The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government yesterday unveiled the next steps in bringing resolution for CLICO (Bahamas) long-suffering policyholders, which include the creation of a new insurance vehicle and $45 million bond issue.

The Christie administration, in a statement, confirmed that a special purpose vehicle (SPV) to be called Coral Insurance Company is being formed to hold CLICO (Bahamas) insurance policies that remain in effect.

The SPV, which will be licensed and regulated by the Insurance Commission of the Bahamas (ICB), will be set up by the second week of November and hold the remaining insurance portfolio until it is purchased by another insurer.

However, it appears that the taxpayer has some exposure to Coral Insurance, as the Government has agreed to provide “capital support” to cover the ‘gap’ between its assets and policy liabilities.

Coral Insurance’s creation will trigger the second phase in the Government’s plan, which is its issuance of $45 million worth of bonds to help compensate CLICO (Bahamas) former Executive Flexible Premium Annuity (EFPA) holders and those who surrendered their pension policies.

The bond issue, as previously revealed by Tribune Business, will be handled by Leno Corporate Services. The bonds will be issued in exchange for, and replace, the pledges issued to former CLICO (Bahamas) clients owed more than $10,000, and who received their first cash payments in February 2016. That collective payment totalled some $13.1 million.

Paul Moss, an attorney representing several persons who were caught up in CLICO (Bahamas) February 2009 collapse into insolvency, said yesterday he was “hopeful” that the Government would finally deliver on its promised resolution.

He added, though, that since it was more than seven years since the insurer fell into court-supervised liquidation, he would adopt a “wait and see” attitude.

“I think in this whole process one would have to wait and see whether anything actually takes place,” Mr Moss told Tribune Business. “This is something that has lasted seven to eight years.

“There are concerns about the length of time this matter has taken, and that it has not been brought to a conclusion.”

Mr Moss suggested that the Government has moved on a CLICO (Bahamas) resolution because it wanted to “ward off” the increasing disillusion among the insurer’s former clients and policyholders, and stop this adding to the increasing disaffection with its policies and direction.

He added that most would prefer to receive a cash payout, rather than then seven-year bonds which will carry an interest rate carry equivalent to Bahamian Prime (4.75 per cent), and pay dividends semi-annually.

The Government, acknowledging that the bond issue would be more almost two months later than advertised, having initially said it would occur on September 30, said interest would start to accrue as of October 1. The first interest payment is due on March 2017.

Mr Moss, meanwhile, again queried why no public inquiry had been held into CLICO (Bahamas) collapse, given that it had negatively impacted the lives of hundreds of Bahamians and their families.

He suggested that there had been “no attempt to learn lessons”, suggesting that the Government and financial services regulators, the Central Bank of the Bahamas and Insurance Commission of the Bahamas, had failed to properly supervise the failed insurer.

CLICO (Bahamas) was able to move some $73 million outside the Bahamas without first obtaining Central Bank exchange control approval, while the Insurance Commission (in its former guise as the Registrar of Insurance) was the company’s primary regulator.

Arguing that a public inquiry should have taken “precedence” over many other recent government initiatives, Mr Moss said: “This should not happen again, and because the Government and regulators were culpable in what took place, they don’t want an inquiry because they don’t want fingers pointed at them.

“The regulators fell by the wayside. They now want it to be shipped away without any inquiry as to how it got into this position in the first place.”

The Government, in its announcement yesterday, said Coral Insurance would be licensed under the Insurance Act 2005.

“The insurance license for Coral is currently being processed and is expected to be completed by the second week of November 2016,” it confirmed.

“The Government will provide capital support to the ‘SPV’ to cover the liabilities with assets which are admitted by the Insurance Commission of the Bahamas (ICB) for solvency purposes

“Policyholders with active/in-force policies should therefore continue to make their premium payments in accordance with their policy contracts to ensure that they continue to receive coverage and benefits under their policies.”

The Government explained that Leno would place the $45 million bond issue as soon as Coral was licensed.

“The proceeds of the bond offering will be earmarked for issuance to qualified policyholders of CLICO in exchange for promissory note letters issued by the Government, reflecting residual claim balances owing following the partial claims payout exercise in April 2016,” the Government said.

“In fulfilling its commitment to policyholders, Coral through its issuing agents, Leno Corporate Services, will make available for exchange the relevant book stocks during the second week of November 2016. A separate notice regarding the swop/ exchange exercise will be sent out at a later date.”