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NIS losing close to $1 million daily – Cristopher Ram

Mar 24, 2009 News

…as CLICO debacle ripples across financial sector

 

As a result of the $6.9B investment in Colonial Life Insurance Company (CLICO) Guyana, the National Insurance Scheme is losing close to $1M per day.

This is according to financial analyst and economist, Christopher Ram, who in an invited comment yesterday, said this is so, given that the income stream relevant to the principal investment is no longer operational.

Mr Ram said that the crisis in which the company has found itself in, is having a ripple effect on the financial sector and as such the President should refrain from reserving the CLICO Guyana issue to a mere three per cent of the financial sector.

The economists also drew reference to the fact that relevant directors, including the Commissioner of Insurance and the Minister of Finance, violated their fiduciary responsibilities and were in breach of the Fiscal Management and Accountability Act.

They should be dealt with according to the provisions of the law.

Commenting on the motives behind the purchase of the Clico bonds in the Berbice Bridge by New Building Society (NBS), Mr Ram said that transaction was “absolutely unthinkable.”

He added that interest payable on the bonds at December 31, last, was not paid and agreed to be deferred.

The analyst added that anyone with half of an interest in NBS would not have made that investment.

The economist also lambasted the government for misleading the population into thinking that the Berbice Bridge was solely private when in fact it was heavily subsidised in the sense that everything was duty free.

The economist also questioned the failure of NIS to retain the services of an actuary to determine the true status of the entity given that a significant amount of its status is impaired.

This is in light of the fact that as of December 31, 2007 the expenditure of NIS far outweighed its contributions.

Recently Alliance for Change (AFC) Raphael Trotman had warned that Guyanese should brace themselves as the ripple effect of CLICO Guyana continues to take hold on Guyana.

The AFC leader has pointed out that there have already been hints that the NIS will have to raise its contribution rate.

According to the 2007 Annual Report for the National Insurance Scheme, the viability of the scheme is dependent on its investment returns given that its expenditure is greater than its income from contributions.

The audited report states that for 2007 its total contributions were some $8.06 billion whilst the total expenditure was some $8.57 billion, a difference of $516.4 million.

The figures indicate that without the returns on investment of some $1.5 billion the company would be operating at a huge deficit.

This was the same trend in the previous year where the total expenditure, $7.6 billion, had to be cushioned by returns on investment of $1.3 billion, given that the total income from contributions was $7.5 billion.

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