The international financial crisis has seen some mega enterprises fold under economic pressure, and that crisis has become embodied in the Caribbean and in Belize, in the crisis now affecting the Colonial Life Insurance Company (CLICO), which has hit home in a very real way for thousands of policyholders now worried about what will happen to their years of investment, and several workers uneasy about the possibility of losing their jobs amid already hard times.
This morning, Supreme Court Justice Samuel Awich granted an order to the Supervisor of Insurance, Alma Gomez, to place CLICO in Belize under the provisional judicial management of Mark C. Hulse, CPA, of Baker Tilly Hulse, in Belize City. (Baker Tilly Gomez, the counterpart firm in the Bahamas, was the court-appointed liquidator for CLICO in the Bahamas.)
Alma Gomez, the Supervisor of Insurance in Belize, explained to our newspaper after this morning’s proceedings that the effect of the judge’s decision is that Hulse will now be in charge of running CLICO’s affairs in Belize, and he is the person to whom queries should be directed if someone has questions on their policy.
Justice Awich this morning issued an order that Hulse should report back to the court within a month (30 days), with a report on the state of affairs of CLICO in Belize, which should include a preliminary explanation of why the company is in its present condition.
“He must indicate what is wrong there,” said Awich.
He noted that in preparing his report, Hulse will have to speak with the persons who have been in charge of the branch here, as well as some policyholders and creditors of CLICO, including bankers.
In court, attorney for the Supervisor of Insurance, Crown Counsel Pricilla Banner, appearing along with co-counsel, Magali Perdomo, told the court that she wished to expedite matters, since they had just been made aware that CLICO in the Caribbean is now in the process of liquidation.
Justice Awich made a concession to bring up the next session from June 5, and he agreed that the applicants should instead return to court on Monday, May 18, at which time he will determine what the next course of action should be – whether they should proceed directly to liquidating CLICO in Belize or proceed to full judicial management, or whether some other option could be put into effect.
A scenario may arise where the Government of Belize may chose to salvage the branch for the sake of Belizean policyholders, if Hulse’s report indicates that the company can be brought back, the judge suggested.
Banner noted in court that of all the CLICO branches in the Caribbean, CLICO in Belize is the only one with any assets.
Speaking with Amandala, Ms. Gomez said that the reason that she is not pushing for immediate liquidation of the company is because CLICO in Belize holds over 10,800 policies with Belizeans, and they hope to transfer the life and health policies to one of five competent insurance companies here.
She notes that the statutory funds of CLICO in Belize are earmarked for Belizean policyholders, putting the Belize branch in better standing than both the Bahamas and the Turks and Caicos arms of CLICO.
For those who may be considering a refund in the form of a “cash surrender,” Gomez said that those persons may end up losing, because when a policyholder surrenders, he or she is added to the list of creditors CLICO would have to pay on liquidation.
“It is better for them to keep their policies,” she recommended.
Justice Awich told Banner that if Hulse experiences any difficulty on the ground in executing the court’s order for placing CLICO (Belize) under judicial management, he should return immediately to the court, which will take up the matter.
Another important issue raised in court this morning was how Hulse would be paid for his work. Information submitted anecdotally from the Supervisor of Insurance claimed that CLICO has a certificate of deposit (CD) against which there are no liens, which could be used to pay the certified public accountant.
However, Justice Awich, not having any hard evidence before him as to exactly how Hulse would get his remuneration, asked for Gomez to give the court an undertaking within 7 days that if CLICO has no funds or assets to pay Hulse, that the Supervisor of Insurance would.
He also put on record that if anyone from CLICO attempts to move assets out of Belize, Hulse has the right to stop them, as provisional judicial manager, and anyone wishing to challenge Hulse would have to go before the court to ask for those assets to be released.
Awich also indicated the possibility that in the process, policy holders may have concerns about financial claims, and it is possible that some of those battles may end up in court as well.
It is important for Hulse to now do a proper investigation and speak to the relevant parties before he makes any further declarations or orders, the judge explained.
CLICO in Belize is one of several branches across the Caribbean, all of them facing the same trouble, but not without a glimmer of hope.
News reports coming out the Caribbean today indicate that Ministers of Finance, Central Bank governors and insurance regulators of the Caribbean have agreed to a US$80 million, to aid British-American Insurance and CLICO: US$50 million from the CARICOM Petroleum Fund (Trinidad & Tobago); US$15 million from regional and international organizations (such as the World Bank); US$10 million from Eastern Caribbean Currency Union; and US$5 million from Barbados.
There is yet no indication if and how Belize would benefit from this massive package of recovery funds being provided to CLICO.
In their recent meeting in Belize, Caribbean Heads of Government have given an undertaking to take collective action to tackle the crisis facing CLICO and other such companies struggling under the weight of the ongoing financial crisis. One critical consequence of the liquidity crisis facing the insurance companies has been problems with finding funds to meet the demands of their policyholders.
Caribbean finance leaders are optimistic that the US$80 million relief will keep the insurance companies from drowning.
Meanwhile, there are questions being raised by some leaders in the region over cross-border transactions by the company and its affiliates.
The Opposition People’s National Congress Reform in Guyana recently laid a motion in Parliament and called for a criminal investigation into the CLICO affairs of that country. The minority party, Alliance for Change (AFC), alleged that contracts entered into with CLICO Bahamas do not appear to have been standard policy contracts. That arm is linked to the Trinidad arm of CL Financial (CLICO’s parent company), which has benefited from bailout from the Government of Trinidad and Tobago.
The Trinidad Express reported last week that CLICO Bahamas had a shortfall of US$18 million between the amount of assets it holds versus the amount of debt it is committing to paying out.
However, that report also says that CLICO Bahamas was owed US$73 million, which it loaned to CLICO Enterprises Limited, as a part of a real estate deal – a debt that is now being classified as uncollectible, because of the real estate downturn and resultant crisis in the US.
Meanwhile, CLICO branches in Suriname and Guyana were also claiming US$50 million on CLICO Bahamas, the head office.
The Trinidad newspaper report also referred a “notional” TT$10 billion (US$1.6 billion) deficit at CLICO – the local government having approved TT$1 billion (US$160 million) to pay depositors and policyholders.