Financial problems of a large company in a small economy are matters of major significance. They are matters of even greater import when the company is one which is regulated by statute because the very purpose of regulating certain companies is to ensure their operations are monitored and are put under “heavier manners” than ordinary businesses.
Regulation is said to be necessary because of the disastrous impact which their failure or difficulties may have on large numbers of people.
Insurance companies fall into the group of regulated companies and their operations here are subject to the provisions of the Insurance Act, which obliges them to follow certain practices in order to safeguard the interests of policyholders.
The problems encountered by the CLICO group of companies are therefore serious ones, and whatever else may have gone wrong, major issues of regulation will form part of any post-mortem once this thorny and complicated imbroglio has been resolved.
We fully support the search for a solution to the problem. We think all right-thinking people will support the ongoing efforts to minimize the fallout from this situation, but whatever solution is eventually arrived at may meet with some criticism of one kind or another and common sense and clear thinking will be needed.
The judicial managers must be complimented for the expedition with which they have worked in trying to come to grips with this complex issue, and particularly for bringing into the public domain the alternative proposals contained in their report to the court.
It was a very wise decision to permit disclosure at this stage because, in the absence of hard information, rumours are easily planted and transplanted in emotional soil.
The disclosure that there is to be a forensic audit will come as no surprise, given that there were several inter-company transactions by which, according to joint judicial manager Oliver Jordan, “a lot of the cash that was raised in the Life company was advanced to the Holding company, in many cases without clear documentation”.
This is a very serious matter because it means that cash belonging to the life insurance business was advanced to the holding company without, it would appear, the follow-up paperwork. This disclosure raises the possible exposure to undue risk to the life insurance company.
Accounts showing assets of $802 million and documentation to support only $447 million of reported assets, as the interim report showed, require forensic analysis, and we note that this idea has met with the approval of the Barbados Investors Policyholders Alliance, the local association of investors and policyholders. It is clearly a proposal in the public interest and we fully support this decision.
Companies play a very important role in this economy, and many of our people are employed by and sometimes invest in these organizations. Directors therefore have a social duty to manage these companies as best as they can, and they carry a heavy responsibility.
Equally, the regulators have a major responsibility to make sure that statutory regulations are enforced. Sometimes, in spite of the best practices by everyone involved, some companies may fail, because nothing is certain in business.
We have previously had business misfortunes occur on our commercial landscape, but life insurance and other financial companies ought to be so prudentially managed within the regulatory framework that failure or major difficulties should not arise.
However and whenever this matter is resolved, we have to ensure that this kind of financial nightmare does not arise in the future, and while the forensic audit may reveal much, we feel that wider and regionally oriented regulation may yet be required for the future dealings of regional companies.
No matter what is done, it may be an obvious truth that regional solutions are required to deal with regional problems; and the CLICO issue is a regional problem.
