EC states announce rescue plan for CL subsidiary

Eastern Caribbean governments have announced a rescue plan for British American Insurance, the main sub-regional subsidiary of CLICO.

They announced the plan following a meeting of the Eastern Caribbean Currency Union, the monetary authority of the Organization of Eastern Caribbean States (OECS).

The CL Financial collapse at the end of January has created immense financial problems right across the Caribbean and authorities have been scrambling to contain the fallout since the Manning administration in Port of Spain provided a multi-million-dollar support package.

Most of the governments had put British American outlets under judicial management to give authorities time to come up with a plan to avoid a financial sector meltdown.

Member governments of the Currency Union said under the circumstances they have accepted the recommendation of judicial managers that a new company be set up to take over some of the assets and liabilities of British American in the Eastern Caribbean.

However the governments have warned that the new company would not be able to cover all benefits and interest to which policyholders are entitled. But they say it provides an opportunity for greater recovery over time.

The key aims are to "ensure that British American does not become a systemic risk to the financial system" and to protect depositors and investors as far as practicable.

The statement from the OECS meeting put the liabilities of British American branches in the Eastern Caribbean total EC$1.05billion (US$391million). It said the company is insolvent, with deficiencies of EC775million up to 30 June.

The governments said they opted for a rescue plan, arguing that "in the event of liquidation, policyholders will not be paid in full."

It added, "Indeed, it is probable that if British American was liquidated, policyholders will only get 10 cents on their dollar."

Grenadian Prime Minister Tillman Thomas pointed out that under Trinidad and Tobago law, the CLICO statutory fund is for the benefit of residents of the two-island nation only, even though CLICO had spread across the region.

"This is where the inequity comes in so we need a regional framework to deal with this matter," he said.

One policyholders group in Antigua and Barbuda has called on the Currency Union governments to put pressure on Trinidad and Tobago to provide a bailout for regional investors as well.

Antigua was owed US$32.5million in unpaid CLICO claims, the highest among the $91.6million arrears in the sub-region, up to 25 June.

The Trinidad and Tobago government has pledged as much as TT$5 billion (US$809million) to cover CLICO''s local liabilities after rescuing CL Financial in January.

CL's financial services companies at the time included CLICO Investment Bank, CLICO Insurance Company, British American Insurance Company and Caribbean Money Market Brokers as well as interests in banking and manufacturing.

Officials say these may be sold when the global economy strengthens.