Risky to refuse gov't offer, CB governor advises CLICO policyholders

The governor the the Central Bank of Trinidad and Tobago said Monday CLICO policyholders who refuse government's offer would be taking a big risk and could end up worse off if they proceed with legal action against the state.

Ewart Williams told reporters Monday CLICO is unable to repay about $18 billion in liabilities and Government is facing fiscal pressures. "Clearly they came to an acceptable position with those policyholders under $75,000," he said.

Williams agreed that the formula is not satisfactory to persons with investments over $75,000 but suggested that those who seek action in court could be worse off.

We all recognise the risks that are inherent in the current situation. We all recognise that if the current situation is not resolved and if those who are dissatisfied seek action from the courts, everybody is going to be worse off,” he said. "It is everybody's interest for it to be settled."

Williams added, “Therefore it’s in everybody’s interests to come to an acceptable solution. A worst case scenario which is characterised by litigation against the Government, the Central Bank and Clico could hurt all stakeholders involved and could have contagion effects.”

Williams added that given the fiscal pressures which the Government currently faces, the best strategy available to it is to stagger the payment of some of Clico’s liabilities.

The Governor said the CLICO collapse had ripple effects across the economy, noting that it forced a higher than usual number of bad loans at commercial banks and financial institutions.

He said loan delinquency rates increased from one per cent at the end of 2008 to 3.9 per cent in September 2010.

Williams witnessed the signing of the 2009 agreement between former CL Financial chairman Lawrence Duprey and former Finance Minister Karen Nunez-Tesheira.

The People's Partnership Government is considering a proposal from the current chairman of CL Financial to renegotiate the MOU in view of the fact that any sale of CL’s assets requires the consent of Duprey-appointed directors.

The Governor said the value of Clico’s shares in Republic Bank have declined while its shares in Methanol Holdings are “tied up in all kinds of covenants and other arrangements.” 

He added that while the value of some of these assets could increase over time, “immediate sales of some of these assets could result in losses which is not going to help the balance sheet.”