BASSETERRE, St. Kitts – AS CL Financial Group insurance subsidiaries CLICO and British American continue to experience liquidation problems as a result of the parent company’s financial demise, panicked depositors are now realising that regional governments can do little to protect their investments thanks to antiquated insurance laws.
In an exclusive interview with SKNVibes, Minister of Finance, International Trade and Commerce Hon. Dr. Timothy Harris explained that each country has its own statutory requirements in relation to insurance. These statutory funds that act as safety nets for depositors, policy holders and investors have recently been found to be grossly inadequate and federal laws pertaining to insurance companies have not advanced with the modernisation of this sector.
Dr. Harris admitted as much, saying that the statutory requirements are not “sufficiently strong” in many countries of the region, noting that in the case of St. Kitts-Nevis, the legislation relating to statutory requirements dates up to about the 1960’s. He said it would not have foreseen the “magnitude of risk related to modern insurance and would have been deficient in stipulating the amount for statutory funds”.
“More modern insurance legislation calculates the amount for statutory fund by matching the company’s assets with its liabilities. However, ours speaks to putting up a percentage of our [the company’s] premiums which would never be equivalent to its assets. This is why we hope to revise our regional legislative response to have a modern-day harmonious Insurance Act.
“For now, the Government of Trinidad and Tobago is effectively in control of the assets of the CL Financial Group. Part of the dilemma is that in the Organization of Eastern Caribbean States, at least to our knowledge, the level of investment is still very limited. So, its asset base within the island is insignificant relative to its indebtedness.”
Dr. Harris explained that the assets of CLICO in the OECS are owned by CLICO Holdings in Barbados while the assets of British American are owned by CL Financial in Trinidad and Tobago. He indicated that although CL Financial has assets in a number of countries in the Eastern Caribbean, “there are things that we can do so that no one attempts to make any claim on the assets”.
He conceded that government take-over is not a “doable” option as the companies’ liabilities outweighed their assets.
“If we take over these companies, then we would automatically agree to take over the company’s indebtedness and we all know that currently what they have is less than what they owe. So our best response is to work collectively to negotiate the best possible deal.”
Harris informed that since local customers of the insurance companies are likely to face difficulties, “the governments of Trinidad and Tobago and Barbados have accepted that to some measure, protection ought to be forthcoming and they are committed and prepared to help to minimize the fallout”.
