PM: Judicial Managers report on British American grim

Grim facts…troubling!

This is how Prime Minister Dr. Ralph Gonsalves describes the contents of a report prepared by the Judicial Managers of British American Insurance Company Limited (BAICO).{{more}}

The report, filed with the respective courts last Friday, revealed that the insurance company’s liabilities from its Eastern Caribbean branches totaled EC$1.05 billion.

Of this sum, EC$842.4 million are annuities or investment contracts.

Amidst the bleak findings, Gonsalves expressed optimism that liquidation could be averted by a set of strategies that have been agreed by the governments of the Eastern Caribbean Currency Union (ECCU).

Discussing the findings for the first time in Grenada last Tuesday evening, Gonsalves said the public was about to hear “the unvarnished truth”.

“Therefore, there is no innocence about this,” the prime minister added.

This report comes three months after Judicial Managers were appointed by the courts upon the request of regulators in the ECCU and the Bahamas who had intervened in the operations of BAICO after discovering several problems.

Gonsalves disclosed the Judicial Managers haven’t said it, but it is evident that BAICO, a Bahamian company, which operated out of Trinidad and Tobago with branches in the EC, may have been insolvent since 1997.

As of June 30, 2009, unaudited financial statements indicated that the company’s deficiency stood at EC$775 million.

The Judicial Managers discovered that an amount of EC$301 million was taken from the branches in the Eastern Caribbean to fund certain inter-company transactions, including the purchase of property in Florida, United States.

Since the discovery, the Judicial Managers have filed a petition in US court to be recognized in bankruptcy proceedings started by BAICO to obtain relief under the US Bankruptcy Code.

The report showed that in the event of a liquidation of BAICO, policy holders will not be paid in full.

“Indeed, it is probable that if BAICO was liquidated, policy holders will only get 10 cents on their dollar. This means if you have an annuity of $1,000, you would only receive $100,” said Gonsalves.

But not so fast, says Gonsalves.

Gonsalves said the plan endorsed by the ECCU Governments will assist the policy- holders to get back the face value of their investment in stages.

“You will not be able to get your investments back immediately. You will be able to have it over a period hopefully of about five years,” Gonsalves stressed.

He expressed that persons would lose some of their interest, and going forward, they are not going to be able to get interest at the rate of 8 per cent and 9 per cent.

“Those are Ponzi scheme levels interest,” said Gonsalves.

Gonsalves’ discourse was centered around the topic “The financial crisis in the Caribbean: Clico, CL Financial, British American, Stanford – How bad is it, and what can be done,” at the Bell Lecture Hall, St. George’s University.