No guarantee for T&T Clico mutual funds holders

(Trinidad Guardian) The Government’s guarantee to Clico’s policyholders and depositors does not apply to investors who had money in the insurance company’s mutual funds, Central Bank Governor Ewart Williams has confirmed. Speaking in an interview last week, Williams said when the Government agreed to provide bailout funding to Clico last January, it said it would guarantee Clico’s third party policyholders and depositors. The policyholders and depositors “have the first claim on the statutory fund,” said Williams, into which insurance companies must place assets equal to its liabilities to its T&T policyholders and depositors.

Government’s intervention to guarantee Clico’s depositors and policyholders included a cash infusion of TT$1.9 billion and TT$3.1 billion in government paper of various maturities. The liabilities of the holders of Clico’s mutual funds, however, “are to be financed by the assets that are not in the statutory fund because the law requires the statutory fund to be directed, in the first instance, to domestic depositors.” Questioned on how the Clico mutual fund holders would be paid if most of the company’s assets outside its statutory fund were encumbered, Williams said, “Encumbered does not mean there is no net value.

Encumbered means they are leveraged and they could have been leveraged at one price and the question is they have a margin.” Williams said not all Clico’s assets outside its statutory fund were encumbered. But he said that as a result of the encumbrances, the liabilities were larger than the net assets which requires a restructuring of the company’s balance sheet.