The President should restrain his comments on CLICO

Mar 05, 2009 Features / Columnists, Peeping Tom

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I wish to urge the President of Guyana to restrain himself and not to give advice at this stage to the policyholders of the troubled CLICO (Guyana). That company now falls under judicial administration which means the judicial manager takes instructions from the Courts and not the government.
It is for the judicial manager, after being advised by the Courts, to pronounce on what course of action policyholders should take. The government may wish to indicate, as it has done implicitly, that it is prepared to ensure that all policyholders are protected. However, the government should refrain from making decisions which are, at this time, premature, and which have not yet been sanctioned by the Courts.
The Court has appointed a judicial manager. The Insurance Act of 1998 is very clear that the Court shall issue directions to the judicial manager as to his or her powers and duties. The said Act also states that the judicial manager shall act under the control of the Court and may apply to the Court at any time for directions as to the manner in which she shall conduct the judicial management in relation to any matter in the course of judicial management.
It is therefore my considered opinion that any decision concerning the payment of premiums for existing policies should be made by the judicial manager, acting under the guidance of the Courts, and not by the President of Guyana.
Regardless of the assurances and guarantees given by the government, it is not for the President at this stage to urge policyholders to pay up their premiums. This is the call of the judicial manager who reports to the Courts and not to the Executive.
The judicial manager is required under the insurance laws to conduct the management of the company with the greatest economy compatible with efficiency  and as soon as is practicable is required to file to the Court a report outlining which of the following options she considers most advantageous to the general interests of policyholders:
a)    the transfer of all or any part of the business to some other insurer.
b)    to continue the operations of the company whether conditionally or without conditions.
c)    the winding-up of the company
d)    such other course as the judicial manager may consider advisable.
It is obvious therefore that any call at this stage for policyholders to continue to pay their premiums is premature since it is still not known what options will be proposed by the judicial manager and which option will be accepted by the Courts. It could well be that a decision can be taken to wind-up the company and thus what sense would it then make to be paying premiums.
The Insurance Act provides for persons to inspect the Report submitted by the judicial manager. This Report would be made available for inspection at the Court Registry.
The law also provides for the Court to hear the Commissioner of Insurance and the judicial manager (in this instance one and the same person), as well as any other person whom the court feels is entitled to be heard. The Court then has to make a determination as to the most advantageous option to pursue. Once the Court so orders, it becomes binding on all persons.
The government is therefore acting prematurely by advising policyholders to pay their premiums. One can, however, understand the need of the government to assuage the fears of the large numbers of policyholders. Instead of giving such advice, the government should indicate to the judicial manager what guarantees it intends to make to the beleaguered insurance company and what interventions it is likely to support.
In this way, the judicial manager could advise the Courts in her report as to just what is the best option available to secure the general interests of all policyholders.
It will of course take some doing to rescue CLICO (Guyana) and this is why it is important that a parliamentary investigation be launched and possible options emerge out of this process, including any possible bailout by the government.
The government feels that it can protect the interests of all policyholders but there needs to be clarification since in today’s complex financial world we have investment instruments disguised as insurance policies.
So just what guarantees is the government offering? Is it to all investors and policyholders? Or is it to only those with pension funds and long-term insurance policies?
I doubt whether given the extent of CLICO (Guyana)’s investment in CLICO (Bahamas) whether all the investors can be repaid. If more than 50 per cent of your assets are imperiled, then it is difficult to see how everyone can be guaranteed their monies. And especially considering the damage that has now been done to CLICO’s corporate brand by its Caribbean-wide meltdown, it is difficult to see the local company surviving given the consequential fallout in public confidence.

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