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Govt seeks to buy out Clico policyholders
The Government is moving to cross the final parliamentary hurdle in order to issue payments to Clico policyholders as Finance Minister Winston Dookeran is expected to present two bills for debate in the House of Representatives on Wednesday. One bill seeks to buy out certain rights held by Clico and British American Insurance policyholders, while the other seeks to prevent policyholders from starting or continuing any legal action against the Central Bank for recovery of monies.This attempt by the Government to facilitate the recovery of the investments made by thousands of locals in the insurance companies, which are owned by CL Financial, comes more than a year after Finance Minister Winston Dookeran announced his 20-year, zero-coupon idea in last year’s budget.
Clico and sister company British American Insurance collapsed in January 2009 with Clico receiving a $5.1 billion bailout from the Government between February 2009 and May 2010. Policyholder groups have complained about the lack of consultation and length of time it has taken the Government to table a concrete proposal for those with investments of more than $75,000 in Clico. Debate on the Central Bank (Amendment) Bill and the Purchase of Certain Rights and Validation Bill 2011is expected to begin on Wednesday. The Purchase of Certain Rights and Validation Bill 2011 seeks to “provide for the purchase of certain rights” of the holders of short-term investment products issued by Colonial Life Insurance Company (Trinidad) Ltd and British American Insurance Co.
Short-term investment products refer to Executive Flexible Premium Annuity, Executive Single Premium Annuity, Group Advanced Protection or Guaranteed Annuity Advanced Protection Policy issued by Clico. The products covered by British American are Executive Flexible Premium Annuity Single Premium Annuity, Corporate Savings Contract and the Flexible Premium Annuity II. If the legislation is passed into law, the payment of all monies under the Act will become a charge on the Consolidated Fund. The bill also sees to “empower the Minister of Finance to make payments and issue bonds for the purchase of those rights; to validate funding provided by Government to Colonial Life Insurance Co (Trinidad) Ltd and British American Insurance Co (Trinidad) Ltd; and related matters,” the explanatory note to the bill stated.
The legislation provides for the minister to “sign agreements, make payments and issue bonds.” The bill also provides for the minister to “issue 20 bonds of varying maturities from one to 20 years and which shall not exceed in the aggregate $10.7 billion, after which he may issue additional bonds.” The bill provides for the establishment of a fiscal agent to set up and maintain a register of the bondholders and promptly pay the sum upon maturity of the bond. The Central Bank (Amendment) Bill amends Section 44E of the Act. The Bill states:
• No creditor, shareholder, depositor, policyholder or any other person shall have any remedy against the institution in respect of any claim.
• No creditor, shareholder, depositor, policyholder or any other person shall commence or continue any action, execution or other proceedings or seek to enforce in any way whatsoever without limitation in Trinidad and Tobago, any judgment or order obtained in Trinidad and Tobago or any other jurisdiction against the institution or its successor or its transferee of the whole or any part of any property, assets or undertaking of the institution for the recovery of any claim or in respect of any other liability, until the publication of a notification under section 44G (1) in relation to the institution, or until the Bank publishes a notification to lift the stay.
The Bill said that publication could be made as soon as:
• the circumstances no longer pose a serious threat to the stability of the financial system, or
• any appropriate steps to prepare for the lifting of the stay of proceedings have been taken by the bank.
The bill also seeks to reduce systematic risk; foster co-operation with other jurisdictions in the development of fair and efficient capital markets; and for other related matters,” the bill’s explanatory note said. It requires a three-fifths majority vote for passage. Wednesday’s sitting begins at 1.30 pm.
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