The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government and its financial regulators were yesterday accused of “running for the hills” over CLICO (Bahamas) , an outspoken attorney arguing that any other country would have initiated a formal inquiry into its collapse.

Paul Moss told Tribune Business that successive administrations had “refused to learn the lessons” from the insurer’s 2009 insolvency, and few Bahamians had confidence that the financial services industry was now protected from similar failures in the future.

With more than 13,000 CLICO (Bahamas) policyholders and annuitants still waiting to access their life savings and investments, and medical policyholders now on the verge of having their coverage cancelled, Mr Moss said the debacle showed the Bahamas needed more rigorous, aggressive financial regulators.

“It says that those charged with regulation to ensure these events don’t take place were, at best, asleep at the wheel,” Mr Moss said. “You look at the Registrar of Insurance, the Central Bank of the Bahamas, and you have to ask how they [CLICO] can get away with it.

While the then-Registrar of Insurance was CLICO (Bahamas) primary regulator, the Central Bank of the Bahamas apparently failed to monitor - and prevent - the insurer moving Bahamian policyholder and annuitant funds out of the country.

Craig A. ‘Tony Gomez, the Baker Tilly Gomez accountant and partner, has repeatedly suggested in his liquidation reports that CLICO (Bahamas) transferred some $73 million outside of the Bahamas without first obtaining exchange control approval from the Central Bank.

Asked what lessons needed to be learnt from CLICO (Bahamas) collapse, Mr Moss replied: “Clearly, that we need to have a better approach to regulation.

“They have not even had a study done to determine how CLICO found itself in that position; how CLICO, notwithstanding they had two regulators, did what it did.

“When you have those studies done, you transfer the lessons into policy. I’m not sure what lessons have been learnt from it. I think everyone’s running for the hills, as they don’t want these studies done.”

Public inquiries are traditionally held by countries with similar legal systems to this nation into financial collapses of the magnitude of CLICO (Bahamas). Trinidad & Tobago, for instance, held a long inquiry into the collapse of its parent, CL Financial, with numerous witnesses and documents presented to the investigators.

Such inquiries are typically placed under the care of a former judge or senior attorney, as happened in the 1984 Commission of Inquiry and early 1990s investigation into how various public corporations were operated under the Pindling administration.

However, no similar commissions or public inquiries have been subsequently held into financial collapses, such as those of CLICO (Bahamas) and, before it, Gulf Union Bank (Bahamas), despite their devastating effects on the well-being of hundreds of Bahamians.

Mr Moss yesterday suggested the Government and financial regulators might not want to hold a public inquiry into CLICO (Bahamas) collapse for fear their actions, or inactions, might be exposed to public criticism.

“Because of this failure, no one can say with any degree of certainty that it will not happen again, with no lessons learned so far,” Mr Moss told Tribune Business.

Suggesting that the same could apply to the $3.5 billion Baha Mar project, Mr Moss reiterated: “How do we learn from them? What steps have we taken to ensure this does not happen again? They refuse to learn.”

This nation is not exceptional when it comes to financial institutions collapsing/failing, as such events have occurred throughout the world. The Bahamas, though, appears to fall down in how it responds to such events, with few - if any - people held accountable for the losses suffered by both Bahamian and foreign clients.

Mr Moss, who represents former CLICO employees, said he had heard nothing from the Christie administration since the Prime Minister himself personally laid out the proposed CLICO resolution back in late June 2015 - just before Baha Mar’s Chapter 11 bankruptcy protection filing.

Describing this as “the last time I had any official contact with the executive”, Mr Moss said his confidence then that the Government was about to finally deliver on its promises had been shattered subsequently.

“When you look at it, I had every confidence then that they had given the matter some consideration and their plan was afoot to make it right,” he told Tribune Business.

“But, like everything else, it frittered away and I don’t think there’s any intention to help these people. The liquidation process will run its course, and that’s what’s happening now.”

Rather than the Ingraham administration’s initial $30 million guarantee, the current government is dividing CLICO (Bahamas) clients into annuity holders and insurance policyholders.

The last proposal was to pay out annuity holders with products worth less than $10,000 or less. Those holding annuities worth $10,000 or more will get that sum up front, and be paid the rest in government bonds with a seven-year maturity.

Former CLICO (Bahamas) employees also will be paid the severance pay and pension benefits due to them, while insurance policyholders will be transferred either to a new underwriter or special purpose vehicle (SPV) created by the government.

Mr Moss, though, said the Government appeared to have baulked at incurring these costs.

“They saw how much had to be paid, and I don’t think they had the stomach, the courage, to do that,” he added.