Governments foot US $80M CLICO bill

BASSETERRE, St. Kitts – GOVERNMENTS of the Caribbean have returned a sense of hope to investors and depositors in the CLICO and British American (BA) Insurance Companies by handing them, and other businesses facing liquidity issues, an unprecedented US $80M in recovery funds.

Over the last three months, the Caribbean’s financial sector, particularly that of the Eastern Caribbean Currency Union (ECCU), has suffered massive job cuts and significant declines in economic growth due to the global financial crisis. 

This was further compounded in early January when the CL Financial Group faced liquidity challenges that resulted in subsidiaries CLICO and BA not being able to meet the demands of depositors wanting to withdraw funds.

Last Thursday (Apr. 2), Ministers of Finance and financial secretaries from the ECCU, Trinidad and Tobago and Barbados, along with officials from their respective central banks, met in Antigua to identify a regional solution to protect the interests of depositors and investors. 

Speaking to SKNVibes, St. Kitts-Nevis Minister of Finance, Commerce and International Trade Hon. Dr. Timothy Harris informed that the member states resolved to contribute to the establishment of an US $80M Liquidity Support Fund, which would provide the necessary liquidity to the financial sector of the ECCU—particularly CLICO and BA.

The Government of Trinidad and Tobago pledged US $50 million via the CARICOM Petroleum Fund, the Government of Barbados would contribute US $5 million and the ECCU Governments are expected to collectively contribute US $10 million. The Government are further expected to raise US $15 million by way of regional and international organizations, such as the World Bank. 

“The US $10 million is the amount the [ECCU] has to contribute collectively,” Harris explained. “This is to meet immediate cash needs in the financial sector of the region.”

He noted that the decision to keep the insurance companies afloat is “critical”, describing the Liquidity Support Fund as the “best solution for an amicable and equitable resolution of the matter”. Harris stressed that the additional liquidity may not instantly return the companies to normalcy, and a special focus on rebuilding confidence in the region’s financial sector would have to be made. 

“This is not only to protect our depositors, but it is also critical to keep the two companies from going under. At this point we are not even contemplating failure for these companies, as this may mean that many of our local depositors would walk away losing their investment. And so, this fund is expected to avoid such loss.   

“This effort should contemplate a reconstruction of people’s lives,” Harris opined. “Just as an individual preserving his/her life is always better than losing it, [CLICO and BA] may not return to the perfect condition, but it is better than closing. It will take some time for these companies to get back to their full, normal position. We hope that we will arrive on something better than it now stands,” he added.

Harris urged local depositors to be patient with the serious efforts that are being made to broker an arrangement toward the best possible solution. 

He stated that, at the moment, there are no guarantees for depositors in the companies, but stressed that governments of the region believe that the Fund, if given a chance, is the best way forward for resolving the matter.

Although Harris noted that the Fund has been endorsed in principle by the International Monetary Fund and the International Financial Corporation, details concerning the distribution of funds across the ECCU and a timeframe in which the contributions are to be made are yet to be finalized by a technical committee.