Sunday, April 21, 2024

THE ISSUE: Proper regulation critical to success


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For CLICO INTERNATIONAL?LIFE policyholders throughout the region, the future is very uncertain.
And investors, regardless of where they have deposited their money, are more concerned than ever about the safety of their investments.
CLICO policyholders pricked their ears from as early as January 2009, when the government and Central Bank of Trinidad and Tobago bailed out CL Financial – the parent company of CLICO Holdings Barbados, Colonial Life Trinidad and British American Insurance.
At the time, CLICO Holdings Barbados Limited chairman Leroy Parris quickly sought to allay their fears and gave them his assurance that the local company was well run, its investments were safe, and there was no need to panic.
 However, in March 2010 then Prime Minister the late David Thompson announced that CLICO would be placed under judicial management after a Government-appointed oversight committee found it impossible to find a buyer for the company.
It was also announced that Cabinet had approved a multimillion-dollar bailout for the individual investors in Barbados and across the Eastern Caribbean.
Under the plan, which does not include companies or institutions which have invested funds, Government will control CLICO’s assets for more than a decade.
The decision to go the route of judicial management, which many felt should have been the first course of action, did little to convince policyholders their investments were safe.
And according to the February 7 DAILY NATION, Minister of Finance Chris Sinckler said the task of cleaning up the “mess” at CLICO must await the appointment of a judicial manager by the court.
He said the Freundel Stuart administration would remain stymied when it came to what it can say and do about CLICO until there is court action.
But once that happens, Government will seek to ease people’s fears about the CLICO debacle and explain what’s being done to protect hundreds of millions of dollars in investments in Barbados, he reported.
Sinckler pointed out that having decided to place CLICO under judicial management, Cabinet must await the appointment of a manager before he, as minister, can outline Government’s plans. That appointment was to have been made in a few weeks.
He said reports that people were withdrawing money from CLICO were “absolutely not true”.
“There is no wild set of circumstances going on as far as CLICO is concerned,” he commented.
“They have not been allowed by the Supervisor of Insurance to write new business and that continues to be in force.
The minister pointed out that when the judicial manager assumes control of CLICO’s assets and operations, limits would be placed on Government’s ability to intervene.
In 2009 some key players in the local insurance industry said Government’s apparent delay in taking decisive action on CLICO Life could jeopardize the future of the entire industry here.
In the September 20, 2009 SUNDAY SUN they called on Prime Minister Thompson to effect a Government takeover of the company to safeguard the interests of stakeholders and preserve trust and confidence in the sector.
“We are concerned about the problems at CLICO, and it is affecting some of the other major players in the industry,” one insurance executive said.
Industry players added that CLICO staffers were saying that they were finding it “extremely difficult” to sell insurance products to the burgeoning middle class, forcing them to target lower-income people who were traditionally less informed and usually do not have a lot of disposable income, particularly in light of the continually rising cost of living.
The executive said there was a feeling of unease in the industry.
“I have met people who have retired and who have gratuities and would like to invest [them], but because of that situation they are ‘push-and-pulling’ and appear to prefer to put their money into the banking system where there is only about a 3.25 per cent interest return.
“And some of them can do better, even with an investment like an income fund which is earning something like 7.14 per cent a year.
“You can’t want it better than that, and that is a safe fund,” the executive said.
Concern about the local insurance industry was also raised by the International Monetary Fund (IMF), which urged Government to be quick and decisive in resolving the problem with CLICO Barbados.
In its Article IV Consultation, the IMF said Government should develop a contingency plan, “should the current approach of selling the subsidiaries of CLICO Barbados to private investors prove unsuccessful”.
The IMF said this would help mitigate the potential impact on the already high public debt, on financial sector soundness and on investor confidence.
Meanwhile, accountant and president of the Barbados Association of Corporate Shareholders Doug Skeete advised Caribbean leaders to update legislation regulating commercial and investment activity in order to minimize financial upsets.
 “In order that people don’t lose confidence, they have to ensure that there is proper regulation of these banks,” he said in the February 2, 2009 BARBADOS BUSINESS AUTHORITY.
He pointed out that while such action was rarely taken until a crisis occurred, regulators and regional governments should act with haste in the current circumstances in order to maintain consumer and investor confidence.
He said the management of CL Financial and its subsidiaries such as CLICO and Caribbean Money Market Brokers should schedule regular discussion forums on the state of financial institutions to ease anxiety among its clientele.
Last month CLICO International Life Barbados and the Organisation of Eastern Caribbean States announced a redoubled effort to improve the company’s level of communication with its policyholders and the public.
It was noted that the Policyholders’ Response Team has been increased while agents had been sending out letters to policyholders, meeting with them and answering their queries on a one-on-one basis.
CLICO has also taken measures to improve accessibility by creating a hotline for policyholders.
CLICO International Life President Geoffrey Brewster explained, “Even though agents and customer service personnel have been available to answer queries over the last year, we will add another dimension to our customer service by establishing a dedicated CLICO Policyholders Hotline for Barbados and the OECS.”
While such measures may give investors the opportunity to have their questions answered, the fact that there is still no definite word on what is going to happen to their savings will cause concern for both current and potential investors.


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