The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

SOME 700 CLICO (Bahamas) policyholders are set to lose their medical insurance after the insolvent insurer’s liquidator yesterday gave two months’ notice of their policies’ cancellations.

Craig A. ‘Tony’ Gomez, the Baker Tilly Gomez accountant and partner, in a newspaper advertisement said he “regrets.... taking this course of action” in announcing that all medical insurance policies will be cancelled with effect from May 18, 2018.

There was no explanation for the move, but in effect the ‘writing has been on the wall for some time’ given that CLICO (Bahamas) medical insurance claims payouts significantly exceed the annual premium income paid to Mr Gomez.

This has severely depleted the insolvent insurer’s dwindling cash pile and, given the company’s status under compulsory liquidation through the Supreme Court’s supervision, the liquidator has had no choice but to protect the remaining funds.

Mr Gomez, in his last report to the Supreme Court, said the insurer, which was suffering a $55.817 million solvency deficiency at end-June 2017, had at that date just over $7 million in its accounts to pay ongoing expenses.

“At the date of this report, CLICO (Bahamas) had $7.41 million in its bank accounts, which is a major concern in the liquidation,” Mr Gomez wrote. “Professional fees, medical and death claims, coupled with the staff, building and operational expenses, have to be paid on a regular basis (daily and monthly).

“There continues to be a depletion of the available funds as a result of the payments of the aforementioned expenses. I will continue to monitor cash flow.”

Mr Gomez was on the verge of cancelling all CLICO (Bahamas) medical insurance policies some two years earlier, only to relent after the former Christie administration stepped forward at the 11th hour with a ‘rescue plan’ for the insolvent insurer.

The liquidator warned then that he had little choice because high claims payouts were eroding CLICO (Bahamas) cash reserves, undermining his duty to preserve and maintain the asset for the benefit of creditors.

Figures supplied to Mr Gomez by insurance actuaries, Morneau Shepell, showed that since CLICO (Bahamas) was placed into Supreme Court-supervised liquidation in February 2009, group medical claims payouts to policyholders exceeded premium payments by 40 per cent up until end-2014.

Over that six-year period, Mr Gomez had ensured CLICO (Bahamas) paid out $4.191 million in medical claims, yet only received $3 million in premium, creating an unsustainable health claims ratio of 140 per cent.

“The claims from the group health business have exceeded the premiums collected on these policies,” the actuaries warned in a report to Mr Gomez.

“The impact of the 2012 re-pricing can be observed in the 2013 experience. We understand from the liquidator that a decision was made to honour claims on compassionate grounds for persons who have ongoing medical conditions, even if the claim amounts have exceeded policy limits.”

The actuaries said this was reflected in the 179 per cent group health claims ratio, where payouts of $682,878 exceeded by 79 per cent some $382,314 in premium payments.

The report contrasted the 140 per cent group health claims ratio with the 60 per cent payout ratio for all other medical and accident claims.

“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 in a report to the Supreme Court.