THE CABINET OF Barbados has formally approved the terms and conditions associated with the restructuring of the local operations of CLICO International Life Insurance Ltd (CIL).
According to a release issued this evening by judicial manager Deloitte Consulting Ltd, this enables Deloitte to begin implementing the final recommendations contained in the report and addendum it presented to the Barbados High Court in June 2013.
The aim was to have a regional solution to the CIL debacle.
However, in the absence of specific responses from within the Eastern Caribbean to the proposal, the judicial manager initiated discussions in November 2013 for the process to be started in Barbados.
These discussions resulted in the Barbados Cabinet giving approval for the regional solution to be started in Barbados as the first step towards the overall restructuring of CIL.
According to the release, work is underway to prepare this and the aim will be for the new company to be in effect as quickly as possible, but no later than the end of the year.
It is intended that:
1. All policyholders with traditional insurance policies (life, health and pension plans) will receive the full value of their policies with the support of the Government.
2. All holders of individual Executive Flexible Premium Annuity (EFPA) policies will receive the value of their principal investment. These types of policies will be converted into annuity products payable over a period of up to ten years.
3. The plan envisages the creation of a new insurance company (NEWCO) to take over the insurance business and the creation of separate entities which will own the real estate and other illiquid assets. These property holding entities will issue bonds to the new insurance company which will be guaranteed by the Barbados Government.
4. Holders of EFPA policies, other than individuals will receive shares in the property holding entities.
With regard to the new company:
*The Government will be the guarantor of the bonds issued by the Property Company to NEWCO
*The Government will issue a Demand Note for the amount of any Statutory Fund Shortfall;
*The Demand Note shall pay interest to NEWCO at a rate sufficient to fund the expected monthly shortfall from NEWCO’s operations, including the monthly payments on the restructured individual EFPA obligations;
*Individual EFPA policyholders shall have their principal claims converted to 10 year fixed annuities. The Government shall guarantee the monthly blended payments of interest and principal due on the restructured 10 year fixed annuity contracts if the operating cash flow of Newco is insufficient; and
*The Government or its assignee shall be the owner of the common shares of NEWCO.
The release noted that “throughout this restructuring, the participation of the Ministry of Finance and Economic Affairs (Government of Barbados), the Central Bank of Barbados and the Financial Services Commission as part of the CIL Advisory Committee will be essential to the successful financing and implementation of this agreed approach in the interest of policyholders”. (PR/NB)
