The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Christie administration was urged within three months of taking office to fulfill the Government’s pledged $30 million guarantee to underwrite the sale of CLICO (Bahamas) remaining insurance portfolio, thereby securing the financial future of thousands of policyholders.

That request was made by Craig A. ‘Tony’ Gomez, the Baker Tilly Gomez accountant and partner, who is the insolvent insurer’s liquidator, when he met with the full Christie Cabinet on July 31, 2012.

“On July 31, 2012, I met with the Cabinet of the Bahamas and provided members with an update on the status of the liquidation,” Mr Gomez wrote.

“I further presented the Cabinet with a request for a government guarantee in the amount of $30 million to assist with the transfer/sale of the portfolio; settlement of amounts due to EFPA (Executive Flexible Premium Annuities are not being sold to a third party) and other policyholder expenses.”

The then-guarantee was said by Mr Gomez, in the report covering the period July 1-December 31, to still be in the hands of the Attorney General’s Office for drafting and not yet completed.

Thus the newly-elected Government was briefed just two-and-a-half months into its reign on the urgency of the CLICO (Bahamas) situation, with the $30 million needed to cover “the anticipated shortfall” in the liquidation.

More than two years later, the Christie administration has yet to make good on the $30 million guarantee first promised by its FNM predecessor in the wake of CLICO (Bahamas) collapse into insolvency in early 2009.

The details, revealed in Mr Gomez’s 13th report to the Supreme Court in his capacity as liquidator, make clear that he is unable to find a buyer for the ex-life and health insurer’s remaining 13,109-strong policy portfolio until the Government delivers.

Potential buyers have made clear they will not contemplate an acquisition without the $30 million guarantee, due to the risk involved in assuming a portfolio where there are concerns over quality and if there are sufficient assets to cover liabilities to policyholders.

Closing a sale, Mr Gomez’s report makes clear, is essential to moving the CLICO (Bahamas) liquidation forward to completion, and bringing much-needed relief to thousands of Bahamian policyholders who have been without their investments and life savings for five-and-a-half years.

It appears that Mr Gomez has ruled out selling the CLICO (Bahamas) portfolio to a foreign buyer, as his report refers to selling the life, health and pension policies only to “a qualified licensee of the Insurance Commission of the Bahamas (ICB)”.

This leaves only Colina Insurance, Family Guardian and BAF Financial in the game, with the report disclosing that Mr Gomez was talking to three potential buyers in the 2012 second half. It is likely the former two, BISX-listed companies would be the main candidates.

Tribune Business revealed this week that the Government is finally moving to resolve the matter, and is exploring whether it can raise the ‘guarantee’ via a $30 million ‘off-balance sheet’ bond issue. Three successive Budgets have contained no specific ‘line items’ or allocations to cover this.

Multiple sources confirmed to this newspaper that the Christie administration is examining whether it can raise the necessary ‘guarantee’ financing from investors and the Bahamian capital markets, using bonds that would be issued by a ‘special purpose vehicle’ or SPV.

For the Christie administration, the advantage of an SPV bond offering is that the $30 million borrowing could be kept off its books, thus ensuring there is no negative impact to the fiscal deficit or national debt.

With an historically-low interest rate environment in the Bahamas, debt servicing costs on the bonds, which would be repaid via policyholder payments until the portfolio is sold, would also be relatively low. And investor demand should be strong with bank interest rates low.

This newspaper understands that the Government is trying to formalise something ‘concrete’ in relation to the CLICO (Bahamas) guarantee by 2014 year-end, with Mr Gomez anxious to shed his unwanted role as a ‘receiver’ running an insurance company.

The liquidator’s latest report indicates that this responsibility has consumed much of his time, as he settled some 854 medical claims, worth $1.233 million, in the six months to year-end 2012.

And, over the same time period, Mr Gomez also settled 43 death claims worth $231,879, plus 68 endowment payouts worth $210,848.

Mr Gomez’s report, which was approved by the Supreme Court this week, contains little that is not new given the time that has elapsed.

However, it does reveal that John Bain, the forensic accountant from UHY Bain & Associates, was hired by the liquidator in September 2012 to review documents obtained from the US.

Tribune Business understands that Mr Bain has been hired to help build the case for legal action against Lawrence Duprey, the Trinidadian principal of CLICO (Bahamas) and its ultimate parent, CL Financial.

As at end-December 2012, CLICO (Bahamas) balance sheet was still showing a solvency deficiency of $28.808 million, based on liabilities of just $71.98 million and total assets worth $43.171 million.

Its Bahamian policy portfolio was 13,109-strong, with a total surrender value of $33.217 million and sum assured of $1.027 billion.