BASSETERRE, St. Kitts – GOOD news has finally reached policyholders and depositors in the British American Insurance Company (BAICO) as Governments of the Eastern Caribbean Currency Union (ECCU) make plans for a new entity to assume the life of the insolvent insurer.
This announcement was made on Monday (Nov. 2) following a series of meetings of the Eastern Caribbean Central Bank’s Ministerial Sub-Committee on Insurance, which is geared to aggressively bring resolution to the matter.
While detailed information about the new company has not been finalized, a press statement from the ECCU Governments indicates that the proposed new company would have its headquarters in the Eastern Caribbean and would take over the life insurance, medical insurance and annuity business in the BAICO’s branches throughout Eastern Caribbean.
Earlier this year, the Trinidad-based parent company of BAICO, the CL Financial Group, encountered critical liquidity problems that sent the company, as well as its regional subsidiaries, teetering with a threatening risk of exposure for thousands of policyholders across the ECCU.
By the end of July, regulators in the ECCU made swift interventions in the operations of BAICO and applied to Courts in the several jurisdictions to appoint judicial managers.
Liabilities of the BAICO branches in the Eastern Caribbean, according to reports from the judicial managers, totalled EC$1.05 billion, EC$842.4 million of which is due to annuities or investment contracts. As of June 30, 2009 the company’s deficiency was stated as EC$775 million.
The revelations from the reports are considered troubling by most financial experts, as only an approximate EC$30 million of assets have been set aside in the Eastern Caribbean.
Questions relating to corporate governance arose as it was revealed that monies from BAICO policyholders within the Eastern Caribbean were used to fund what the judicial managers deemed to be “risky real estate investments in Florida and elsewhere”.
“Without a substantial capital injection, policyholders and investors would suffer tremendous losses,” the release stated. “The ECCU governments are pleased to announce that we have agreed upon a strategy to assist the Judicial Managers in the structuring and funding of the proposed new entity to take over certain assets and liabilities of BAICO in the Eastern Caribbean.”
Consistent with the principle of crafting a solution that is regional in nature, the new company will be capitalized by ECCU Governments, the Government of Trinidad & Tobago, the Government of Barbados and one or more strategic investors.
Policyholders may also have an opportunity to obtain equity in the new company, according to the report.
Regulators have been committed to avoid liquidation of the company as, through this is an option, policyholders “will not be paid in full” if that happened. Therefore, the new entity is expected to offer policyholders and investors the potential for recovery of a greater portion of their assets and investments.
Policyholders are asked to be patient as much work remains to be done. The plan has to first be approved by the Court before the entity is established.
However, the ECCU has placed its optimism on record as the governments wish to see the new company set up within six months of Court approval of the plan.
