 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
|
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
|
|
 |
|
|
 |
 |
|
|
|
|
| |
Regional News>ECCU plans takeover of British American- CMC |
 |
TO SAFEGUARD the interests of British Ameri-can Insurance Company (BAICO) policyholders, govern-ments of the Eastern Caribbean have agreed to create a new company to take over the operations of the failed CL Financial subsidiary firm.
The new company will handle the traditional life insurance, medical insurance and annuity business of British American branches and will be headquartered in the Eastern Caribbean.
"While the details of this strategy will require a great deal more work, both in collaboration with the judicial managers of the region and in collaboration with potential strategic partners, it is a real opportunity, perhaps the only real opportunity, to avoid some of the inevitable losses associated with liquidation and to offer policyholders and investors the potential for recovery of a greater portion of their assets and investments," Organisa-tion of Eastern Caribbean States (OECS) governments said in a joint statement.
That plan ensures that British American does not become a systemic risk to the financial system of the sub-region, and is also designed to "protect, as far as practicable, the interests of depositors and investors, (and) to keep British American as a 'going concern' in a form to be determined and to craft a solution that is regional in nature."
A rippling effect
Earlier this year, the Trinidad and Tobago government was forced to pump billions of dollars in a rescue package for British American's parent CL Financial, and particularly its flag ship company, Colonial Life Insurance Company (CLICO).
The financial problems at the Port-of-Spain-based conglomerate have had a rippling effect on several Caribbean countries where the company had operations.
The OECS governments say that while BAICO is a private, limited liability company incorporated in the Bahamas, its sheer size and the significant exposure of the Eastern Caribbean have made it imperative "to adopt a proactive and collective approach to this challenge".
Earlier this year, the regulators in the Eastern Caribbean Currency Union (ECCU) and The Bahamas intervened in the operations of British American and applied to the courts in several jurisdictions to appoint judicial managers.
The key findings of the report by the judicial managers indicate that the liabilities of BAICO branches in the Eastern Caribbean total EC$1.05 billion (US$380.8 million) of which EC$842.4 million (US$312 million) are annuities or investment contracts.
The report also showed that BAICO is insolvent and that, as of the end of June this year, it had a deficit of EC$775 million (US$287 million).
The OECS governments warn that, in the event of a liquidation of BAICO, policyholders would not be paid in full.
"Indeed, it is probable that if BAICO was liquidated, policy-holders will only get 10 cents on their dollar. This means if you have an annuity of EC$1,000 (US$370), you would only receive EC$100 (US$37).
Troubling facts
The governments say the facts revealed in the judicial managers' reports are troubling.
"However, they are not entirely unanticipated, for over the past few months, many of the grim facts concerning BAICO's financial status have become public knowledge. Moreover, the governments of the ECCU have actively sought to obtain a better of understanding of the situation with a view to becoming part of a solution."
OECS says the judicial managers have now endorsed the approach for the creation of a new entity "and we are optimistic that their recommen-dations will be accepted by the court."
"It is clear from the judicial managers' reports that BAICO is insolvent and that without a substantial capital injection, policy-holders and investors would suffer tremendous losses. However, a strategy for recovery has been prepared by the ECCU govern-ments, and the judicial managers have made recommendations that are consistent with that strategy.
The approach, they said, was a "much superior alternative to liquidation."
- CMC