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Leader of the Opposition Arnhim Eustace (file photo).

KINGSTOWN, St. Vincent – The person who wrote a letter published in at least two of last Friday’s newspapers about Opposition Leader Arnhim Eustace being wrong about the National Insurance Service (NIS), doesn’t have a clue about how the institution functions, Eustace said on radio yesterday.

“R. T. Luke V. Browne”, in the letter published in Searchlight and The News, said that Eustace and “his apologists and sympathizers have … demonstrated tremendous irresponsibility and scant regard for the truth” in commentary about the financial health of the NIS.

Browne singled out “Kenton Chance” and “I-Witness News”. However, the same facts published by I-Witness News were also published in a Searchlight article.

Browne said that Eustace was wrong in saying that according to the latest actuarial review, released in 2008, unless the 8 per cent contribution rate is revised, the NIS would not have enough money to cover its expenses after 2016.

He said that the actuarial projections show that the NIS could meet its obligations to pensioners and other operational expenses without reform up to around 2040.

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Eustace was wrong in saying the NIS stands to lose $62 million as a result of the collapse of British American Insurance Company (BAICO) and Colonial Life Insurance Company (CLICO), Browne further wrote, adding that it is also improper to describe the NIS’ net income as profit.

But Eustace, who was chairman of the NIS for four years, pointed to the International Monetary Fund (IMF) Article IV Consultation report of December 2011.

That report, which quotes the 2008 actuarial review, says, “in the absence of parametric reforms, the contributions collected will not be sufficient to cover expenses after the year 2016, and investment income will have to be used as a supplement. The review also showed that reserves are projected to start falling in 2027 and will be depleted by 2040”.

Eustace, a former prime minister and minister of finance, said that in normal circumstances, the NIS uses the contributions it receives to cover its expenses.

“He (Browne) is trying to make do that that is something strange. That is how it is with those systems because the rest (investment income), you want to put in reserves to help cover the scheme over a long time,” Eustace said

He further stated that according to the report, the NIS would therefore have to use the income from its investments to cover its expenses.

“So I don’t know what he is trying to say. I am not misleading anybody or misinforming anybody,” Eustace further said, adding that the NIS is losing investment income because of the BAICO-CLICO debacle.

“You can’t count them. And the NIS itself is providing in its accounts for its losses associated with its investments, including the British American and CLICO investments,” Eustace further stated.

He said that is why the NIS “profit” fell from EC$27 million in 2008 to EC$5.6 million in 2010. “I know it is net income. But not everybody in the street would understand when you say net income. So I say ‘profit.’”

He said that while Browne concentrated on the 2027 and 2040 projections, the NIS could meet its commitments up to 2040 if it uses all its investment income also.

“… I don’t know what sort of foolishness he is talking about. … He doesn’t understand. He doesn’t have a clue. … People just run and write about things they have no knowledge about. And [he] is calling Kenton Chance, because he repeated something I said, … reckless.”

Eustace was also concerned about how National Properties Ltd., a state-owned company, would repay the EC$50 million it owes to the NIS.

He the NIS will have to increase its rates, adding that three years ago, when contributions were increased to 8 per cent, it was initially recommended that they be increased to 11 per cent.

“… the longer you wait, the more you would have to put on. So more money will have to be deducted from people’s salaries. … I was chairman of the NIS for four years. I have a pretty good idea of what is involved in running that institution.”

Browne, Eustace said, cannot be sure that the NIS is going to get back $30 million of its investment in BAICO-CLICO, which is now advertising for a company to take over its general insurance portfolio.

“There is no solution proposed for that up to now. The hope is that the company, which you ain’t set up yet, will eventually become profitable and you get back some money,” Eustace said.

Half of the annuity holders, who invested their gratuity in BAICO-CLICO would be dead by the time a new company become profitable, Eustace said.

“So what foolishness is he talking about? Get back and get back when? When they are all dead? … This is no game where people write letters because they want to write letters. This is the livelihood of Vincentians and other people in the OECS …”

Eustace said that while he does not normally respond to letters in the press the NIS “is a very, very serious matter on which I have been speaking for years.

“And I take strong objection to that kind of foolishness that is written in the papers, trying to fool the public of St. Vincent and the Grenadines.

“Whoever Luke Browne is, don’t write those kinds of foolish letters in the newspaper. Think of those people today. Maybe if he is one [of those annuity holders] he would have a different understanding of the situation. Those are who we have to think about in this and ensure that it never happens again,” Eustace said.

Eustace said he believes the government should float a bond issue to pay some of the monies owned to the Vincentians policyholders.

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