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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
The Barbados Investors and Policyholders Alliance (BIPA) has welcomed the news that the Cabinet of the Government of Barbados has finally approved the proposals for the restructuring of the operations of CLICO International Life (CIL) contained in the Report and Addendum presented to the Barbados High Court in June 2013. The Alliance is also pleased that a projected timeline for completion of the plan has now been stated.
However, BIPA has requested a meeting with the CLICO Judicial Manager in order to go through, in detail, a number of elements of the plan, including the projected process and timing of the approval of the Court; the setting up of ‘NEWCO’, its ownership and management; and the latest position on the interest expressed by the Canadian group, and any other parties, in taking over the operations of CIL. The Alliance will also be asking for more detailed information on the Special Purpose Vehicle (SPV) to deal with CLICO’s real estate.
BIPA President June Fowler is particularly concerned that clarity is reached regarding the treatment of the EFPA policyholders. “We need a clear interpretation of the meaning of ‘principal’ insofar as it relates to individual EFPAs, as well as specific details on the nature of the annuities being offered to the EFPA policyholders, including the proposed interest rate, term and early cash-out options, especially for older policyholders,” says Fowler.
While frustrated at the length of time it has taken to get to this stage, the BIPA President feels there is now real light at the end of the tunnel. “Policyholders have suffered so many delays and setbacks,” she says, “that I hope all parties will co-operate to ensure that the process from this point forward is unhindered and finally leads to a satisfactory conclusion by year end.”
CABINET APPROVES PAYOUT PLAN FOR POLICYHOLDERS
by Emmanuel Joseph
The way is now clear for thousands of policyholders and investors of CLICO International Life Insurance to start getting compensation, five years after the company’s financial collapse.
Deloitte Consulting Ltd tonight announced it had received confirmation that Cabinet had approved the terms, conditions and actions to be taken, as set out in the restructuring of CLICO’s operations.
In response, the Barbados Investors And Policyholders Alliance (BIPA) said it was “relieved” but still cautious until all the details were revealed. “The devil is in the details,” BIPA chairperson June Fowler told Barbados TODAY.
According to Deloitte, the formal approval enables the judicial manager to start the process of implementing the final recommendations contained in the report and addendum presented to the Barbados High Court in June 2013, with the aim of having a regional solution,” Deloitte stated, noting that the Barbados solution would be the first step of the overall restructuring of CLICO.
Under those recommendations all policyholders with traditional insurance policies, such as life, health and pension plans, will receive the full value of their policies with the support of the Government.
“All holders of individual Executive Premium Annuity (EFPA) policies will receive the value of their principal investment. These types of policies will be converted into annuity products payable over a period of up to ten years,” it said.
The plan envisages the creation of a new insurance company (NEWCO) – by the end of this year – to take over the insurance business and the creation of separate entities that 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 the Barbados Government.
Holders of EFPA policies, other than individuals, will receive shares in the property holding entities.
Key elements of the agreed approach include Government being 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 Government or its assignee will also own the common shares of NEWCO.
Deloitte said the demand note would also pay interest to NEWCO at a good enough rate to fund the expected monthly shortfall from the new company’s operations, including the monthly payments on the restructured individual EFPA obligations.
The judicial manager noted that throughout the 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, will be essential to the successful financing and implementation of this agreed approach in the interest of policyholders.
BarbadosToday: Wednesday May 14th 2014
DAILY NATION. THURSDAY, MARCH 6, 2014
BIPA Hopeful of Offer
by RICKY JORDAN
CLICO POLICYHOLDERS are cautiously optimistic about an offer by Canadian management agency, Canada Loyal Financial, to buy all of the assets of CLICO International Life (CIL) Insurance Limited and totally repay the principal sums to policyholders and investors in Barbados and the Eastern Caribbean.
Chairman of the Barbados Investors and Policyholders Alliance (BIPA), June Fowler, said while the offer had excited many policyholders, based on the number of calls she had received in the last few days, she wanted them to bear in mind that the due diligence on this company would take time.
“The court and the Government would still have to rubberstamp the setting up of a new company and the judicial manager would still have to consider all the offers on the table before accepting, hopefully, the one that is most beneficial to the policyholders. How long will this process take? We do not know,” she told the DAILY NATION.
Fowler added that while this offer might seem to be finally providing a satisfactory solution to the CLICO debacle stretching back to the collapse of Trinidadian parent company CL Financial in 2009, there was “an inertia and a lethargy and a lack of critical cooperation that have dogged the path to resolution over the past five years”.
She therefore said she hoped such delays would not result in the deal falling apart and causing suffering policyholders to lose out.
“If this deal is better than all the others, we hope that it would not turn out to be another Four Seasons, where you have to go back to the drawing board and start afresh, where people get frustrated with all that has taken place to delay the process,” said the BIPA head.
Noting she was hopeful the company would receive the necessary cooperation of all the parties involved, namely the CLICO judicial manager Deloitte Consulting Inc. and the Government, she said: “BIPA is willing to cooperate with any plan that will maximise the policyholders’ recompense.”
However, she added, BIPA would continue to pursue its court case “against the directors and auditors of CLICO, and others, to make up any shortfall in the return of the value of its members’ policies”.
Stating that she hoped to see “some level of movement taking place” in the next few weeks, the BIPA head said while much business happened behind the scenes, policyholders would be keenly watching the Canadian offer.
Letters from Canada Loyal Financial, bearing the company’s letterhead and signed by the CEO, were sent to Deloitte and the Minister of Finance late last week, expressing the firm’s commitment to ensuring that policyholders in Barbados and the region were “made whole for their principal”.
It added: “We wish to proceed with our due diligence and are in the process of preparing a financial package that will be presented with our formal proposal. Our offer will meet and exceed Government objectives and ensure that the commitment is satisfied and that the company can move forward as an ongoing business. I look forward to meeting with you and our delegation to present our proposal at your earliest convenience.”
The company’s partners include Canada Life, Forresters Life, Industrial Alliance, RBC Insurance and UL Mutual, and its offer to purchase CIL’s $800 million in assets is reportedly backed by two other entities.
BARBADOS BUSINESS AUTHORITY Monday, March 3, 2014
Safety net: FSC to rule on policyholder protection scheme
by Shawn Cumberbatch
The Financial Services Commission (FSC) is contemplating the introduction of a special Policyholder Protection Scheme (PPS) as part of efforts to ensure consumers do not suffer when their insurers collapse.
This follows a new International Monetary Fund (IMF) recommendation for the establishment of a “privately-funded” PPS and related concerns from the Barbados Investors and Policyholders Alliance (BIPA), which is representing thousands of Barbadians with money still tied up in CLICO and its sister company British American Insurance Company (Barbados) Limited.
As part of a series of recommendations related to the FSC and issued in its latest Financial System Stability Assessment report on Barbados, the IMF said: “Consideration should be given to the establishment of a PPS for insurance. A privately financed PPS could help secure continuity of insurance coverage and payments by the transfer of insurance policies to a bridge insurer or third party and to compensate policyholders for their losses in liquidation.
“In order to establish a PPS, further discussions would need to be undertaken by the authorities about its governance, coverage level, funding arrangements, and position within the resolution framework.”
After BARBADOS BUSINESS AUTHORITY asked the FSC to respond to the IMF suggestion and BIPA’s related concern that the recommendation might be an inference of a wider concern, its director of insurance and pensions, Randy Graham, said while implementation of a PPS was “a relatively new regulatory tool”, the FSC was examining the feasibility of having one here.
But Graham also emphasised that this had nothing to do with his organisation’s current mandate to ensure the statutory funds of insurance companies operating in Barbados were operating in accordance with the law.
“The Financial Services Commission notes the recommendation from the IMF about reviewing the use of a Policyholder Protection Scheme.
“The PPS which is separate and distinct from the statutory fund is more akin to the deposit insurance scheme in the banking sector. It essentially forms an additional layer of protection for policyholders that creates a structured approach which could allow for the continued settlement of legitimate policy holder claims during a period where there is corrective action ongoing for an insurance entity,” he said.
“FSC actively conducts ongoing supervision of the statutory funds of insurance companies operating in Barbados in accordance with the legislation. The implementation of a PPS is a relatively new regulatory tool recommended by financial safety net specialists as a response to financial crises that would have occurred globally over the past 30 years.
“It is not a response to the characteristics of the statutory fund mechanism. FSC has taken the initiative to review the feasibility of a PPS for the insurance sector as a work in progress. We also continue to work in developing, in collaboration with fellow regulators, a deposit insurance scheme for the credit union sector as we seek to increase the robustness of the safety net for the non-bank financial sectors,” Graham added.
In its own response, BIPA said it supported the IMF recommendation “in principle”, but said it hoped such a scheme “would be operated and managed by a body independent of the insurance companies for which it provided policyholder protection”.
“However, as there is already a legal requirement for Insurance Companies to maintain a Statutory Fund for such purposes, the IMF appears to be inferring that it is concerned about the ability of the Financial Services Commission to adequately oversee and enforce the law as it relates to individual Statutory Funds,” it asserted.
“Certainly, it would appear that the FSC’s predecessor, the supervisor of insurance, failed to adequately monitor the activities of the BAICO and CLICO Statutory Funds and enforce the law when those companies continued to breach the minimum requirements for the fund, as well as failing to submit timely annual accounts.”
SUNDAY SUN MARCH 2, 2014
by RICKY JORDAN
CLICO POLICYHOLDERS MAY be getting a dream offer from a North American firm, which wants to buy all of the assets of Clico International Life (CIL) Insurance Limited and repay the principal sums to the policyholders and investors in Barbados and the Eastern Caribbean.
The North American firm has been meeting with CIL’s judicial manager (JM) Deloitte Consulting Inc. as a result of correspondence going back to 2013.
The offer to purchase CIL’s $800 million-plus in assets, including large tracts of land, and ensure policyholders receive over $441 million, was contained in the proposal sent to the JM and Minister of Finance Chris Sinckler recently.
Delivered two days ago to Deloitte, the document obtained by the SUNDAY SUN confirmed the firm’s commitment that policyholders in Barbados and the Eastern Caribbean be restored their principal investment or “made whole for their principal”.
The prospective investors propose to rebrand the company, acquire all of the assets of CIL and ensure that the Government of Barbados achieves its own objective.
Asked why Barbados, a reputable source told the SUNDAY SUN that the woes of CIL were made known to them by an American-based Barbadian businessman.
However, the source added, they also knew that a local insurance company wanted to buy some of the assets, particularly land. “But that would hurt the policyholders very badly. This is a far better offer,” said the source.
“The company would be buying CIL lock, stock and barrel and have the financial capability to satisfy all the parties.” He added that the firm was a billion-dollar operation that had been doing business since the 1970s.
“Barbados has Trade Confirmers behind us and one doesn’t want that to happen again, not in the 21st century, especially when there are opportunities to avoid it,” he added.
The SUNDAY SUN understands that the company’s partners include some of the largest North American financial entities. Recently, Central Bank Governor Dr Delisle Worrell told regional media that a cooperative solution had been found to settle outstanding CLICO claims in Barbados and the Eastern Caribbean.
He said the latest report from Deloitte made to the court here provided a way forward which seemed fair to all stakeholders. CLICO and its sister company, British American Insurance Company (BAICO), collapsed in 2009, and on February 4, 2011 the Supervisor of Insurance in Barbados announced the appointment of a judicial manager.
Last July, the JM informed policyholders and other stakeholders that it had presented its final recommendations to the High Court, and based on discussions with the Ministry of Finance and the Central Bank of Barbados and subject to Cabinet’s approval, it was proposed that a new company be established to hold CIL’s portfolio of traditional insurance business and the restructured Executive Flexible Premium Annuities (EFPAs).
The ultimate aim is to create a viable insurance company which could be sold to an investor insurance company, and the decision on this matter is expected to include the approval of policyholders and investors.
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 (ECCU).
The JM also presented a forensic report to the court but its scope did not cover all areas of CIL’s activities.
Click on each of the links below to view the documents comprising the CLICO Judicial Manager’s Report.
All documents are in PDF format.