Parliament updated on BAICO/CLICO

More payouts are expected to be made to policyholders in St Vincent and the Grenadines, who were affected by the Colonial Life Insurance Company/British American Insurance Company (CLICO/BAICO) meltdown of 2008.

An update was given on the situation {{more}}recently, during Prime Minister Dr Ralph Gonsalves’ presentation of the 2015 National Budget.

“There is no doubt that the BAICO/CLICO melt-down has deeply hurt the economies of the Eastern Caribbean Currency Union (ECCU) and brought significant and sustained damage to the ECCU policyholders. Indeed, it is one of the factors for the slow recovery of the ECCU following the Great Recession,” the Prime Minister said.

In 2011, Gonsalves had shared his view that Trinidad and Tobago should play an integral role in the resolution of the CLICO/BAICO debacle, particularly since both companies were subsidiaries of CL Financial, which is based in Trinidad.

Gonsalves, who is also the chair of the ECCU Ministerial Subcommittee on insurance, declared that thousands of policyholders have had their policies saved and transferred to another insurer, as a result of the committee’s efforts to craft and develop a resolution to the situation.

Furthermore, he indicated that more than EC$100 million has already been paid directly to policyholders.

With regard to St Vincent and the Grenadines, in phase one of these efforts, 716 policyholders were paid a total of $4.5 million, while 406 policyholders were paid a total of $5.5 million in phase two. In phase three, 505 policyholders were to be paid a total of $15.2 million; however, Gonsalves stated that these payments had not yet been made.

“It was our expectation based on commitments given at the CARICOM Heads of Government last year; a further disbursement should have been made by the Government of Trinidad and Tobago by July 2014. Unfortunately, no disbursements were received in 2014. As a consequence, we deeply regret that we were unable to complete Phase III of the ECCU Policyholders Relief Programme as planned,” he said.

“We will complete Phase III as soon as the funds become available.

“In the case of St Vincent and the Grenadines, an additional 128 policyholders will be paid $3.1 million. Thereafter, we will shift our focus to Phase IV, which includes policyholders over $30,000 and some institutional investors.”

The Prime Minister, however, expressed appreciation to the government of Trinidad and Tobago for partnering with the governments of the ECCU to help in the resolution of the regional problem.

According to Gonsalves, the ECCU governments also have put forward an alternative proposal with respect to CLICO.

This proposal is referred to as a “Barbados-first” proposal and was announced by the Government of Barbados and the judicial manager for the restructuring of Colonial International Life (CIL).

“This alternative proposal was discussed with the judicial manager and representatives of the Government of Barbados in July 2014. Notwithstanding the limited information about policyholder liabilities, the proposal from the ECCU governments was intended to be the basis for discussion about an alternative to any “Barbados-first” solution. At the end of this meeting in July, the parties agreed to continue discussions regarding such an alternative proposal, but regrettably no such progress was made,” the Prime Minister said.

The alternative strategy is expected to make a number of provisions, which include the transfer of business to the insurance company, NEWCO, whereby the adjusted policy liabilities and all CIL assets deemed to have value by the judicial manager in his most recent report to the High Court, would be transferred to a NEWCO at fair value.

Other provisions will allow for traditional policyholders to be made whole, through a combination of their share of the CIL assets and a contribution from the Government of Barbados and for executive flexible premium annuity (EFPA) policyholders to be repaid in equal installments over 10 years.

“It is important to remind everyone that the alternative ECCU proposal is consistent with our guiding principle from the outset of the BAICO/CLICO debacle, that it is a regional problem that requires a regional solution. Consequently, any “Barbados-first” proposal would not be consistent with this principle,” Gonsalves said.

“At this stage, the governments of the Eastern Caribbean Currency Union are awaiting word from the Government of Barbados and the judicial manager on this alternative proposal. However, we have become aware through various media reports that the judicial manager considers the proposal to be “impractical.” We trust that the judicial manager will see it fit to address these comments to the ECCU governments directly so that the long-awaited dialogue can continue.”

Gonsalves further disclosed that the judicial manager of CLICO in Barbados has recommended to the High Court that CLICO be placed into liquidation. He indicated that the matter will go before the court sometime shortly.

“The Governments of the ECCU are resolute in their determination to protect the interest of ECCU policyholders in this longstanding issue which has deeply hurt the economy of the ECCU and wrought great hardship to ECCU policyholders,” the Prime Minister said.(BK)