Flexible Annuity close to Ponzi scheme, says Sealy

Article by NC

Parliamentary representative for St Michael South Central Richard Sealy sees the Executive Flexible Premium Annuity as very “close to a Ponzi scheme”.

Sealy made this observation yesterday in the House of Assembly while speaking on three money resolutions which sought to compensate CLICO policyholders who lost their investments when CLICO crashed in 2009.

“The same way that we are being told that we should learn from the CLICO affair, certainly the last Government should have learned from the Trade Confirmers affair and to some extent, the Narsham Insurance collapse,” said the St Michael South Central MP.

“They should have had an eagle eye out, particularly for the Executive Flexible Premium Annuities offer to customers. You cannot be paying an agent ten per cent and offering 8 per cent on a facility as well. That is pretty close to a Ponzi scheme and this was going on for many years.”

Sealy told Parliament that the genesis of the CLICO fiasco goes back to the early 2000s.

“We have had to out a fire that was set by others. The Supervisor of Insurance provides reports on financial institutions and would have known that there were issues with CLICO’s statutory fund for years. There were also issues of CLICO not providing financial statements for years. I do not accept this notion that somehow you can just sit back as a Government and throw the Supervisor of Insurance under the bus. I do not accept that. I can tell you that the Democratic Labour Party has learned from the CLICO affair.”

Sealy said the Financial Services Commission came into being in 2011 to ensure that not only insurance companies but co-operatives existed within the four corners of the law.

Sealy, who is the Minister of Tourism and International Transport, recalled that during the early 2000s several major companies went belly up and had to be bailed out by their governments.

According to Sealy, it was felt by the governments of the day that they were too big to fail.

However, Sealy argued that in small economies like Barbados’, we do not have the funds to recapitalise major industries.

He said that providing guarantees for large sums of money adds significantly to the national debt. (NC)