SOME PENSIONERS could find themselves penniless as a result of a reported multimillion-dollar plan to salvage personal investments in CLICO International Life Insurance Company (CIL), says former Prime Minister Owen Arthur.
Arthur’s comments came yesterday following reports that a Government initiative to recover individual investments in the company would not include the investments of companies and institutions.
Arthur told the SUNDAY SUN there were individuals whose pensions would have been invested by companies and institutions in CLICO annuities and their plight was a significant part of the problem that would remain unresolved.
“A large number of institutions would have in good faith made that investment, and just to say that they should have read a prospectus or should have done their due diligence . . . standing on a formal process. The fact is that there is still a human face to this.
“I would not like to be one of those persons whose institutions would have invested my pension in CLICO annuities,” he said, stressing he was speaking having not seen the prepared document on the issue.
According to reports, CLICO will be placed under judicial management and Government will accept responsibility for individual investment in the Executive Flexible Premium Annuities [EFPAs] of $314 million, less an estimated $6 million in related party investments to offer protection to individual investors.
Government is also expected to offer individual investors a $25 000 bond with two per cent interest at a cost of $44 million.
Yesterday one official source, who asked not to be named, told the SUNDAY SUN that Cabinet was yet to approve the bail-out package even though it was under active consideration.
Details of the proposed package are said to be contained in an information note discussed by Cabinet two Thursdays ago under the chairmanship of Prime Minister David Thompson.
The source said it was clear Government could only guarantee the principal of individual investors. The source added: “Government is not obligated to bail out anybody. With investment comes risk.”
Commenting on the plight of the institutional investors, the source said they had been advised that EFPAs were only to be sold to individuals but many of those investors went ahead and purchased them anyway.
However, Arthur chided Government for waiting over two years to take the steps the Opposition Barbados Labour Party had suggested when CLICO’s financial meltdown was first publicised.
“We said then you could not have an informal approach to this matter when there was a clear process built into the Insurance Act. The Government needs to explain why it went the alternative route rather than by way of the Insurance Act . . . ,” he said.
Arthur added: “. . . One wonders by how much have the assets of the company that now has to be sold to settle this matter, by how much has it deteriorated? How much has the existing management benefited in the period when they were allowed to be in place?”
He said Government had to find $44 million to pay individual investors who held annuities and there were no provisions for it in the Estimates or the Medium-Term Fiscal Strategy which he said he had previously described as a “hoax”.
Arthur noted both the Governor of the Central Bank Dr Delisle Worrell and Attorney General Freundel Stuart had given assurances that “all investors” would get back their money. But now Government’s plan was limited to individual investors.
He said in the final analysis it appeared as though the matter would be decided by the law courts.
“What is intrinsic here is that Government is making a decision to appoint a judicial manager and one would think that the decisions in respect of the settlement of the issue would depend on what that judicial manager presents to the courts and then what the courts decide.”
But he added if Cabinet had made a final decision on the matter, there would be no point in having a judicial manager.
Arthur stressed that “heads” at CLICO should have “rolled”, but none has and Government’s initial response seemed to have been to see how best it could have protected the company’s management rather than the public’s interest.
