
Strict Enforcement
In a previous analysis, Houben and Ketellapper cited Aruba as a prime example of effective enforcement.
“During the transition to a new supervisory framework, there should be some flexibility to address initial implementation challenges,” said Ketellapper. “But once those are resolved, strict enforcement is crucial. Leniency can lead to serious financial issues.”
CBCS has implemented a ladder of intervention, which progressively limits management actions based on solvency ratios.
“To ensure clarity for financial institutions and customers, CBCS should quantify these intervention levels and specify at which solvency ratios regulatory actions will take place,” said Houben.
Governance
One of the key failings in the Ennia collapse was poor governance.
“The Board of Supervisors (RvC) failed to act as an internal regulator and prioritized financial gains over policyholder protection,” Houben and Ketellapper stated. “The executive team blindly followed board instructions, and the regulator failed to intervene in time.”
CBCS has since introduced stricter requirements for financial institution executives, emphasizing not only qualifications, experience, and integrity, but also the need for strong leadership across the entire management team.
Minimum Capital Requirements
In 2025, CBCS will adopt Solvency II standards, an internationally recognized risk-based capital framework. To accommodate local institutions, CBCS will implement a light version of these rules.
“This is a major step forward, and a lighter version is justified given the scale of the local market,” Houben said. “We recommend publicly disclosing the results of the Solvency II light framework, just as is done under full Solvency II regulations.”
Another improvement is the implementation of risk-free interest rate curves to calculate capital requirements.
“Currently, institutions define their own interest rate curves, which allows for manipulation of capital requirements and prevents fair comparisons,” Houben said. “CBCS’s plan to mandate a standardized curve is a positive step forward.”
Conclusions
Of the nine improvements proposed by Houben and Ketellapper, they believe CBCS has successfully addressed three key recommendations:
Implementation of Solvency II
Governance improvements
Risk-based regulation
However, three issues remain unresolved:
Prudential supervision ownership within CBCS
Stricter enforcement
Better communication of solvency problems
Two other areas, standardized reporting and timelier financial disclosures, are expected to be addressed under Solvency II implementation.
Both experts commend CBCS for its progress over the past five years.
