Colonial Life Insurance Co Ltd (Clico)–a subsidiary of cash-strapped CL Financial–is being forced to pay out $631 million to thousands of its policyholders, who surrendered their policies after the company went belly up. From Friday, Clico's head office in Port-of-Spain will issue cheques to policyholders who cancelled their insurance policies–some old and new–for their cash value. The $631 million comprises payments of TT$250 million and US$60 million (TT$381), which came from mainly the Executive Flexible Premium Annuity plan, an insurance product that gave high interest and annuity rates.
Of the $250 million worth of policies surrendered, approximately $100 million came from Clico's Valpark branch, a well- placed source said. Many of them had surrendered their policies within hours of the bailout, sources indicated. Policies surrendered during the early years of ownership were likely to have a reduced cash value, it was noted. The cancellation of policies came after the Government and the Central Bank rescued the financial powerhouse last January 30, in return for an immediate injection of $1.3 billion to protect the company's depositors and policyholders and a commitment to ensure that all interest on existing policies and deposits would be paid by the State.
Clico, the largest insurance company in the region, with more than 100,000 policyholders, offered a variety of insurance plans for its clients. At a meeting on Thursday at Clico's head office on St Vincent Street in Port-of-Spain, conservation unit team members, Tommy Ramjattan and Mona Browne, met with its customer care workers to advise how to treat with the influx of policyholders to their various branches this week. They are expected to receive cheques that would have to be cashed at local banks. Faced with a total of $350 million in surrendered policies initially, the conservation unit, a source said, was able to influence several policyholders not to cancel $100 million-plus worth in policies.
Workers concerned for safety
One worker said during the meeting that he was not prepared for any hostility after hearing that Clico wanted to pay its US policyholders in TT dollars. "Subtle threats were made on the telephone by policyholders that if they don't get their money all hell would break loose," the employee added, stating that beefing up its security would bring little comfort to them.
Stating it was the calm before the storm, workers drafted a letter on July 20, to be sent to Central Bank Governor Ewart Williams, querying the six-month anniversary pay-out. "We are advised that only $1.5 billion has been provided by the Central Bank to Clico to conduct transactions, mainly payments of pensions, group health and life claims and annuity investments interest," the draft letter stated. "This amount is probably the stipulated amount the Central Bank has been authorised to provide to date, but when will additional funds be forwarded?" the workers penned.
The worker noted that Friday, July 31, was the end of the six-month waiting period that Clico had given to the general public who bombarded their offices since January 30 for payments. "Our staff members have been trying to conserve the business. However, the question again is, if and when will Government release additional funds to deal with these payments and future costs?" the letter queried. The letter also was copied to CL Financial chairman Shafeek Sultan-Khan, chief executive Claude Musaib-Ali, and chairman Euric Bobb. The letter also was sent to Vincent Cabrera, president of the Banking, Insurance and General Workers Union.
Williams had said in April that Government had to spend $5 billion during the next two years to fund its bailout of the cash-strapped subsidiaries of CL Financial Group. Williams said initial investigations revealed that there was a hole of at least $10 billion in the group's finances. Local policyholders had complained, last month, to Tabaquite MP Ramesh Lawrence Maharaj that they were getting their monthly interest payments late, despite the fact that they depended heavily on such payments to meet their daily living expenses and pay their medical bills. They had appealed to Maharaj to raise the issue in Parliament.