PORT OF SPAIN, Trinidad, Oct 1, CMC – The Trinidad and Tobago government Monday said “substantial progress” had been made in resolving the financial “debacle” that plagued the Port of Spain-based regional insurance giant Colonial Life Insurance Company (CLICO) and involving a multi-billion dollar rescue plan.
Finance Minister Larry Howai, delivering the TT$58.4 billion (One TT dollar = US$0.16 cents) budget to parliament, said that the CLICO issue had dragged on ‘for far too long” and that he intends to bring it to a close this year.
He said that the cost to the government so far in dealing with the CLICO matter as well as that of the Hindu Credit Union (HCU) “has been substantial – an amount of TT$19.7 billion or 13 per cent of our current GDP”.
But Howai defended the expenditure, saying it “was necessary and decisive for containing an economic and financial crisis.
“However, we took steps to ensure that the CLICO impact on growth and employment was not as severe as has occurred in other countries affected by their own financial crises.
“As part of the overall solution we shall incorporate a new insurance company into which those traditional policies and other assets will be transferred from CLICO. That new company will continue to manage the traditional policies.”
The Kamla Persad-Bissessar government last year said it would make an initial partial payment of a maximum of TT$75,000 to depositors in the short-term investment and mutual funds and those whose principal balances exceed TT$75,000 will be paid through a government IOU amortised over 20 years at zero interest.
Howai told legislators “we are discharging the liabilities held by individual and corporate investors in Short-Term Investment Products (STIPs) in two components”
He said that as of September 18, this year 25,115 STIP holders, including credit unions and trade unions, accounting for TT$10.268 billion have accepted the government’s settlement offer.
“We shall launch the CLICO Investment Fund on November 1st, 2012 and on January 2nd, 2013 trading will begin on the Trinidad and Tobago Stock Exchange for the units of those persons who exchanged their 11-20 year bonds for units in the CLICO Investment Fund.
“This action will bring the CLICO matter to an end, having settled all the obligations committed by this Government. In keeping with arrangements in place for similar Funds, we have arranged in the Budget for the income generated by the Fund to be tax-exempt in the hands of investors,” Howai added.
In 2009, the then Patrick Manning government signed a shareholders’ agreement CLICO following the signing of a memorandum of understanding (MOU) between government and CL Financial on January 30, 2009.
The MOU gave government control of 49 per cent of CLICO’s shares.
The Manning government injected seven billion dollars into CLICO in 2009 to keep the collapsed insurance firm running and protect policyholders.
Last September, through the passage of legislation in Parliament, the Trinidad government committed an additional TT$13 billion (US$2.01 billion) to keep the insurance company afloat.
CLICO, in finances made public in January, posted a deficit of TT$9.4 billion for the year ending December 31, 2009.
In his more than two and a half hour address, Howai said it would also waive any applicable stamp duty on the transfer of the 51,858,299 shares of Republic Bank Limited (RBL) from Colonial Life Insurance Company Limited (CLICO) to the government as well as on the transfer of the 51,858,299 RBL shares from government to the CLICO Investment Fund (CIF);
In addition, the government is also waiving any applicable stamp duty on the transfer of units in CIF by government to bond holders after the expiration of the initial offer period.
He said that the income tax act would be amended to “expressly exempt from tax the dividends or other distributions paid to resident individuals and companies by the CLICO Investment Fund as well as the profits accruing to the Trust under the CLICO Investment Fund.
