September 26, 2020

CLICO bail-out plan rejected


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newclico-corporate-centre5213-450x303By Shawn Cumberbatch, From Barbados Nation News

Eastern Caribbean countries which have suffered major fallout from the collapse of CLICO want Barbados to consider an alternative strategy to fix the company.

However, CLICO International Life Insurance Limited (CIL) judicial manager Deloitte Consulting Limited thinks the plan, which would see Government having to make a commitment exceeding $300 million, is “impractical”.

Additionally, it was also pointed out that the strategy was only forwarded to the Ministry of Finance and Economic Affairs and the Central Bank in May, one month after Cabinet approved the approach where there will be a Barbados first solution to the matter.

According to information Deloitte has filed with the High Court, the Eastern Caribbean Currency Union’s (ECCU) alternative strategy contemplated “a pooling of the assets in all jurisdictions to settle all traditional liabilities in full”.

This was in addition to “pledged assets are to be retained in the jurisdictions in which they are held”, “unpledged assets are to be redistributed from Barbados ($35.6 million), St Lucia ($30.6 million) and St Kitts ($2.6 million) to the six other Eastern Caribbean countries.

This proposed redistribution, Deloitte said, “is based on a 2011 allocation of unpledged assets situate in each country, compared to the total liabilities for traditional and all [Executive Flexibile Premium Annuities (EFPA)] liabilities including interest”.

The strategy also proposed that “following this reallocation of these notional unpledged assets, the Government of Barbados is required to ‘make whole’ any unsettled traditional policy liabilities in each country.

The challenge was that this would result in Government “being required to fund $148.1 million, of which $93.8 million is transferred to seven other jurisdictions”.

“On this basis, in addition to the Barbados government’s funding of $148.1 million to ‘make whole’ all traditional liabilities in the region, the Barbados government would, if it accepts the responsibility, be required to guarantee and most likely pay an amount of $155.8 million of EFPA principal for individual and corporate policyholders,” Deloitte said.

It was concerned that in addition to meeting a more than $300 million commitment, the alternative strategy also involved the governments involved having to “guarantee the restructured insurer’s solvency and liquidity”, something that “has not been quantified”.

Deloitte said based on these and other reasons, it “considers the ECCU Core Committee’s alternative strategy as currently presented to be impractical”.

But it believed “the possibility of a plan which encompasses the traditional insurance business of the region is one worthy of consideration, provided that it does not further delay the implementation of an agreed solution”.

IMAGE: CLICO Corporate Centre, Barbados (FP)

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