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WHAT MATTERS MOST – Insolvent


Clyde Mascoll

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THE PROPOSED RECOMMENDATION of the Government-established Oversight Committee to put CLICO International Life Insurance Company under judicial management is an attempt to stop it from being wound up. If it is wound up in its current insolvent state, the policyholders will not be paid in full. In fact payment would be a small fraction of their investment.
In accordance with the model that has been used in the Eastern Caribbean, the appointment of a judicial manager (JM) for CLICO would be pursuant to the Insurance Act and by order of the Supreme Court. A specified time period would be assigned for the JM to provide an interim report to the court.
Given the insolvency of CLICO, the JM would assume two broad responsibilities: (1) payment for claims; and (2) management control. In the case of the former, to ensure equitable treatment of all policyholders, it will be necessary to cease making payments in respect of policyholders’ claims from the date of the judicial manager’s appointment.
Failure to adhere to the principle of equitable treatment under the Oversight Committee has been responsible for funds being paid to the chief policymaker at a time when some other lesser mortals could not receive such privilege. The maxim that the captain is the last man to jump ship did not apply.
In the Eastern Caribbean model, there was a request “to ensure that all claims in respect of policies issued for health care be paid immediately for the period of, at least, the tenure of the JMs and the administrator”.
In respect of the management control function of the JM, it was determined that it would be done with the greatest economy compatible with efficiency. For this to be achieved, the JM would have to undertake a number of actions ahead of and immediately following the appointment.
In some sense, there must be an element of surprise and cooperation. Fortunately, the Oversight Committee for CLICO has been in place for some time, but its tenure comes to an end tomorrow.
Among the number of actions would be the appointment of legal advisers as legal issues would arise. It is not inconceivable for a group of policyholders to commence formal action against the company in the circumstances. The appointment of the JM provides an automatic stay of action against the company.
To make the appointment of the JM efficient, it is important for the JM to speak to the employees and advise them accordingly of the new state of play. This guarantees a higher level of cooperation.
Furthermore, it is critical to bring the policyholders on board by informing them of the true state of the company’s finances. In the case of the Eastern Caribbean, policyholders were told that the route of judicial management was better than a winding up because the latter would mean that “policyholders will get only ten cents on their dollar. This means if you have an annuity of $1 000, you would only receive $100”.
The other actions of the JM would include securing cash and bank accounts and securing property among several others. Such actions as advising the various banks of the appointment, preventing any monies from being paid from accounts, taking control of any cheque books or company credit cards held by employees are all part of the process.
On the matter of property, the JM will have to request a land registry search to identify any interests in land and property that CLICO is supposed to own or part-own. The JM is also expected to “register a caution and/or notice of the JMs interest in any land or property to ensure that no action could be taken with regard to any land or property without reference to the JM”.
These are only but a few of the responsibilities of the judicial manager. But what matters most is that CLICO International Life Insurance Company is insolvent and everything must be done to protect the policyholders.
* Clyde Mascoll is a professional economist and former Government minister in the last Barbados Labour Party administration.

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