By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Government is proposing to “pay out” all CLICO (Bahamas) annuity holders and transfer insurance policyholders to a new company by year-end, Tribune Business can reveal.
The solution for 13,000 clients of the insolvent insurer, who have endured a six-and-a-half-year wait to access their investments and life savings, was unveiled by Prime Minister Perry Christie last week.
Mr Christie, together with minister of state for finance, Michael Halkitis, and deputy financial secretary, Simon Wilson, met with several CLICO (Bahamas) policyholders and their attorneys on Thursday, to unveil the long-awaited Government remedy.
They informed those present that they would take the proposed solution to Cabinet - possibly as early as yesterday - for a full ministerial briefing and discussion.
And once Cabinet is fully on board, the proposal is expected to be formally unveiled in Parliament within the next few weeks.
Paul Moss, the attorney for a former CLICO (Bahamas) branch manager, confirmed he was present at the meeting and provided details of the Government’s proposed solution.
“What the Government has proposed is the following,” he told Tribune Business. “They have said they will ensure that all annuity holders will be paid, and they have a prescribed payment plan.
“They will pay out those annuity holders with annuities worth $10,000 or less. For those holding annuities worth $10,000 or more, they’ll get $10,000 up front and be paid the rest in Government bonds.”
As for CLICO (Bahamas) former life and health insurance policyholders, Mr Moss said their policies will be transferred to a new insurance company that will be created by the Government.
“The Government also intends to establish an insurance company, and that insurance company will be dealing with the life policyholders and the medical policyholders who had insurance with CLICO.”
Mr Moss did not confirm whether this ‘insurance company’ will be a special purpose vehicle (SPV), an off-balance sheet entity created specifically to hold the former CLICO (Bahamas) insurance portfolio.
Tribune Business previously revealed that such a solution had been proposed by CLICO (Bahamas) liquidator, Craig A. ‘Tony’ Gomez. The SPV would issue bonds to raise the $30 million guarantee demanded by other insurance underwriters to facilitate their acquisition of the former CLICO (Bahamas) portfolio, with bondholders repaid via continued premium payments on those policies.
Regardless of the method, Mr Moss told Tribune Business: “It was indicated [by the Government] that this should be done by year’s end.
“He [the Prime Minister] indicated they’d take it to Cabinet, and make an announcement in Parliament the very next opportunity they have.”
CLICO (Bahamas) liquidation has been unable to make significant progress until the Government delivers on the $30 million guarantee that was pledged by the former Ingraham administration.
Other carriers have made clear the transfer/acquisition of the insolvent insurer’s policy portfolio will not happen until the Government delivers on that long-promised guarantee to underwrite such a deal.
As a result, the 13,000-plus long-suffering policyholders have been unable to move on with their lives. They have essentially been in ‘financial limbo’ since February 2009.
Bishop Simeon Hall, a CLICO (Bahamas) policyholder who was also present at the meeting with the Prime Minister, described the proposal outlined by Mr Christie as “a big relief” if the Government delivered.
“Permit me to say I’m elated that the Prime Minister is keeping his promise,” Bishop Hall told Tribune Business. “We appear to be headed towards concretising a resolution after six-and-a-half years.
“As I understand it, they are working towards some policy by which the policyholders, the annuity holders and the agents, persons who were once employed, will be duly paid what they are owed. I’m happy we seem to be headed somewhere.”
Bishop Hall, too, said he expected the Government to make a formal announcement on its proposed CLICO (Bahamas) solution within a matter of weeks.
“I’m expecting to hear in a matter of days, a week or two, to have some announcement,” he told Tribune Business. “Otherwise, we’ll be back on the streets.”
Mr Moss said CLICO policyholders appeared “very satisfied” with the outcome of the meeting with the Prime Minister, given the circumstances and length of time since CLICO (Bahamas) collapsed into court-supervised liquidation.
“They finally got a response from the nation’s chief executive,” Mr Moss told Tribune Business. “At least they have the understanding the Government is putting something together. Although it’s been a bad situation all along, there’s a glimmer of hope at the end.”
With CLICO policyholders and former staff now waiting to see if the Government will execute on its latest pledge, Mr Moss said the insurer’s ex-employees were “in dire straits financially”.
“Many of those who had good incomes now have virtually zero,” he told Tribune Business. “Banks have foreclosed, and many have had to retrench from the traditional economic positions they held. It’s not been a good situation since 2009.”
Mr Moss said his client, Virginia Outten, a former CLICO (Bahamas) branch manager, was entitled to some $500,000 in severance pay.
Yet she had only received $100,000, even though the former Ingraham administration had set aside $2.5 million in 2011 via Parliamentary resolution to provide what was due to staff.
The Government finally acted on CLICO (Bahamas) after appearing to realise it was a growing political liability, especially with a general election less than two years away.
CLICO (Bahamas) policyholders protested outside the House of Assembly last Wednesday, further drawing public attention to their plight, and within 24 hours they had met with Mr Christie.
“Isn’t it a shame, but that’s how this country works,” Mr Moss said. “They don’t respond to quiet protests. They want you out in the streets, in the sun.”
Many had previously questioned why the Government, flush with Value-Added Tax (VAT) revenues and projecting $2.047 billion in income for the 2015-2016 fiscal year, previously had difficulty finding room for the $30 million CLICO guarantee.
Especially given that spending is projected to jump by $100 million to $1.944 billion, with $60 million allocated to prepare for National Health Insurance (NHI) and $20 million for ‘youth unemployment’, rather than rescuing lower and middle income Bahamians.
At the end of June 2012, CLICO (Bahamas) portfolio contained 13,835 policies with a total surrender value of $20.074 million and cumulative sum assured of $1.093 billion.
Its Bahamian balance sheet showed a solvency deficiency of $22.162 million at June 30, 2012, with total assets worth $44.794 million out matched by liabilities totalling $66.956 million.
Comments
banker 9 years, 4 months ago
Sigh .. another $30 million added to the government debt. When will it end? This is nothing but vote buying.
TalRussell 9 years, 4 months ago
Comrade Banker to your knowledge has there ever been a police or any other investigation into what lead to the CLICO leaving so many financially stranded for many millions? If not, why not? Is there NO accountable for the very people who manged this mess? At minimum they should all be sued to repay any and all bonus monies, include lavish trips they were 'wrongly" advanced or paid for nothing more than bankrupting many thousands policy holders? Is there never accountability for any wrongs done to people in this Bahamaland? You go steal a O'Henry chocolate bar and they sends your ass on da recklessly driven Fox Hill Prison bus. You go figure.
GrassRoot 9 years, 4 months ago
more of the same voodoo economics. This is not a bailout for the policyholders, it is a bailout for Clico. Feeding the monster of entitlement that is all so Omni present in the Bahamian minds.
PapaGolf 9 years, 4 months ago
The resurrection of Southern Alliance Insurance?
Well_mudda_take_sic 9 years, 4 months ago
Here again, as was the case for the Bank of The Bahamas (BOB), we see Christie screwing hard working Bahamian taxpayers by wrongfully using the public purse to bail out private personal investments made by many of his political friends and business cronies, like Allyson Maynard-Gibson and her family members and their investment holding companies, who have invested many millions of dollars in annuity products issued by CLICO (Bahamas). Christie's lamed brain rational for this bail out at the expense of Bahamian taxpayers is that government regulators with oversight responsibility for monitoring and regulating the business affairs of CLICO (Bahamas), like the previous Registrar of Insurers (Dr. Brown) and the previous Governor of the Central Bank of The Bahamas (James Smith), failed in their primary duty to ensure the interests of the annuity holders and other policyholders were protected by assets of CLICO (Bahamas) that should have been held (kept) in the Bahamas and not allowed to be removed from our country. Why should Bahamian taxpayers be made to pay for the past mistakes and outright negligence of Dr. Brown and James Smith who now both enjoy receiving generous monthly pension payments from the public purse. To add real insult to injury, Christie had the audacity to appoint James Smith as the Chairman of Bahamas Resolve where he is now being handsomely compensated by Bahamian taxpayers to keep a lid on the names of the 13 borrowers who defaulted on their loans received from BOB totalling $100 million, which were transferred to Bahamas Resolve at the expense of Bahamian taxpayers in an effort to recapitalize BOB. The past negligence of James Smith involving CLICO (Bahamas) is such that he should never again have been tasked with doing anything for the benefit of Bahamian taxpayers! The annuity holders and the life & health policyholders, as a collective group, should have taken legal action against the Bahamian government for the failures of Dr. Brown and James Smith, among others, and also against the external auditors for their failure to disclose in their annual audit reports that the assets that should have been backing the obligations of CLICO (Bahamas) had been wrongfully allowed to be removed from the Bahamas.
Well_mudda_take_sic 9 years, 4 months ago
The big problem for CLICO's Bahamian policyholders is that the assets derived from its insurance operations in the Bahamas were allowed to be moved outside of the Bahamas; accordingly, these assets were never ever readily available in our country to satisfy CLICO's obligations to its Bahamian policyholders. All of the following can be blamed for their significant part played in allowing (over many years) the flight of assets out of the Bahamas that should have been backing the Bahamian policyholders: (1) James Smith, then Governor of The Central Bank of The Bahamas, who must have granted the necessary exchange control approval for the premiums paid by the policyholders to be effectively converted to other currencies and invested outside the Bahamas; (2) Dr. Brown, our previous insurance commissioner (now retired and living off of Public Treasury) for his failure to properly regulate CLICO's insurance operations in the Bahamas; and (3) Deloitte & Touche (Bahamas) for failing to report in its audit reports that management and the Board of CLICO Bahamas had repeatedly failed to disclose in the annual audited financial statements the very significant concentration of the company's assets effectively denominated in currencies other than the Bahamian dollar which, had this been done, would have at least put the Bahamian policyholders on notice that the company had moved its assets outside of our country and beyond the control of our local regulators. Yup, James Smith, Dr. Brown and Deloitte & Touche Bahamas all helped contribute to the 'royal shafting' received by CLICO's Bahamian policyholders. And now Christie is wrongfully seeking to transfer the losses incurred by the annuity holders and policyholders of a private enterprise on to the backs of honest hard working Bahamian taxpayers. Many of the greedy annuity holders, e.g. several 'prominent' members of the Maynard family, had been lured for years by the overly generous rates of return that they received on their annuities issued by or through CLICO (Bahamas); they ought to have known the very high yields came with great risk of loss. Why in the hell should these greedy investors now be bailed out by honest hard working Bahamian taxpayers? Had these investments proven highly profitable to the annuity holders, you can be rest assured they would not have been willing to share a penny of their profits with their fellow Bahamian taxpayers. Someone needs to sit down with Christie and explain to him what moral hazard is all about!
Reality_Check 9 years, 4 months ago
With respect to the external auditors, Deloitte & Touche (D&T), the financial statements of CLICO Bahamas and CLICO Enterprises did provide sufficient disclosures of their underlying investments outside of the Bahamas. However, D&T failed to disclose in their audit reports that the Bahamian regulators (then James Smith at the Central Bank and Dr. Brown at the Registrar of Insurance Companies) had "enabled" both CLICO Bahamas and CLICO Enterprises to violate local statutes and related regulations by effectively transferring the bulk of their real assets abroad (real assets that should have remained in the Bahamas to back the obligations of CLICO Bahamas to its annuity holders and policyholders) in exchange for related party inter-company loans and advances bearing unusually high yields in order to accommodate the usually high yields being paid to annuity holders in the Bahamas. D&T, Smith and Brown all ought to have known, simply by virtue of the unusually high interest rates being earned on borrowings from related parties abroad and in turn being paid to annuity holders in the Bahamas, that both CLICO Bahamas and CLICO Enterprises were increasingly becomingly nothing more than highly inappropriate Bahamian incorporated (and supposedly regulated) vehicles for the purpose of raising funds in the Bahamas from annuity holders and policyholders to make very inappropriate high risk speculative investments in other jurisdictions. In other words, Smith, Brown and D&T each failed in their duties to the annuity holders and policyholders of CLICO Bahamas by not blowing the whistle much sooner on the massive defrauding that occurred over several years right under their noses.
Well_mudda_take_sic 9 years, 4 months ago
I stand corrected by you as regards the actual role played by D&T in this financial debacle. Christie, by agreeing to take from honest working taxpayers in order to bail out the greedy annuity holders of CLICO Bahamas, like the Maynard family, has effectively admitted its guilt by virtue of the regulatory failures on the part of James Smith (then Governor of the Central Bank) and Dr. R. Brown (then Registrar of Insurance Companies).
Reality_Check 9 years, 4 months ago
I think you more accurately intended to say: "Christie...has effectively admitted 'his government's' guilt..."
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