Commissioner of Insurance and Judicial Manager of CLICO (Guyana) Maria van Beek yesterday defended her handling of CLICO (Guyana)’s problems and announced that the processing of some claims will resume.
The local company has $6.9 billion (US$34 million) invested in CLICO (Bahamas), which represents 53 percent of CLICO (Guyana)’s assets and which may not be recoverable. The 53 per cent is an infringement of Section 55 of the Insurance Act, Chapter 91:02 which states that insurance companies must invest at least 85 per cent of its statutory funds locally. Questions have been raised as to why more was not done by the regulator to have this figure reduced.
President Bharrat Jagdeo in a press conference on February 26 stated that the company had persisted with this practice despite “instructions from the Commissioner to the company over a year ago and more recently to reduce this exposure.”
Van Beek in her first press conference since the CLICO (Guyana) crisis broke said that she had issued instructions on several occasions to the insurance company requesting them to reduce their exposure overseas but she said this was not done. When asked why more was not done previously to ensure that the local company adhered to her requests, the Judicial Manager said that she was aware that efforts were being made to reduce this exposure, and more so after the financial woes of C L Financial in Trinidad became public at the end of January. Van Beek stated that as a regulator it was not her role to “help the company, or assist the company or even to dictate its investment policies or even to manage” since this would impinge on the responsibility of the management of the firm. She, however, said that a regulator in normal operations would not move to the court to shut the company down since it is extremely prejudicial to the policyholders and all actions have to be done in the best interest of the policyholders.”
When asked if sanctions were ever considered in keeping with the powers given to her under section 65 of the Insurance Act, van Beek explained that an intervention by the Commissioner could always be challenged and that there were several other factors to be considered including the fact that sufficient evidence had to be demonstrated to external parties (including the Court) that this action was necessary. Section 65 contains opportunities for earlier intervention in matters like those besetting CLICO (Guyana)
Meanwhile, van Beek said that the company is preparing to honour verified claims for health, fire, motor and other general insurance contracts. She said that “claims related to life and pension contracts will not be paid at this time” since “the assets backing these claims are still being assessed and may be subject to litigation. She added that “payment of these claims would quickly erode the liquidity of the company and affect its viability.” She, however, re-emphasised the assurances given by President Bharrat Jagdeo and Finance Minister Dr Ashni Singh, that no one with investments in the company will lose their money.
Further, van Beek urged all “policyholders that have regular premium in-force contracts to continue to pay their premiums in light of the assurances given by the Government.” She explained that failure to do so would severely impact access to entitlements “notwithstanding any guarantees.” She further explained that “upon the expiry of renewable contracts such as motor policies, these policies will not be automatically renewed.” She added that at this point, these persons should “seek alternative insurance arrangements.” That statement appeared to be a signal that the company is definitely heading for a winding up. Persons with questions are asked to contact CLICO customer service representatives on 226-2626 or their financial advisor.
She explained that currently investigations are being done to ascertain the financial status of the company. She said that the audited financial statements of CLICO (Guyana) as at the end of last year are now being finalised. She explained that the accounting firm Nizam Ali and Company has been contracted to assist in the financial assessment of the firm. Additionally, Prescience Insurance Consultants and Canadian based actuaries have been solicited to work alongside the actuary of the local company. She also said that a team of legal representatives has since been hired both locally and in The Bahamas.
Further, she said that investigations so far revealed that the company has 14,900 insurance policies, 90 members of staff and approximately 65 agents. When asked about the status of these employees, van Beek said that no employee has been dismissed and said that these workers are integral to the current process that the company is undergoing.
Van Beek further said that it took the company most of the last two weeks to verify each of the 1197 un-presented cheques with the company and the 154 stale-dated cheques as well as to complete an initial liquidity analysis. She said that the total amount of un-presented cheques would exceed about $500 million and that the stale-dated cheques amount to $2 million. She said that “as a control measure given the large number of un-presented cheques”, the company will be re-issuing all health, motor fire and other general insurance cheques that were un-presented as at 25th February 2009.”
Since van Beek took over as Judicial Manager on February 27th, all new business and renewals of contracts were ceased. Additionally all payments except the essential payments such as utilities were to stop until an analysis into the liquidity position of the company was completed. Consequently, since February 25 no claims were paid and all cheques previously issued but not presented prior to this date were suspended.
The Judicial Manager said that she will be submitting her final report on the future of the company to the Court in a month’s time.
According to van Beek, the matter regarding the wind-up of CLICO (Bahamas) will be heard in the Nassau Courts next Wednesday, when “it is expected that the wind-up and the appointment of the Liquidator will be confirmed”. She said that on this occasion the legal team which is representing the interest of CLICO (Guyana) will be making representation on behalf of the local company. She said that the team has already communicated to the Provisional Liquidator Craig Gomez in an effort to share information regarding investments in the Bahamas. Gomez is yet to confirm this investment but van Beek opined that he “may not be in a position to do so until the Court has confirmed his appointment.” However, van Beek said that from all indications, this process may take some time to conclude.
Earlier in the afternoon, Finance Minister Dr Ashni Singh delivered a 16-page statement in the National Assembly outlining the current issues with CLICO (Guyana) and government’s response to the issue. He was quick to point out that the difficulties facing the CLICO conglomerate were as a direct result of the current “global financial crises.”
During his speech, the Singh emphasised that in spite of the current issues facing CLICO (Guyana), the country’s financial system remains sound. He said that efforts will be made to ensure that the sums which were owed by local group subsidiaries of CL Financial such as Caribbean Resources Ltd. (CRL) and Premium Security Services Inc (PSSI) were met. CRL has an amount of $1.9 billion payable to CLICO (Guyana) and Premium Security Services Ltd has a sum of $235 million. He said that once the parent company CL Financial honoured the guarantees it has issued to cover related party loans and advances, the level of impairment of CLICO Guyana’s assets will be minimised.
In her press conference van Beek said that letters were sent to the local group subsidiaries Caribbean Resources Ltd. (CRL) and Premium Security Services Inc (PSSI) requiring the payment of loads. He also said that an injunction was applied for and subsequently obtained which restrains these two companies from making any payments to their parent company CL Financial until the matter is heard on 27th March, 2009.
Meanwhile, yesterday the Finance Minister said that over the years the money that NIS invested in CLICO (Guyana) has seen a decline. He said that in at the end of 2004, the NIS had invested over $9 billion dollars in the insurance company which represented over 40 percent of the company’s assets at that time. He said at the end of last year this investment had been reduced to $5.6 billion which represented about 20 percent of the assets of the NIS. He said “these investments were made at rates of interest higher than the NIS else was earning elsewhere at the time.”
On February 25, CLICO (Guyana), van Beek had moved to the High Court to have the local CLICO company placed under judicial management. This was done following an order issued by the Supreme Court in Nassau to send CLICO (Bahamas) into liquidation on February, 24. Investigations regarding Guyana’s US $34 million investment revealed that although this sum was liquid on paper, this deposit has been tied up in real estate investments that CLICO (Bahamas) had in Florida via subsidiaries.
Singh also restated that no investor in CLICO (Guyana) will lose.
“…I wish to be pellucidly clear in repeating the assurances previously given by the Government of Guyana on this matter. Specifically, the Government of Guyana will take all steps that are necessary and appropriate to protect the assets of CLICO (Guyana) in the interest of the company’s policyholders. Furthermore, the Government of Guyana will take all necessary steps to ensure that there will be no financial loss to any policyholder of CLICO (Guyana), to secure the investments made by the NIS in CLICO (Guyana), and to guarantee the savings, pensions, investments, and insurance of all investors, depositors, policyholders and contributors of CLICO (Guyana).”
He also alighted on the regulatory challenges posed by conglomerates like C L Financial.
“…the current situation has brought into sharp focus issues such as the emergence of large and widely diversified conglomerates in our Region, and the implications that such conglomerates would have for our regulatory environment especially where they have investments in both regulated and unregulated sectors and across many regulatory jurisdictions. In particular, it is clear that regulators encountered difficulties in ensuring compliance by the CLICO Group with regulatory directives across the entire Region. After the immediate imperatives of the current situation would have been addressed, therefore, it will be necessary for authorities across the Region to re-examine the adequacy of the existing regulatory framework, associated mechanisms for enforcement, and protocols for coordination across jurisdictions.”
Singh also described in detail the current arrangements for financial sector supervision, the expansion of the banking and insurance sectors, the external context and regional developments in relation to C L Financial.
At press time, the National Assembly was deliberating on a motion in the name of Opposition Leader Robert Corbin on the CLICO (Guyana) crisis.