A meeting of regional finance officials, which was held in Antigua on Thursday, has seen the decision being made to establish a “Liquidity Support Fund” which would provide support to the financial sector in the Eastern Caribbean Currency Union (ECCU) in addition to a strategy being developed that would maintain the viability of British American and CLICO in the ECCU, a press release from the Ministry of Finance and Economy of Antigua said.

The meeting was held under the Chairmanship of Dr Ralph Gonsalves, the Prime Minister of St Vincent and the Grenadines and Chairman of the Joint Task Services of OECS and the ECCB. Other attendees were Barbadian Prime Minister David Thompson, the Barbadian Finance Minister and other officials from that country’s Finance Ministry, Secretary General of Caricom Edwin Carrington, Governors of the Central Bank of Barbados, Eastern Caribbean Central Bank (ECCB), Guyana and Trinidad and Tobago, officials from the Ministry of Finance of Trinidad and Tobago, Insurance Regulators of the Eastern Caribbean Currency Union (ECCU) and Guyana and representatives of the OECS Secretariat.

“The meeting considered mechanisms for cooperation among the member states of Barbados, the ECCU and Trinidad and Tobago and agreed on a strategy that would maintain the viability of British American and CLICO in the ECCU in order to safeguard the interests of Policyholders of these institutions”, the release said.

According to the release, it was agreed that Barbados, member states of the ECCU and Trinidad & Tobago would contribute towards the establishment of a “Liquidity Support Fund” which would provide additional liquidity to the finance sector in the ECCU.

The initial contributions toward the Fund in relation to British American would be comprised as follows: (1) The Government of Trinidad and Tobago through the Caricom Petroleum Fund- US $ 50 million, (2)The Government of Barbados-US $ 5 million , (3) ECCU Governments-US $10 million and (4) Regional and International Organisa-tions- US $ 15 million.

Significantly, the gathering was also informed of the progress made by the Barbados Government in respect of the purchase of CLICO Life (Barbados) by the Barbadian Insurance Corporation. The member of Governments of the ECCU undertook to give full support to this initiative.

According to the release, the need to maintain British American Insurance in the Bahamas as a concern and acknowledged the concerns of Guyana with CLICO (Bahamas). The gathering agreed to communicate with the Prime Minister of the Bahamas on these matters. CLICO (Bahamas) held 53% of the assets of CLICO (Guyana). The liquidation of CLICO (Bahamas) then led to CLICO (Guyana) being placed under judicial management. Prospects for CLICO (Guyana) retrieving any of the US$34M deposited with CLICO (Bahamas) grew dimmer on Monday with the Bahamian liquidator proposing that the amount dispatched from Georgetown be reclassified as unsecured intercompany advances.

The liquidator Craig Tony Gomez also revealed in a court affidavit that CLICO (Bahamas’) liabilities exceed its assets by a whopping US$18M

According to a report in the Nassau Guardian, Gomez filed an affidavit on Monday in the Bahamian Supreme Court in which he said that  the directors and management of CLICO (Bahamas)  operated  the business without “proper corporate governance; without an understanding of the basic financial management requirements of managing a regulated insurance business, and without any acknowledgment of the insurance laws of The Bahamas or any other country in which the company has a licence to conduct business”. Gomez contended that  the person who bore the ultimate responsibility is the parent company chairman Lawrence Duprey. Ironically, Duprey was in Nassau on Monday for a meeting with a delegation of regional regulators, The Nassau Guardian said.

In his affidavit, Gomez made a ‘liquidation projection’ that takes into account a draft unaudited balance sheet at December 31, 2008, and a financial and actuarial analysis on CLICO (Bahamas’) operations.
The liquidation projection reflects an ability to pay off policy owners and secured creditors in full provided the court agrees with some ‘critical assumptions’ – which impinge directly on the Guyana funds. One such assumption by Gomez is that balances with CL Financial (CLICO (Bahamas’) Trinidad-based parent company) and its subsidiaries are unsecured debts and rank after Bahamian policy owners in a liquidation, and are thus not included as secured creditors in the liquidation projection.

Another assumption is that funds transferred to the Turks and Caicos branch of CLICO (Bahamas) from Guyana, Trinidad and Suriname – annuity products sold by associated group companies to their own citizens – are not policy owner liabilities of CLICO (Bahamas), but rather unsecured advances due to affiliated companies.

“We believe these liabilities should remain as policy owner liabilities of the originating company and such amounts have been removed from CLICO Bahamas policy reserves and reclassified as unsecured intercompany advances in the liquidation projection,” the affidavit said, according to the Nassau Guardian.

The liquidator presented a twin-fold rationale for this treatment: CLICO (Bahamas) was never licensed to do business and has never sold insurance products in those countries and therefore cannot have policy owner liabilities in those countries.

The other reason listed by Gomez is that CLICO (Bahamas) has no relation with individual policy owners, and no policy documents were ever delivered. “The documents in the files solely related to the transfer of funds to the Turks and Caicos,” according to Gomez.

Another  assumption listed in the affidavit is that CLICO Bahamas’ core life and health policy owners and the CD annuity policies rank pari-passu (without partiality) under a fairness doctrine. The liquidator contended that although one could argue a case that bank CD-type products are not genuine insurance products, the facts are that insurance regulators gave their approval to the product, the policy was marketed and sold by a registered insurer, and other competitors also sell similar products.

President Bharrat Jagdeo has said that Guyana will oppose the move by the Bahamas liquidator to classify Guyana’s assets as unsecured intercompany advances.