Posted on

BIPA has work cut out for them on CLICO issue

Pat Hoyos

BIPA has work cut out for them on CLICO issue

Social Share

Finally, the Barbados victims of Clico International Life (CIL) and British American Insurance Company (BAICO) are coming together to make their stand, forming a lobby group to press their cause as investors in the two former giants of insurance which have ended up on the scrap heap of business failure, mainly due to abysmal management.
I salute your coming together to form a non-profit organization to be called Barbados Investors And Policyholders Alliance (BIPA). But you are so middle-class, it hurts! Imagine that you have to apply to the same Government which has postponed, put off, avoided and watered down taking any action at all on these shining examples of corporate empire-building without a care for the long-term sustainability of their policies.
Of course, the Government will let you form up, and then it will do everything in its power to ignore you.
Simply put, until people start chaining themselves to the gates of the Public Buildings or undertaking similar acts of civil disobedience, which I do not for one moment recommend, I doubt much is going to happen for you.
Before you came on the scene to press your members’ case, dear BIPA, the Government had been given some options by the Oversight Committee on how to deal with your members. I have mentioned them before but feel it is worthwhile to mention them again, so here goes:
I do not have any figures to hand for BAICO, so its liabilities would have to be added to the Clico ones noted below.
After leaving within CIL enough assets to cover its $303 million “traditional” life insurance portfolio, only $261 million, in mainly real estate assets, is available to service the $1/2 billion Executive Flexible Premium Annuities (EFPA) debt. The total EFPA debt therefore cannot be serviced from these assets, even if all were to be sold off at full market price.
That is why the Oversight Committee chairman has recommended to assist just those individual investors, who were described as “small and unsophisticated”. There are $308 million worth of EFPAs held by them, people just like you hard-working folks who got together last week to start BIPA.
The advice to the Cabinet was that the Barbados Government issue $44 million in bonds of up to $25 000 for each small investor, payable at an interest rate of two per cent per year for five years. However, “individuals who need cash immediately would be able to sell the bonds”, states the report.
That is basically it, because any sums over $25 000 invested in Clico International Life’s EFPAs, would not earn any interest at all, and you would get back your principal sometime between 2015 and 2025, assuming the sale of CIL’s assets go through.
In other words, there are no Suzuki vans driving around doling out cash refunds to EFPA certificate holders like they do hot meals on busy weekdays up and down this fair country of ours.
I am sorry to be so blunt, but the situation should not be seen through rose-coloured glasses. It is pretty dire, for by the time you or your inheritors actually get back any of the principal, inflation would have eaten up a good portion of it and there would have been no interest added to offset those cumulative gouges. 
This is the bitter cup the investors in EFPAs are being asked to drink as the Government tries to salvage what it can of life savings destroyed by the policies (and politics) of unsustainable interest rates and insatiable lust for cold, hard cash, allowed for so many years to be practised by the management of Clico International Ltd.
If the Barbados Government decided to take on the entire EFPA amount due ($507 million), the individual investors would still get their initial $25 000 bond as above, while another $167 million would have to be issued in Government bonds, along with the above-noted sale of CIL assets.
That would make the process of repayment even longer and therefore even more vulnerable to inflation, but it would at least be fairer, as it would not discriminate against policyholders on the basis of who should have known better.