By JADA LOUTOO Friday, August 5 2011
INSURANCE giant, Colonial Life Insurance Company (Trinidad) Limited (CLICO) has paid out hefty sums — amounting to millions — to two regional banks, after a default judgment was entered against the company in the local courts.
CLICO had been taken to court by the Bank of Nevis (BN) and Bank of Nevis International (BNI) Limited for the full repayment of all outstanding principal, and interest payments.
Both banks held Executive Flexible Premium Annuity policies.
The banks lawsuits were dated May 17, 2010, and judgment was awarded in default of appearance by Clico’s attorneys on June 14, 2010.
It was ordered that Clico pay BNI the sum of 550,003 British Pounds sterling; 851,189 Euros, and US$2,000,010.55 while the insurance company, which was placed under direct control of the Central Bank in 2009, was ordered to pay BN 150,002.25 British Pounds and 200,000.25 Euros.
On July 8, 2010, Cental Bank filed an application seeking to have the default judgment set aside. As part of its argument, Clico maintained that BNI was not entitled to the payment of the US$$2,000,010.55 sum under the EFPA policy as the guaranteed interests rate was two percent, and not eight, as the bank sought to surrender the EFPA on March 17, 2010, and not March 18, 2010, which was the calculated maturity date for the policy.
In an apparent change of heart, Clico was given leave on October 10, 2010, to withdraw its objection to the default judgment, and agreed to pay.
According to the Banks’ consolidated financial statements for the year ended June 30, 2010, noted that at the time of approval of the statements, all payments had been honoured.
This about turn by Clico is now troubling EFPA policyholders, who are now questioning a recent decision by Finance Minister, Winston Dookeran, to appeal a similar judgment of the high court which compelled the insurance company to pay six EFPA policy holders more than $58.7 million.
In a statement issued recently, the ministry said it was proceeding with appealing the ruling of Justice Maureen Rajnauth-Lee, who ordered that the six EFPA policyholders get back their investments in the failed insurance company.
Justice Rajnauth-Lee had ordered the insurance giant to pay the six EFPA policyholders after they sought judicial intervention to recover millions in investments they held in the insurance company. The claimants in the lawsuits were the St Christopher and Nevis (St Kitts and Nevis) Social Security Board — the equivalent to TT’s National Insurance Board; businesswoman Vindra Amar, attorneys Alvin Fitzpatrick, SC, and Lesley Ann Lucky-Samaroo as well as Darryl Arthur Goede and David Knott.
The six complained of breach of contract after their attempts to cash-in their policies were denied following Central Bank’s suspension of the insurance company’s activities following the company’s collapse in January, 2009. CLICO’s contention was that the Central Bank’s suspension also suspended their obligation to pay policyholders.
Last year, Dookeran announced a plan to deal with Clico policyholders and the holders of what he called short-term investments/deposits.
Short-term investors with $75,000 and less would get their funds repaid completely.
However, 15,000 investors with more than $75,000 would be paid through a Government IOU amortised over 20 years at zero percent interest. At a post-Cabinet media briefing last week, Dookeran noted that the issue of the payment of Clico customers remain subject to the drafting of a bill to approve a new plan to work out the discount rates for billions, in bonds to be provided.
In March, Government said it had paid out approximately $33 million to CLICO policyholders who invested in the high-interest bearing EFPA financial instruments, with contracts valued at $75,000, or less. CLICO’s EFPAs were short-term deposit instruments which had 25,000 customers, and had liabilities of about $12 billion, Finance Minister Winston Dookeran said last September. The Commission will continue in September.