There is an ongoing pattern of behaviour in the CLICO debacle associated with two prime ministers, the Minister Of Finance, the Governor of the Central Bank and the Financial Services Commission (FSC), which suggests that the policymakers have put the concerns of CLICO above those of the individual investors.
The obvious political ties have been identified by the prime ministers themselves in their public utterances about the former CEO. These utterances mattered when the pillars of justice were in the background, but things have certainly changed.
Former Prime Minister David Thompson boldly declared that the local CLICO was being well managed and approved a contribution of $10 million to CLICO Mortgage and Finance Company (CMFC). In the absence of a forensic audit, the Central Bank agreed with the pouring of the money into CMFC. In the face of all that has transpired with pending layoffs at the bank, the efficacy of the bank’s actions is up for serious evaluation.
In early 2012, Prime Minister Freundel Stuart suggested that “there is nothing in the [forensic audit] report, quite frankly”. He was referring to the forensic audit at CLICO that was available then and oddly enough is not available to policyholders even now. Since there is nothing in the report, the question is, why can’t it be made public?
This brings me to the actions of the FSC. In the same 2012, it was noted by the Government that the time frame for a CLICO resolution was the end of 2012. It was further recognised that the supervisory/regulatory needs in the non-bank sector call for urgency to bring the FSC into operation.
“The collapse of CLICO and BAICO [British American Insurance Co.] bring to the forefront the weakness of the insurance supervisory system, also responsible for supervising offshore companies. Barbados faces urgent needs to address weaknesses in the insurance regulatory environment.”
New entity
The main intent of the FSC was to protect the interests of policyholders. However, their interests are now to take the back seat once again in the interest of forming a new entity named New Life Investment Company Inc. (NLICO); the soul of the Government may be willing but its pockets are empty.
In the circumstances, it is puzzling that “the FSC does not want the forensic report unsealed because it fears information contained in it could adversely affect the Ministry of Finance’s efforts to get NLICO off the ground and eventually sold”, according to the SUNDAY SUN of February 8, 2015.
If the assets of CLICO International Life Insurance Limited (CIL) are to be sold to form NLICO, then whoever purchases the former is effectively purchasing the latter and therefore has to know the facts in making such a decision. It is amusing that a resolution of CIL can occur without the facts being public, since it is obvious that the taxpayers’ money is being used to “facilitate the transfer of CIL’s assets and liabilities to NLICO to continue the insurance business”.
The actions of the FSC seem to contradict Prime Minister Stuart’s assertion that there was “nothing” in the forensic report. I cannot be alone in the view that the Prime Minister takes the intelligence of Barbadians for granted; as on his infrequent rides into town he spews words “. . . full of sound and fury, signifying nothing”.
The need to have the facts on CIL so as to avoid major confusion is precisely why the contents of the forensic audit have to be made available. It must be recalled that when the CLICO debacle was in full bloom, the taxpayers’ money went to CMFC. It is important that the issues surrounding CIL be fully ventilated such that in the interest of financial prudence, the public is aware of how the Government intends to use money that it truly does not have.
In the face of the Government’s fiscal crisis, it is imperative that every dollar is accounted for. It is known that the fiscal deficit has worsened in light of the lack of growth in the economy and the over-taxation of Barbadians. And unfortunately while Barbadians deserve the relief from lower gasoline prices and electricity bills, the Government revenue has been negatively impacted.
In light of the recent revelation of old facts about CLICO, the typical reaction of the Government is to send a message of false hope; preferring to avoid the real financial issues. This issue, however, fits into the prediction that the politics will take precedence over the economics in 2015.
• Dr Clyde Mascoll is an economist and Opposition Barbados Labour Party adviser on the economy. Email [email protected]
