ECCU Governments agree to a revised plan for resolving the BAICO issue

The Kamla Persad-Bissessar led administration of Trinidad and Tobago has withdrawn support for the creation of a new company to take over BAICO’s (British American Insurance Company) operations.{{more}}

Prime Minister Dr Ralph Gonsalves, delivering his budget address last Monday, January 24, said this is despite support from the previous Patrick Manning administration and the fact that negotiations were in advanced stages for the establishment of the new company, NEWCO, as was put forward as a resolution strategy by the Eastern Caribbean Currency Union (ECCU).

On November 2, 2009, the governments of the Eastern Caribbean Currency Union (ECCU) announced a strategy to deal with matters pertaining to BAICO. That new company, which was expected to have an asset base of USD 268.6 million, was expected to offer new policies to former BAICO policy holders with voluntary acceptance.

Of the total asset base, the Eastern Caribbean governments were expected to put in USD 75 million; the petroleum development fund, USD 48.6 million; government of Barbados, USD 5 million; USD 40 million from a strategic investor, and USD 100 million from the government of Trinidad and Tobago.

However, this plan was disrupted after the May 2010 General Elections in the twin island republic, when the new position was explained to the governments of the ECCU.

“It is apparent that the Government of the Republic of Trinidad and Tobago, whose contribution to the plan’s success is critical, would not support this new company solution as it was formulated,” Gonsalves explained.

He added that the Trinidadian government was in favour of another plan, that of working with the ECCU governments and the Caribbean Development Bank (CDB) to establish a regional fund through CARICOM to respond to major financial threats to the region’s economy.

Gonsalves said considering that this path will take time to implement, the ECCU Ministerial Sub-committee had agreed to a revised plan called Plan B for resolving the BAICO issue, whilst also permitting this potential CARICOM solution.

This new proposed plan, Gonsalves said, would involve the recapitalization of the traditional life portfolio with funds currently on deposit with the Eastern Caribbean Central Bank (ECCB) from the Petroleum Fund and selling it to a third party for its fair value as a going concern. Discussions will also continue

with the Trinidadian government and the CDB regarding the establishment of a CARICOM support fund to deal with the annuity policyholders. The intention is for these policyholders to be paid compensation up to a fixed amount, which will depend on the funding available.

The Prime Minister said the ECCU Governments also intend to work with the proposed CARICOM fund to create a pool of funds to settle liabilities due to systemic important institutions such as banks, credit unions and pension funds.

Of equal concern was the situation regarding CLICO International Life Insurance policy holders.

Prime Minister Gonsalves said that he was informed back in mid December of the intention by the Government of Barbados to place that company under judicial management.

Gonsalves noted that while his government had been officially informed that this appointment was yet to take place, it was anticipated that the recovery efforts for that company would also involve a regional strategy to deal with the persons affected. (DD)