CLICO (Guyana)’s deals with CLICO (Bahamas) were not standard contracts

Apr 01, 2009 News

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…appear to be mere transfer of funds

The liquidator of CLICO (Bahamas), Craig Tony Gomez, has confirmed that CLICO (Guyana) did business with CLICO (Bahamas), contrary to the claims of the Bahamian Prime Minister Hubert Ingraham when the crisis first hit the island in late February.
However, Gomez said that a preliminary review of the contracts forwarded to him reveals that CLICO (Guyana) may have had policy contracts with its customers and then the funds were forwarded to CLICO (Bahamas), principally the Turks and Caicos branch.
“It appears that while the funds forwarded to The Bahamas were recorded in the records of CLICO (Bahamas), the cash actually appeared to have flowed into the United States of America bank account directly from Guyana…,” Gomez is quoted by the Nassau Guardian as saying.
He said that, unfortunately, the contracts entered into with CLICO (Bahamas) do not appear to have been standard policy contracts, but in many cases could easily appear to be the transfer of funds to The Bahamas that could easily be classified as related party loans rather than policies.
“I have received substantial evidence to support my view that most of the funds were received into a United States bank account,” Gomez says. “I am continuing to examine this matter.”
In his report to the court, the liquidator lists a number of concerns. Some of them include a shortfall in cash needed to meet claims; the asset base required to transfer the policy portfolio to a new insurance provider; transferring policyholders’ accounts to an established insurance provider; payment of claims received prior to February 24, last; funding of staff severance pay; sale of the Florida real estate investment; payment of a Turks and Caicos $2.9 million claim and sale of annuities with shortfall in cash.
As requested, Guyana has since submitted its claim, which Gomez has confirmed receiving.
Guyana is claiming $34 million in policies with CLICO (Bahamas).
It has come to light that the liabilities of CLICO (Bahamas) are in excess of its assets by $18 million and the company’s most significant asset — a $73 million loan due from a subsidiary that financed a Florida real estate project — is not anticipated to be realized in the short-term, which then makes the company insolvent and thus qualifies it for liquidation, according to a report from Gomez.
That highly anticipated report has been filed in the Bahamian Supreme Court.
In the report, the liquidator lists CLICO (Bahamas)’s total assets at $116,965,096 and its total liabilities at $135,085,964, the Nassau Guardian reports.
Gomez said he has been confronted with a “considerable amount of critical claims”, which are being reviewed on a case-by-case basis and without prejudice.
According to the report, these claims include death benefits and funeral arrangements; emergency medical services; emergency operations; cancer patient treatment; HIV patient treatments; preventative medical care and critical surgeries.
Gomez’s report — delivered to Supreme Court Justice Cheryl Albury just over a week ago — details the activities he performed since his appointment on February 24 up until the date he presented the report.
The liquidator says in the report that he and his team were alerted to several instances of “key liabilities” not yet recorded in the company’s financial statements, which were significant, including $1.1 million due to reinsurers.
“It is necessary that we pay this amount to continue to keep policyholders covered,” he says.
In court on Friday, Gomez’s attorney, Sidney Cambridge of Callenders and Co., informed that the liquidator had come to an understanding with the reinsurers.
Gomez also informs in his report that CLICO (Trinidad & Tobago) performed the processing of accounting transactions for CLICO (Bahamas) and also compiled its financial reports.
The government of Trinidad and Tobago has now taken over CL Financial Limited (the T&T parent company), and the accounting services formally provided for CLICO (Bahamas) are now suspended pending payment of the outstanding fees owed by CLICO (Bahamas), the report says.
The liquidator informs that from the period December 31, 2008 to the date of the liquidation, it appears that Bahamas-based term deposits of approximately $10 million had been liquidated to settle surrenders of policies.
“The liquidator will review the settlement of these claims with a view to determining the propriety of surrenders to determine that these were not preferential disbursements made to policyholders,” the report says.
Gomez also reports that the loan CLICO (Bahamas) made to its subsidiary, CLICO Enterprises Limited (CEL), of approximately $73 million, is not considered presently collectible and thus endangers the asset base of the company and places policy values in peril.
The report says the Florida real estate CLICO (Bahamas) invested in is not presently considered marketable as a result of the significant downturn in the Florida real estate market.
The liquidator informs that as a result of inter-company loans from CLICO (Bahamas) to its subsidiaries, the company faces severe liquidity problems and is challenged to service its daily operations.
CLICO (Guyana) and CLICO (Bahamas) are both insurance subsidiaries of Trinidad-based CL Financial, which received a bailout because of bad real estate investments and the global financial crisis. CL Financial’s interests include manufacturing, health services, spirits, real estate and energy.

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