One of the issues that this column may have been guilty of is not paying enough attention to the regional aspects of the Clico and British American (BA) crisis. From my preliminary reading, it seems that the approach taken by the Government of T&T has been different to the approach taken in other Caricom countries affected by this crisis. In T&T, both the past and the present administrations have taken the approach that the Clico/BA crisis is an issue of solvency that required a Government-led solution without reference to this country's Insurance Act. As far as I can determine, the approach everywhere else in the Caribbean is that the Clico/BA crisis is an issue of solvency that required close adherence to the legal provisions governing insolvent insurance companies. The different approaches have led to the T&T government going out of its way to dismiss the possibility of a resolution of this crisis by the appointment of a judicial manager or liquidator and the other Caribbean governments choosing to adopt the path of judicial management or liquidation. What is the evidence that the T&T government-and the Central Bank is very much part of this-was dismissive of a resolution to the crisis that would have been governed by a judicially appointed third party?
In a major speech to Parliament on the issue of the Clico/BA crisis on October 1, 2010, Prime Minister Kamla Persad-Bissessar went out of her way to equate the liquidation approach to that of a fire sale.
From the Hansard version of her speech on the Web site of the Parliament of Trinidad and Tobago, thePrime Minister said: "If a liquidation-type valuation or sale of these assets is conducted in order to repay the short-term liabilities, it is extremely likely that these assets would not raise $16 billion and, therefore, the shortfall in assets available to repay Clico creditors would be even higher than the estimated $7 billion. That is to say on the books now there is a deficit of $7 billion between the assets and liabilities. A shortfall of $7 billion. But should it be that you have a liquidation-type valuation and/or what is called a fire sale to try to repay the creditors, what is going to happen? What happens in a fire sale is like a garage sale. So you are not even going to realise the $16 billion that these things are estimated to be valued at and, therefore, you are going to get a position where it may be higher.
I am saying that the deficit, the shortfall in assets would be higher than the $7 billion that is at present estimated." (Note: Clico's deficit is $2.3 billion if the Government assistance of $5 billion is included.)
At a press conference on September 28, 2010, Minister of Finance Winston Dookeran, arguing that most of Clico's assets were encumbered, said that, "it would have been irresponsible on the part of the Government to engage in a fire sale of assets that belong essentially to the people of Trinidad and Tobago." I would submit that this contention that the liquidation of Clico would have amounted to a fire sale of the company's assets-which belong to the insurer's policyholders and not the people of T&T-cannot withstand serious scrutiny, based on the experience of Clico in The Bahamas.
On February 24, 2009, less than a month after the collapse of CL Financial in T&T on January 30, 2009, an order was made for the winding up of Clico (Bahamas). A prominent Bahamas accountant, Craig (Tony) Gomez, was appointed as the liquidator of the insurance company, under the supervision, which seems quite rigorous, of the Supreme Court of The Bahamas.
The court in the north Caribbean nation ordered that the liquidator should be assisted by a Bahamas law firm and, as well, that an insurance specialist be appointed to assist in the liquidation. Since his appointment, Mr Gomez has issued four reports keeping Clico policyholders and other interested parties up to date with developments at the company, which has branch offices in the Turks and Caicos and Belize. Mr Gomez has been very busy looking after the affairs of the company-a multi-jurisdictional matter that involves US accountants, attorneys and the Florida bankruptcy court as well as policyholders and regulators in Turks and Caicos and Belize. One of the interesting things that he did was to ask for and receive an opinion from a Queen's Counsel in London, who specialises in insurance law, whether the EFPA (Executive Flexible Premium Annuity) insurance product formed part of the life insurance business of Clico. The unnamed QC's opinion was that the EFPA sold to individuals should form part of Clico's life insurance business but that "a similar opinion could not be issued in respect to the EFPA policies issued to and the beneficiary of which is a company."
That opinion may have some implications for the T&T Government's decision to treat credit unions, trade unions and other non-individual purchasers of Clico (Trinidad's) EFPAs on the same level as the individual purchasers. I say no more on that issue for now. It may also be of interest locally, that Mr Gomez is actively pursuing the enforceability of CL Financial's US$58 million guarantee to Clico (Bahamas) in local courts. The Bahamas liquidator of Clico was appointed more than two years ago. If the Prime Minister and the Minister of Finance were correct that a liquidation scenario for Clico would amount to a fire sale or even a garage sale, then it follows that Mr Gomez would have rushed to liquidate the insurer's assets in order to recover funds for the policyholders. Yet, in two years of diligent work, for which he must be handsomely compensated, no assets have as yet been disposed, according to the liquidator's fourth report. The main assets of Clico in The Bahamas are its life, health and pension portfolio and the Wellington Preserve property in Palm Beach, Florida, which is a high-end polo development.
Instead of conducting a fire sale of the assets of Clico (Bahamas), Mr Gomez has gone through the process of ensuring proper valuations of its assets, followed by a process of advertising the assets for sale, receiving offers, reviewing offers and negotiating the sale of the assets. He has kept the court and the population in The Bahamas fully informed of his all of his work. A second example of an alternate approach to resolving the Clico issue comes from Guyana, where the Clico operation was placed under judicial management on February 25, 2009, one day after Clico (Bahamas) was placed in liquidation. Clico (Guyana) and Clico (Bahamas) are linked because the Guyana company had invested 53 per cent of its assets (some US$34 million) in Clico (Bahamas), with most of that money going to the Wellington property development in Palm Beach. In Guyana, the government there spent G$3.6 billion (US$17.4 million) to fund a largely successful resolution of the Clico issue.
Of the US$17.4 million, according to a Caribbean360 report report on September 17, 2010, US$13 million was used to pay 4,366 policyholders of annuity products and other insurance liabilities who had invested less than US$150,000 (TT$1 million). The sum of US$4.4 million was used to pay off 39 large policyholders. Of the US$17.4 million used to bailout Guyanese policyholders of Clico, the Guyana government accessed US$15 million (G$3 billion) from the Caricom Petroleum Fund. The Caricom Petroleum Fund is financed exclusively by the Government of the Republic of Trinidad and Tobago. In other words, 83 per cent of the money that the Guyana government used to bailout Guyanese policyholders of Clico came from the taxpayers of T&T and everyone who had an annuity-type product of $1 million or less received 100 per cent of their investment last year. In T&T, the Government is still muddling through an arrangement that would guarantee the payment in full of those holding up to $75,000 in Clico investments, while those holding more than $75,000 have been threatened with a severe haircut-with no expectation of any movement before 2012. Is there something wrong with this picture?