IS IT THE END FOR CLICO (GUYANA)?

Mar 01, 2009 Features / Columnists, Peeping Tom

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I was disappointed that the President took the lead in disclosing to the nation that the government had moved towards placing CLICO (Guyana) under judicial administration.
I accept that, unlike the Chairman of the Integrity Commission who enjoys independence, the Commissioner of Insurance is obligated to conform to general and special directions given by the Minister of Finance.

And this is why I very much would have preferred if the announcement about the takeover of CLICO (Guyana) was made by the Commissioner and the Minister of Finance, rather than them being virtual spectators at the Press Conference hosted and presided over by the President of Guyana.
The President was extremely defensive in his presentation. This to some extent was to be expected, given the genesis of this whole matter. However, I consider Dr. Ashni Singh as the most qualified accountant and financial analyst in Guyana, and I would have preferred if he had taken the lead, since I am sure that many of the technical matters could have been better explained.

Instead, what we had was the President of Guyana finding a defence in the global financial crisis for what has happened to CLICO (Guyana), and not in the absence of proper financial and regulatory oversight.
Had both the Commissioner of Insurance and the Finance Minister played a more active role in that press conference, they may have shed greater light as to just what exactly CLICO (Guyana) was cautioned about one year ago.

Perhaps we would have known whether the pension funds of CLICO were invested in accordance with the provisions of the Insurance Act, which provides that no more than twenty per cent of those funds should be invested outside of Guyana. Also, the same Insurance Act states that no more than 15% of its statutory fund can be invested outside of Guyana.

Thus, since we are told that some US$40M has been invested outside of Guyana, and since this is said to represent some 51% of the assets of this country, it begs the question whether the limits placed by the Insurance Act on the investment of both the statutory fund and pensions were violated. If this was indeed the case then what was done about the matter? And more importantly, who will be held accountable?
There is also the major issue of why the company had told the nation that CLICO (Guyana) had no investments or dealings with sister companies when we are now learning about the massive amounts invested in the Bahamas and in Caribbean Resources Limited.

If also the government was said, after the problems experienced by CL Financial in Trinidad and Tobago, to be exercising rigorous oversight of the local company, how then can we reach the stage where we are now without the government accepting some, if not a great deal, of moral responsibility?
The President is ever the optimist. He is hopeful that the monies invested in the Bahamas can be recovered, thus minimising the exposure to the Treasury. I am not that hopeful. I do not anticipate that we will see very much of that money, and for all intents and purposes there will be great losses locally, even with the sale of assets.

My hope is that the pensions and long-term insurance policies will either be sold to another insurance company or have the first call on the statutory fund or on the sale of any assets and sums recovered. I cannot envisage a situation where everyone will come out with all their monies intact. And, as I said yesterday, those who invested in short-term annuities and other instruments should bear the greater burden that will come with the folding up of CLICO (Guyana).

I hope that Guyanese people understand the implications of what took place on Thursday. I hope they recognise that CLICO will most probably be wound up.
I hope they appreciate that the Commissioner of Insurance does not need the authority of the Courts to intervene when problems are detected. The Insurance Act provides that the Commissioner of Insurance only needs to give notice in order to intervene to protect the interests of policyholders. There is no need for a Court order for this purpose.

When a Court order is needed is when the company is to be wound up, in which case the Commissioner may, with leave of the court, present a petition for the winding up of the entity or present a petition for the company to be placed under judicial administration. The Insurance Act provides for an application for judicial administration when the company is to be wound up.

The fact that such a petition has been made to the Court for judicial administration suggests that CLICO (Guyana) is likely to be wound up. Even though the Court does have the authority to order that the business be continued, it seems clear to me that, given the petition presented, we are witnessing the folding up of CLICO (Guyana), and the most that can be salvaged is that the investments, pensions and insurance policies can be protected through a variety of means.
But I doubt whether they can all be protected.

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