HAMILTON, Bermuda — Thousands of life insurance policyholders of the defunct Bermuda branch of the British American Insurance Company (BAICO) will get back a maximum of 50 cents on the dollar of the value of their policies, according to the liquidator’s agents.
The level of payouts depends partly on how much is raised from selling the British American building on Front Street, Hamilton, which is for sale at an asking price of US$3.6 million. The building is 40 per cent owned by BAICO and 60 per cent owned by the BAICO Bermuda pension scheme.
The Supreme Court of Bermuda is due to consider the so-called scheme of arrangement — the document which proposes a plan on how the 6,000 existing policies can be settled with the 3,800 policyholders.
If the court approves it, and if creditors vote in favour of the plan at a scheme meeting on May 19, cheques could start being sent out as soon as August.
BAICO is a branch of British American Insurance Company Ltd., a Bahamian company with operations throughout the Caribbean.
The team from KPMG Advisory Ltd., appointed by the official receiver to oversee the BAICO liquidation, said calculations of payments were based on actuarial valuations of the policies carried out over the past year.
“People will have the ability to challenge our valuations through a scheme adjudicator,” Mike Morrisson of the KPMG team said.
Morrisson described some of the complexities involved in bringing the British American saga to the brink of closure, after a challenging 20 months. The branch went into receivership in August 2009.
The first efforts had been directed at ensuring health insurance clients had continuing cover, something that had been achieved through the formation of a liquidity bridging facility by government, before Bermuda-based company Argus took on the clients.
A similar solution had been sought for the life insurance policies, some of which had been in force for decades. But despite exhaustive efforts, there were no takers among local insurance companies.
While these efforts were under way, policyholders were advised to continue to pay their monthly premiums to ensure their policies remained in force in case a transfer to another insurer was possible, with the promise that the premiums would be fully refunded if no alternative carrier was found.
Premiums from that one-year period totalled around $2.5 million and refund cheques were cut late last year. Many of those entitled to that money have not dropped in at the British American office to pick it up. Morrisson said that, as of February 11, 277 people had yet to either pick up or bank cheques worth a combined $220,000.
BAICO’s assets in Bermuda, including the stake in the building, are around $11 million and its liabilities are $21 million.
