The government of St. Vincent and the Grenadines says it is not culpable for the loss of EC$290 million to the Vincentian economy in the collapse of two Trinidad-based insurance giants but that there are “potential opportunities for further recoveries” of those losses.
The 2009 collapse of British American Insurance Co. Ltd (BAICO) and Colonial Life Insurance Co. Ltd (CLICO) resulted in losses of $800 million to businesses and individuals across the eastern Caribbean, BACOL, a group of policyholders from both companies, had claimed in a lawsuit against the government of Trinidad and Tobago.
However, the Trinidad-based Caribbean Court of Justice dismissed the lawsuit in October, ruling that if BACOL’s arguments were correct, “it would mean that the defendant would have been responsible for bailing out all BAICO policyholders in other Caribbean territories”.
“There are at least two potential avenues still active for recovery,” Minister of Finance Camillo Gonsalves told Parliament as he responded to a question from Central Kingstown MP, St. Clair Leacock.
“There’s action by the judicial managers against the estate of a particular individual,” Gonsalves further said, noting that the individual, the late Lawrence Duprey, is well known in the judicial management and a US$125 million judgment had been awarded in the United States against Duprey.
He noted that the judgment was recognised in Trinidad and Tobago but lawyers for Duprey’s estate continue to contest the ownership of assets believed to belong to Duprey’s estate.
“So, there’s a bit of legal wrangling on that US$125 million,” the finance minister said.
He also said there was action by the supervisor of insurance in St. Vincent and the Grenadines against a regional commercial bank.
“The supervisor of insurance in St. Vincent and the Grenadines initiated action against a regional commercial bank for alleged failure to ring-fence certain assets of British American Insurance Company Ltd. and that is currently in litigation. So, it’s not something that I could speak on at the moment.”
Gonsalves said that following a high court order in Barbados on May 12, 2023, a $29.6 million bond has been held by the Supreme Court for the benefit of CLICO policyholders in the Eastern Caribbean.
“This was part of a regional restructuring plan approved in 2015 aimed at converting illiquid assets to liquid funds in satisfaction of policyholders’ claims,” the finance minister told Parliament.
“The release of the bond proceeds was contingent on the transfer of clear title to the remaining Barbados properties that were set aside for the benefit of Eastern Caribbean policyholders.
“However, the release of the bond proceeds was delayed due to title issues with some of the properties. While some properties were transferred, the majority required applications under various land laws in Barbados.”
Gonsalves said the judicial manager has made progress with these applications and was seeking court approval to distribute $24.6 million of the bond proceeds to policyholders.
“A detailed distribution plan is expected to be presented in the Barbados High Court and then subsequently to the High Court in St Vincent and the Grenadines,” he said.
“The plan ensures equal distribution among territories of the $26 million excluding those that have ring-fenced assets, such as St. Lucia, St. Kitts and Anguilla.”
Gonsalves: SVG gov’t not culpable
In his question, Leacock had noted the court ruling and, among other things, asked the finance minister whether there was any culpability by the Vincentian government.
“I can answer the culpability question with one word. It’s ‘no’ but I’ll give you a little more background there,” Gonsalves said.
He said Prime Minister of Antigua and Barbuda Gaston Browne heads a working group within the Eastern Caribbean Currency Union dealing with the recovery of assets through the judicial management process and there is a potential for other small recovery based on certain assets held in Barbados.
“The corporate collapse on Jan. 30, 2009, of CLICO, the largest conglomerate in Trinidad and Tobago and the Caribbean is today the worst financial shock experienced by the region,” Gonsalves said.
He said that 15 years later, “the devastating effects are still being felt as governments within the region continue to work on effective bailout measures to stabilise the financial system, mitigate contagion risk and resolve the CLICO crisis.
“The question of culpability as asked would not permit us to delve, in this particular moment, into the root causes of CLICO’s collapse, or who or what in other jurisdictions may have been to blame, but we can talk in some general terms about the lack of corporate governance at the centre and some of the challenges that it precipitated regionally.”
Trinidad’s insurance law had not changed since 1980s
Gonsalves said insurance legislation in Trinidad and Tobago at the time of the collapse had remained fundamentally unchanged since its enactment in the 1980s.
He said the Central Bank of Trinidad and Tobago had only incrementally updated the regulatory framework governing licensed and registered financial institutions to enhance its regulatory oversight.
“The liquidity challenges experienced by CLICO Investment Bank, which was deemed to be the result of unusually high levels of withdrawal requests, illustrated a serious mismatch between the assets and liabilities.”
He said a third element was that CLICO was also experiencing liquidity problems because of the prevalence of inter-group transactions.
“And finally, the increase in withdrawals at the CLICO investment bank and a near panic at CLICO were attributed to concerns about the impact of the sharp decline in methanol and real estate prices within the portfolio of the entity.”
Gonsalves said other factors identified as central to the financial difficulties experienced by CLICO, included excessive related party transactions which carried significant contingent risks and aggressive high interest rate resource mobilisation strategy to finance equally high-risk investments, much of which were illiquid assets including real estate in Trinidad and Tobago and overseas.
He said there was also very high leveraging of the group’s assets, which constrain the potential amount of cash that could be raised from asset sales in a pinch.
The finance minister told Parliament that because the assets were illiquid, those deficiencies in the operations of CLICO highlighted the inadequacies of the legislative framework in Trinidad and Tobago at the time.
He said that in 2009, Port of Spain still did not have the authority to conduct on-site investigation supervisions or share information with other regulators.
“As recently as 2009, the regulatory structure in Trinidad and Tobago did not permit the level of information sharing and on-site supervision that is now commonplace across the region,” Gonsalves said.
“The operational weakness is pinpointed to underlying causes of CLICO’s collapse, namely the need to change its current business model and adopt a more robust and less risky model and to change its corporate governance structure.
SVG’s legislation enhanced
He said the collapse of CLICO underscores the need to strengthen the regulatory framework and insurance industry in the currency union.
Therefore, the insurance legislation in SVG has been enhanced with respect to the insurance fund requirements, establishing more effective protection of policyholders,” Gonsalves said.
He noted that the Financial Services Authority (FSA) was established in 2012 to regulate certain entities and businesses in the financial sector, including insurance companies.
“The FSA’s powers and duties include the conduct of fit and proper assessments on the board of directors and senior management of its licensed entities conduct of surveillance and on-site examinations,” Gonsalves said.
The finance minister said the FSA Act will be amended soon to promote further a more cohesive, consolidated supervisory approach, which will allow regulators to share information better, identify emerging risks across the region and advise the authorities on the identification of firms whose failures could pose systemic threats to the financial stability of the region, as was the case in the CLICO-BAICO collapse.
Gonsalves further said the college of regulators in the Caribbean was established following the CLICO debacle to strengthen regional regulatory frameworks and improve oversight of financial entities, especially those with cross-border operations.
“These measures have significantly improved the stability and resilience of the Caribbean financial sector,” Gonsalves said.
I say as Minister of insurance Gonsalves and his government are culpable
They negligently accepted worthless bonds from the bank then amended the law yet allowed the bank to escape
The law suit is now a farce languishing before the court of appeal like the $1 Bequia case
Government must compensate policy holders. This included ‘ governmentt’ organizations!
That will never happen. The governmenr failed to secure peoples money and thats it. This is a ploy to hoodwinked people.now that an election is close.
some people tell so much lies that they themselves believe dem own lies, de people still waiting to know wen their bus is coming, ar. yo put things at bus stops fo continue fool the fools eh. Can just imagine how Ar yo does laugh 😂 at poor people.