CLICO NOD

THE WAY NOW SEEMS to be clear for a restructuring plan for CLICO International Life Insurance Limited (CIL) to be put in place.

This follows Cabinet’s approval of the judicial manager’s recommendations.

This formal approval enables the judicial manager, Deloitte Consulting Ltd, to start the process of implementing the final recommendations contained in the report and addendum presented to the High Court last June, with the aim of having a regional solution to the long-running situation.

It will see, among other things, the creation of a new insurance company (NEWCO) to take over the insurance business by yearend, along with the creation of separate entities which will own the real estate and other illiquid assets. These property holding entities will issue bonds to the new insurance company which will be guaranteed by Government.

This development has however been cautiously greeted by the Barbados Investors & Policyholders Alliance Inc (BIPA), which represents the thousands of Barbadians with money tied up in CLICO and its sister company British American Insurance Company (Barbados) Limited since their collapse in 2009.

Last night, BIPA chairperson, June Fowler, said they were relieved that progress has been made, “even though the only thing that has changed since June last year is that we now have Cabinet’s approval and a timeline has been given.

“The devil is always in the detail so we now have to sit down with our team of advisors to further examine the other things outlined in the Press release,” added Fowler.

In the release yesterday, Deloitte stated that in the absence of specific responses from within the Eastern Caribbean to the proposal, they initiated discussions last November for the process to be started here. These discussions resulted in the Cabinet giving approval for the regional solution to be started in Barbados as the first step towards the overall restructuring of CIL.

The intentions of those recommendations were that firstly, all policyholders with traditional insurance policies (life, health and pension plans) would receive the full value of their policies with the support of the Government.

Secondly, all holders of individual Executive Flexible Premium Annuity (EFPA) policies would receive the value of their principal investment. These types of policies would be converted into annuity products payable over a period of up to ten years. And third, holders of EFPA policies, other than individuals, would receive shares in the property holding entities.

Deloitte noted that work was under way to achieve these goals. It stated that the key elements of this approach includes:

  • Government being the guarantor of the bonds issued by the property company to NEWCO;
  • Government issuing a demand note for the amount of any Statutory Fund shortfall;
  • The demand note shall pay interest to NEWCO at a rate sufficient to fund the expected monthly shortfall from NEWCO’s operations, including the monthly payments on the restructured individual EFPA obligations;
  • Individual EFPA policyholders shall have their principal claims converted to ten-year fixed annuities. The Government shall guarantee the monthly blended payments of interest and principal due on the restructured ten-year fixed annuity contracts if the operating cash flow of NEWCO is insufficient; and
  • The Government or its assignee shall be the owner of the common shares of NEWCO.

The release stated that throughout this restructuring, the participation of the Ministry of Finance and Economic Affairs, the Central Bank of Barbados and the Financial Services Commission as part of the CIL Advisory Committee would be essential to the successful financing and implementation of this agreed approach in the interest of policyholders.

After CLICO and BAICO collapsed in 2009, a judicial manager was appointed on February 4, 2011. The total value of the policyholder liabilities to be transferred to the new company was put at $542 million, consisting of $275 million of liabilities from Barbados and $275 million from the Eastern Caribbean Currency Union. (SP)

Daily Nation Thursday May 15th