An­tho­ny Wil­son

Cli­co, the failed in­sur­ance com­pa­ny, has 225,000 tra­di­tion­al long-term pol­i­cy­hold­ers, those hold­ing its pen­sion plans, life in­sur­ance and health in­sur­ance poli­cies. Those pol­i­cy­hold­ers ac­count for $6 bil­lion in li­a­bil­i­ties. In the 2011 bud­get speech, in re­fer­ring to Cli­co, Fi­nance Min­is­ter Win­ston Dook­er­an said: "We will sep­a­rate the in­sur­ance busi­ness from the short-term in­vest­ment and mu­tu­al fund busi­ness to pro­tect the in­sur­ance pol­i­cy­hold­ers; and the oblig­a­tions of 225,000 pol­i­cy­hold­ers will be ho­n­oured, backed by the statu­to­ry fund."

In his con­tri­bu­tion to the bud­get de­bate on Sep­tem­ber 23, 2010, Gov­ern­ment Sen­a­tor, Patrick Wat­son, speak­ing about the 225,000 pol­i­cy­hold­ers who bought in­to the clas­sic in­sur­ance op­er­a­tions of Cli­co, said: "And in one fell swoop, in the state­ment from the Min­is­ter of Fi­nance, the 90 per cent of the in­vestors/de­pos­i­tors-I want to use that word very guard­ed­ly, those who put their trust in Cli­co-the re­as­sur­ance was giv­en in gold that they have ab­solute­ly noth­ing to wor­ry about." Prime Min­is­ter Kam­la Per­sad-Bisses­sar, in her state­ment to Par­lia­ment on Oc­to­ber 1, 2010, said: "All of the tra­di­tion­al, long-term in­sur­ance pol­i­cy­hold­ers; group pen­sions and long-term an­nu­ities and so on, would be ful­ly pro­tect­ed."

From their ut­ter­ances, these three mem­bers of the cur­rent ad­min­is­tra­tion have sought to as­sure the 225,000 hold­ers of tra­di­tion­al Cli­co poli­cies that they will be ful­ly pro­tect­ed, that their long-term an­nu­ities, group pen­sions, life in­sur­ance poli­cies or health in­sur­ance poli­cies will be ho­n­oured when the time comes. Are the as­sur­ances giv­en by these three high-rank­ing mem­bers of the Gov­ern­ment worth "gold," as Sen­a­tor Wat­son would have the coun­try be­lieve? The first point that aris­es is that if Cli­co, which is con­trolled di­rect­ly by the Cen­tral Bank, has re­fused to ho­n­our the month­ly or quar­ter­ly in­ter­est pay­ments on EF­PA poli­cies-fol­low­ing a di­rec­tive from the Min­is­ter of Fi­nance-why should the com­pa­ny be trust­ed to ho­n­our any con­tract?

If Cli­co-di­rect­ed by Mr Dook­er­an-has re­fused to ho­n­our EF­PA poli­cies that have ma­tured, why should the com­pa­ny be trust­ed to ho­n­our the "guar­an­tee" pro­vid­ed to the long-term pol­i­cy­hold­ers by Mr Dook­er­an, Prof Wat­son or Mrs Per­sad-Bisses­sar? The sec­ond point is that if the cur­rent ad­min­is­tra­tion can dis­re­gard the many as­sur­ances on the Cli­co is­sue giv­en by the pre­vi­ous Min­is­ter of Fi­nance, Karen Tesheira, and the cur­rent Cen­tral Bank Gov­er­nor, Ewart Williams, what is to pre­vent them dis­re­gard­ing the as­sur­ance that they them­selves have giv­en? As Op­po­si­tion Sen­a­tor, Pen­ne­lope Beck­les-Robin­son, put it in the Sep­tem­ber 23, 2010 de­bate: "If you give a guar­an­tee that talks about 20 years now, if the PNM guar­an­tee and the Cen­tral Bank guar­an­tee were not good, why is the guar­an­tee be­ing of­fered now by this Min­is­ter of Fi­nance good? It can change at any time."

Re­spond­ing to Mrs Beck­les-Robin­son in wrap­ping up the de­bate, the Min­is­ter of Fi­nance said that the guar­an­tee pro­vid­ed by the pre­vi­ous ad­min­is­tra­tion "be­lies the point that there is a dis­tinc­tion be­tween the will­ing­ness to of­fer a guar­an­tee and an abil­i­ty to do so. There is no doubt that by the ac­tion of the pre­vi­ous gov­ern­ment, in spite of their words, they did not have in their deeds the abil­i­ty to do so." Mr Dook­er­an went on to chas­tise the pre­vi­ous ad­min­is­tra­tion for bail­ing out the CL Fi­nan­cial group but "for 18 months there was no ac­tion with re­spect to ho­n­our­ing this ver­bal guar­an­tee." It is im­por­tant to note that Mr Dook­er­an, in this speech, makes a dis­tinc­tion be­tween the will­ing­ness to of­fer a guar­an­tee and the abil­i­ty to make good on the guar­an­tee. Quite so.

Has this Gov­ern­ment tak­en any ac­tion of its own with re­spect to ho­n­our­ing its own ver­bal guar­an­tee to the 225,000 tra­di­tion­al long-term Cli­co pol­i­cy­hold­ers? In ex­plain­ing the dif­fer­ence be­tween the pre­vi­ous ad­min­is­tra­tion's ver­bal guar­an­tee and its own, Mr Dook­er­an in the Sep­tem­ber 23 bud­get de­bate said: "In our pro­pos­al, we are of­fer­ing pa­per, cer­tifi­cate, bonds, sov­er­eign bonds. It is sov­er­eign bonds and sov­er­eign bonds are al­ways ho­n­oured by any gov­ern­ment there is in the world. That is the fun­da­men­tal dif­fer­ence." Mr Dook­er­an, of course, ig­nores the nu­mer­ous ex­am­ples of gov­ern­ments, with their backs to the wall, which have rene­go­ti­at­ed their sov­er­eign bonds to the dis­ad­van­tage of the bond­hold­ers. But he al­so seems to be un­aware of the in­ter­nal in­con­sis­ten­cy of the state­ment: The tra­di­tion­al, long-term pol­i­cy­hold­ers will NOT re­ceive sov­er­eign bonds. In fact, it is the hold­ers of the short-term in­vest­ment prod­ucts (the Ex­ec­u­tive Flex­i­ble Pre­mi­um An­nu­ity and the mu­tu­al funds) that the min­is­ter pro­pos­es to pay off with 20 an­nu­al, ze­ro-in­ter­est, sov­er­eign bonds.

The oblig­a­tions of the tra­di­tion­al, long-term pol­i­cy­hold­ers, ac­cord­ing to the min­is­ter's bud­get speech, will be "ho­n­oured, backed by the statu­to­ry fund." What Mr Dook­er­an's le­gal ad­vis­ers have been telling him, and what he re­fus­es to tell the na­tion, is that as it re­lates to the as­sets in Cli­co's statu­to­ry fund, the EF­PA pol­i­cy­hold­ers rank pari pas­su with the long-term, tra­di­tion­al pol­i­cy­hold­ers. The proof that all of Cli­co's Trinidad and To­ba­go pol­i­cy­hold­ers must be treat­ed eq­ui­tably and with­out pref­er­ence can be found in the T&T In­sur­ance Act. At Sec­tion 37, the In­sur­ance Act re­quires in­sur­ance com­pa­nies car­ry­ing on long-term busi­ness to es­tab­lish a statu­to­ry fund and stip­u­lates that those in­sur­ers "shall place in a trust in Trinidad and To­ba­go, as­sets equal to its li­a­bil­i­ty and con­tin­gency re­serves with re­spect to Trinidad and To­ba­go pol­i­cy­hold­ers."

The In­sur­ance Act (1980) makes no dis­tinc­tion be­tween those hold­ing a tra­di­tion­al an­nu­ity pol­i­cy as op­posed to those hold­ing an EF­PA. All of Cli­co's Trinidad and To­ba­go pol­i­cy­hold­ers, whether hold­ing a TT or US dol­lar pol­i­cy, are cov­ered by the statu­to­ry fund. This means that Cli­co's East­ern Caribbean pol­i­cy­hold­ers are not cov­ered by the statu­to­ry fund. It al­so means that those who in­vest­ed in Cli­co's mu­tu­al funds are not cov­ered by the statu­to­ry fund. Sec­tion 38 (1) makes this crys­tal clear when it states: "...The as­sets rep­re­sent­ing each statu­to­ry fund of a com­pa­ny shall not be ap­plied di­rect­ly or in­di­rect­ly to any class of busi­ness oth­er than that in re­spect of which the fund was es­tab­lished and is be­ing main­tained."

What's more, the In­sur­ance Amend­ment Act (2009), which was passed by both hous­es of Par­lia­ment in Feb­ru­ary 2009, amend­ed the In­sur­ance Act specif­i­cal­ly to in­sert the term "an­nu­ity con­tract." This amend­ment "in­cludes a con­tract for an an­nu­ity at the ac­cu­mu­la­tion stage or the pay­out stage which is sold or is­sued to in­di­vid­u­als on­ly." The amend­ment al­so ex­pand­ed the term (in­sur­ance) "pol­i­cy" to in­clude an­nu­ity con­tracts. In pi­lot­ing the In­sur­ance (Amend­ment) Bill, for­mer Fi­nance Min­is­ter Karen Tesheira said there were two forms of an­nu­ity con­tracts that were gen­er­al­ly of­fered by in­sur­ance com­pa­nies: de­ferred an­nu­ities (tra­di­tion­al an­nu­ities sold by banks and in­sur­ance com­pa­nies) and im­me­di­ate an­nu­ities, al­so called sin­gle pre­mi­um an­nu­ities, which were sold by Cli­co.

Ms Tesheira said: "Giv­en the growth of the an­nu­ities busi­ness in Trinidad and To­ba­go, it is im­por­tant that the In­sur­ance Act be made to specif­i­cal­ly ap­ply to the reg­u­la­tions of an­nu­ities, in much the same way as it does for life in­sur­ance busi­ness and pen­sion fund plans." In oth­er words, ac­cord­ing to the law of Trinidad and To­ba­go, the as­sets in Cli­co's statu­to­ry fund are for the sole and ex­clu­sive use of its Trinidad and To­ba­go pol­i­cy­hold­ers, which in­clude both de­ferred and im­me­di­ate an­nu­ities when sold or is­sued to in­di­vid­u­als on­ly. Any com­mon man read­ing the In­sur­ance Act and its amend­ment, there­fore, could quick­ly come to the con­clu­sion that it would be il­le­gal and ul­tra vires the In­sur­ance Act for the Gov­ern­ment to ap­ply the statu­to­ry fund as­sets to long-term, tra­di­tion­al pol­i­cy­hold­ers and not to short-term, non-tra­di­tion­al pol­i­cy­hold­ers.

And the com­mon man would al­so con­clude that it would be il­le­gal to ap­ply the as­sets in the statu­to­ry fund to pol­i­cy­hold­ers in the East­ern Caribbean, who were sold poli­cies by Cli­co (Trinidad). It would be il­le­gal, as well, for the as­sets in the statu­to­ry fund to be ap­plied to hold­ers of Cli­co mu­tu­al funds and EF­PAs sold to in­sti­tu­tions such as cred­it unions, trade unions and ed­u­ca­tion­al bod­ies. This means that Cli­co's statu­to­ry fund as­sets, which to­taled $12.285 bil­lion as at No­vem­ber 2009, MUST be shared equal­ly among the 225,000 long-term pol­i­cy­hold­ers, who held $5.95 bil­lion as at No­vem­ber 2009, and the 25,000 short-term pol­i­cy­hold­ers, who held $10.958 bil­lion. By the No­vem­ber 2009 val­u­a­tion, there­fore, Cli­co's T&T pol­i­cy­hold­ers would each be en­ti­tled to 73 cents on every dol­lar ($12.285 bil­lion/$16.9 bil­lion).

But if the Cli­co statu­to­ry fund on­ly cov­ers Trinidad and To­ba­go pol­i­cy­hold­ers who have been is­sued poli­cies as in­di­vid­u­als, the amount that the fund is re­quired to cov­er is re­duced by $3.55 bil­lion: $1.338 bil­lion to non-res­i­dent hold­ers of short-term in­vest­ment prod­ucts; $1.389 bil­lion owed as a re­sult of the mu­tu­al fund guar­an­tee and $830 mil­lion for cred­it unions, trade unions and ed­u­ca­tion­al bod­ies. Those sums will have to be set­tled by as­sets out­side the statu­to­ry fund, which as­sets are re­port­ed to be heav­i­ly en­cum­bered. This means that $3.55 bil­lion should be re­moved from the in­sur­ance li­a­bil­i­ties cov­ered by the statu­to­ry fund, which leaves the fund with a re­quire­ment to fi­nance $13.35 bil­lion-a No­vem­ber 2009 deficit of $1.1 bil­lion.

If the Cli­co statu­to­ry fund were ap­plied legal­ly, there­fore, it would mean that for every one dol­lar of in­sur­ance li­a­bil­i­ties, the fund would cov­er 92 cents ($12.285 bil­lion/$13.35 bil­lion). Thank­ful­ly for both Cli­co's tra­di­tion­al and EF­PA pol­i­cy­hold­ers-those legal­ly en­ti­tled to share in the statu­to­ry fund in the event of a wind­ing up, liq­ui­da­tion or ju­di­cial man­age­ment-the val­ue of the as­sets in its statu­to­ry fund, es­pe­cial­ly the Re­pub­lic Bank and Methanol Hold­ings (Trinidad) as­sets, have in­creased sub­stan­tial­ly be­tween No­vem­ber 2009 and to­day. If the statu­to­ry fund as­sets have in­creased in val­ue in the 26 months, does the Gov­ern­ment need to take more tax­pay­ers' mon­ey to pay off the Cli­co's short-term pol­i­cy­hold­ers, which is es­ti­mat­ed to cost the Trea­sury $12 bil­lion over the next 20 years?