You are here
More Clico info needed
The Government in general, and Minister of Finance Winston Dookeran in particular, should be commended for starting the process of transferring monies to the policyholders of Clico, who invested up to $75,000 each in the insolvent insurance company. In a statement issued this week, the Ministry of Finance announced that it had paid out about $33 million to some 1,053 eligible holders of Clico’s Executive Flexible Premium Annuity with investments of $75,000 or less. Although there have been delays in the payments—with the Minister of Finance promising disbursement before Christmas, then before the end of 2010, and finally before Carnival—it is quite likely that those who have received funds and will continue to receive funds are grateful to the Government. The start of the process to pay off those policyholders with up to $75,000 invested in the short-term annuities came more than two years after Clico collapsed in January 2009, with a deficit in its statutory fund, which was first determined to be $5 billion.
It is accepted that the collapse of the insurance company was the result of a deadly cocktail of corporate adventurism by the owners of Clico, regulatory inertia by the Central Bank, which were topped off with the delay by the previous administration to implement its plan for the resolution of the financial institution. All of these factors—plus the significant scale, scope and reach of Clico—meant that it was left to the current Minister of Finance, Mr Dookeran, to come up with a plan to pay off the policyholders. Mr Dookeran’s initial resolution proposal, which was outlined in the September 8, 2010, budget speech, was that the Government would make an initial partial payment of up to $75,000 to all of Clico’s policyholders and mutual fund investors. The Minister of Finance estimated that there were 10,000 policyholders and mutual fund investors with sums of $75,000 and less. Mr Dookeran also proposed that those whose principal balances exceeded $75,000 would be paid by a Government IOU amortised over 20 years at zero interest. In an advisory to Clico policyholders on February 25, the Ministry of Finance made it clear that payments to holders of Clico and British American short-term investment products would be made in phases with the first phase going to those holding EFPAs of up to $75,000. “Thereafter, subsequent payments will be made to mutual fund holders, credit unions, trade unions, and to contract owners whose principal balance exceeds $75,000,” according to the advisory.
While we commend the Government for addressing the first phase of this payment process, we recommend that the Ministry of Finance should do more to inform others holding Clico and British American policies about the status of their payments. It would also be appropriate for the Minister of Finance to provide the public with some up-to-date information on the financial status of the companies and their respective statutory funds, which are supposed to protect policyholders in the event insurers get into financial trouble. It would also be appropriate for the Ministry of Finance to provide the public with current information on the best estimate of the cost of the bailout to taxpayers. Everyone agrees—those in favour of and those against the minister’s resolution proposal—that taxpayers have a huge stake in Clico and British American. This is because the previous administration provided the insurance company with a $5 billion bailout and the proposal by Mr Dookeran is likely to cost more than $10 billion over 20 years. It is not unreasonable for taxpayers to be kept informed about the disbursement of funds from the Treasury on what is, after all, a private company with a small number of shareholders.
User comments posted on this website are the sole views and opinions of the comment writer and are not representative of Guardian Media Limited or its staff.
Guardian Media Limited accepts no liability and will not be held accountable for user comments.
Guardian Media Limited reserves the right to remove, to edit or to censor any comments.
Any content which is considered unsuitable, unlawful or offensive, includes personal details, advertises or promotes products, services or websites or repeats previous comments will be removed.
User profiles registered through fake social media accounts may be deleted without notice.