The Tribune

Two Bahamian insurance companies are in negotiations to acquire CLICO’s Turks & Caicos business, Tribune Business can reveal, with the deadline for the cancellation of the insolvent insurer’s local medical policies just two weeks away.

Craig A. ‘Tony’ Gomez, the Baker Tilly Gomez accountant and partner, in his latest Supreme Court report revealed that Colina Insurance and BAF Financial & Insurance “are interested” in acquiring the company’s Turks & Caicos insurance business.

“I have been in discussion with two licensees in Turks & Caicos Islands on the sale of the TCI portfolio,” Mr Gomez, CLICO (Bahamas) liquidator, wrote in his recently-filed report.

“These licensee, who are also licensees in the Bahamas, namely Colina Insurance Ltd and BAF Financial & Insurance, have advised that they are interested in the portfolio.

“I have received executed confidentiality agreements, and I am continuing my discussions on the sale with these parties. In the meantime, I am seeking other parties in the Bahamas and Turks & Caicos Islands who may be interested in the portfolio.”

The latest financials for the insolvent insurer show why two Bahamian life insurance underwriters are only interested in the Turks & Caicos portfolio, and not the Bahamas, where hundreds of CLICO policyholders are facing the cancellation of their medical insurance coverage on New Year’s Eve.

Apart from being a much smaller business book, the prospective Bahamian purchasers would inherit around only $575,000 in liabilities once the $36.252 million owed to Executive Flexible Annuity (EFA) clients - which they have no interest in acquiring - are stripped out.

This sum is exceeded by the $769,000 that CLICO’s T&C operation has as cash and fixed deposits in the bank, meaning that there are more than sufficient assets that a purchaser will inherit to cover the liabilities.

This is in stark contrast to the Bahamas, which at end-June 2015 had a $46.876 million solvency deficiency, with $33.399 million in assets dwarfed by $80.275 million in liabilities.

Tribune Business understands that Family Guardian is among the potential purchasers that Mr Gomez is seeking to re-engage with, both on the T&C portfolio as well as the Bahamas’ book of business.

Neither Family Guardian nor its BISX-listed counterpart, Colina, or BAF will move on acquiring CLICO’s Bahamas portfolio without the long-promised Government guarantee to cover the difference between the assets and liabilities they will take on.

The clock is now running down rapidly on the remaining ‘window’ for the Government to deliver on its pledge, and save CLICO (Bahamas) medical insurance policyholders.

Mr Gomez’s latest report makes clear that the Christie administration has known about the issue, and impending cancellation of the medical insurance policies, for at least around six months.

“The transfer of CLICO (Bahamas) life, health and pension policies to a new insurer or the establishment of a new insurance company is in abeyance until the Government guarantee is secured,” Mr Gomez said.

“I have continued my communication with the Ministry of Finance with regard to the government guarantee but, at the date of this report, the meetings with the Ministry of Finance are still a work in progress.”

Tribune Business previously revealed that the Government’s plans to compensate CLICO (Bahamas) long-suffering creditors, who have been waiting almost seven years to access their life savings and long-term investments, fall into two categories.

Rather than the initial $30 million guarantee promised by the former Ingraham administration, the current Government is dividing the insolvent insurer’s clients into annuity holders and insurance policyholders.

The last proposal, presented in late June 2015, is to pay out annuity holders with products worth less than $10,000 or less. Those holding annuities worth $10,000 or more will get that sum up front and be paid the rest in Government bonds with a seven-year maturity.

Former CLICO (Bahamas) employees will also be paid the severance pay and pension benefits due to them, while insurance policyholders will be transferred either to a new underwriter or special purpose vehicle (SPV) created by the Government.

Mr Gomez’s report confirmed that the guarantee was discussed at a June 25, 2015, meeting with Simon Wilson, the Ministry of Finance’s deputy financial secretary.

“Mr Wilson advised that the Government has commenced the drafting of a Cabinet paper, which is expected to be presented to the Cabinet shortly,” Mr Gomez said. “This paper will layout the proposed government guarantee to support CLICO (Bahamas) structural changes.

“Mr Wilson further advised that the proposed government guarantee will be restructured from the initial proposed government guarantee, which will include cash payments in the amount of $10,000 to certain classes of creditors and a negotiable, probably seven-year, paper which will be issued for the balance of funds owing to certain of the other creditors.”

This action has seemingly yet to materialise, and Mr Gomez said he currently has little choice but to cancel the medical insurance policies because high claims payouts are eroding the $11.893 million in CLICO (Bahamas) bank accounts.

This undermines his duty to preserve and maintain the asset for the benefit of creditors.

“Upon the completion of the actuarial valuation and the actuary’s analysis of CLICO (Bahamas) current state, and along with the obvious financial impact of the medical policies on the insurance operations and available cash, and providing that a government guarantee is not received by the official liquidator shortly, the actuary advised that the medical policies should be discontinued immediately,” Mr Gomez wrote.

“I have scheduled the discontinuation date at December 31, 2015.”