• Today
    November 18

  • 11:55 PM

Newco no more a rescue option

Albert Brandford,

Added 24 February 2011

kamlapersadbissessar2

The plan to set up a new company to take over the majority of the financially troubled British American Insurance Company’s (BAICO) businesses has been abandoned because the new Trinidad and Tobago government has failed to commit the financial resources needed. The announcement came Tuesday from the governments of the Eastern Caribbean Currency Union (ECCU), which said they have had to reassess the viability of their proposed response to BAICO’s collapse. It was back in November 2009 that the governments announced the proposed establishment of a New Insurance Company (Newco) Plan. They had said that, given BAICO’s insolvency, the only feasible option was to establish a company with capital provided mainly by government contributions. “These were intended to come from the ECCU governments and a strategic investor, as well as US$100 million from the government of Trinidad and Tobago and US$5 million from the Government of Barbados . . . Following the change of administration in Trinidad and Tobago in late May 2010, the ECCU governments worked hard to engage the new administration, and in particular to seek confirmation that [the Kamla Persad-Bissessar administration] was committed to the Newco Plan and the necessary financial contribution,” the statement said. “We pursued this for many months but, by the end of 2010, were unable to gain the necessary confirmation. Without the required financial commitment of the government of Trinidad and Tobago, Newco is not feasible as originally envisaged.” The ECCU governments said alternative solutions “must now be embraced to protect against systemic economic risks, and to offer much needed relief to policyholders”.   The statement said while discussions were ongoing, given the delays finalizing the contribution from Trinidad, Eastern Caribbean governments have approved a plan that concentrates on an ECCU/BAICO Health Insurance Support Fund; the traditional business of BAICO; and the annuity and investment contract business. The fund had been announced since July last year, but the statement said that there were several complications since then, mainly from critical third party stakeholders failing to provide the ECCU governments with timely and accurate information.  However, the statement said, most of those issues have now been resolved. “Significant progress has been made towards launching the fund. This includes the establishment of a company to act as the trustee, finalizing which insurance policies will be covered by the scheme, and developing the rules and materials under which the fund will operate,” it said. “The main outstanding challenge is to ensure that British American in Trinidad (BAT) provides critical support services for the fund. BAT, although a separate insurance company based in Trinidad but also a member of the CL Financial group, was in effect running BAICO’s operations, and possesses both BAICO’s data and also the expertise in relation to claims and policy operations.” The ECCU governments said that to date neither BAT nor the Central Bank of Trinidad and Tobago, which now has control of the company, had provided the necessary assurances about the quality and continuity of BAT’s services which were essential to the fund’s operations.   “We have formally raised this issue with the government of Trinidad [and] Tobago and requested its support,” the statement said.  “We expect that the fund will commence operation shortly after these final issues are resolved.” Approximately 22 000 of the 33 000 BAICO policyholders in the Eastern Caribbean hold traditional life insurance policies, which formed the heart of the company’s longer term operations, and represent approximately 10 per cent of BAICO’s liabilities in this region, recently estimated at US$38 million. 

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