News this past week that Leroy Parris had finally quit the boards of all CLICO subsidiaries in Barbados and the Eastern Caribbean was welcome and was long overdue. After all, if you remain a director of a company you are suing, it might be said you are partly suing yourself.
The Memorandum of Understanding between the Government and CLICO Holdings, dated May 12, 2009, created the Oversight Committee, which proposed to the Cabinet that “the Government of Barbados support a restructuring plan for CIL [CLICO International Life Insurance] under judicial management”.
The life of the Oversight Committee was extended several times, and finally expired on June 11, 2010, leaving CIL still unsold because of the presence of the Executive Flexible Premium Annuities (EFPA) portfolio, estimated at the end of 2009 to be $507 million.
That is how much money CIL took in from investors through its investment “product” called the EFPA.
How much does CLICO have available to pay off these debts when they mature (most by next year)?
According to the memo submitted to Cabinet in the middle of last year by now retired permanent secretary in the Ministry of Finance, William Layne, who headed the Oversight Committee, CIL’s actuary had put its net assets at $564 million.
But he noted: “In order to sell the traditional life insurance portfolio, assets to the value of the liabilities will have to be transferred to that branch of the business and therefore from the net asset figure of $564 million, $303 million will have to be subtracted, leaving a net assets balance of $261 million.”
Remember, the EFPA liability is $507 million. The total shortfall of CIL is therefore around $246 million, that is, a quarter-of-a-billion Barbados dollars.The present administration, which can find nothing critical to say of Mr Parris’ management, and which took eight months to emerge from its catatonic state to actually act on Mr Layne’s recommendation that a judicial manager be appointed, does not have that kind of money available to it.
The memo to Cabinet, as noted previously in this column, recommends that only individual investors are dealt with, which would conveniently reduce the EFPA figure from $507 million to $308 million, leaving nearly $200 million worth of annuities completely unrepaid.
If you think things are hot now, let’s see how the region’s other investors, including some governments through their national insurance schemes, respond to that, should it come to pass.
It will be another month (May 2) before the court hears the petition, filed on March 17, for the appointment of the judicial manager. Once installed, the manager, which is expected to be the firm of Deloitte Touche Tohmatsu, will have to find out exactly what the position inside the company really is, but it will still be up to the Government to decide who gets paid what in the end.
I hope that the judicial manager will report to the investors in Clico on a timely basis, say every quarter, to let them know what is going on. They have been waiting and worrying long enough.
If it cannot do this for legal reasons, then it is hoped that the Minister of Finance makes it his business to keep people informed. The media will have a major role to play in explaining and analysing the facts and figures which emerge out of any such process, in order to set out the options being considered fairly without fear or favour, without sensationalism, and also without sugarcoating.
It would, therefore, be better for the country if the man whose name is inexorably associated with this financial debacle should realise that his position as chairman of the Government-owned Caribbean Broadcasting Corporation (CBC) could be felt as an impediment by journalists working there to do their job of covering the resolution of the CLICO mess.
Even if they didn’t feel that way, I think it would be hard for the public to give their reports the credibility they deserved due to the continuing presence of the current chairman.
I am not for a second saying anything untoward about Mr Parris’ tenure to date at CBC regarding coverage of CLICO . But it would be better if, having resigned from the CLICO boards, he made it one more for the road by removing himself entirely from the CBC board as well.
