At long last, it seems that the dim flicker of light at the end of what was a long, dark tunnel has got a bit brighter for local policyholders of CLICO. Their investments were very much in jeopardy following the 2009 collapse of the former Trinidad-headquartered regional insurance giant after a severe liquidity problem arose.
Last Friday, the House of Assembly debated and passed a resolution providing for the local policyholders and other CLICO investors to receive much-hoped-for compensation. Government is doing so through guaranteeing over $127 million in bonds that will be used to settle CLICO’s obligations in respect of local policyholders.
Noting that while governments in wealthy developed countries tended to bail out companies which had failed but often left investors to suffer their financial losses, Minister of Finance Chris Sinckler said Barbados, on the contrary, had “an admirable record as a people and a Government of intervening to help people” though “it comes at a cost”.
Unfortunately, that cost sometimes involves adding to the national debt and, as former Prime Minister Owen Arthur implied during the debate, it could not have come at a worst time in this latest case. With Barbados already heavily indebted, Mr Arthur expressed concern that the approach to the CLICO bail-out might be creating a situation that “could come back to haunt us” even though he agreed the problem needed to be solved.
“Some of the assets of the company that is being created have been non-performing in recent times. . . .[And] as we seek to grapple with a debt problem that will overwhelm the future of our children and grandchildren, we are now adding to it by creating a company that has assets that are so badly impaired that the very problem you are seeking to solve – mainly a deficit in the statutory funds – could come back to haunt us,” the former PM cautioned Government.
The news of the impending $91 million payout is naturally music to the ears of policyholders after waiting eight anxious years during which many at times were close to giving up hope of ever recovering their investments. “We are now looking forward to the next phase, and this would be the issuing of the instruments by the Central Bank and hopefully we would see that happen, if not by December 31, by the first week in January, 2018,” said June Fowler, who was instrumental in organizing local policymakers to lobby for protection of their interests.
We too are delighted for the policyholders, most of whom are ordinary Barbadians saving for old age or the proverbial rainy day. However, we hope the experience teaches an important lesson for the future. As Mr Sinckler warned, investors need to be much more careful when parting with their hard-earned money, especially in schemes which come across as too good to be true. “Be careful because you may be buying yourself in serious financial difficulties,” he said.
A few rather interesting observations were made about CLICO’s operations during the debate. One which stood out came from Minister of Tourism Richard Sealy, in relation to the high interest-yielding product known as the Executive Flexible Premium Annuity, identified as a major factor in the collapse. He described it as “close to a Ponzi scheme” which is defined as “fraudulent investing scam”.
For running Ponzi schemes, former big-time US financiers Bernie Madoff and Allen Stanford, who is well known in the Caribbean for his many high profile investments, are serving lengthy prison sentences in the United States. If there is solid evidence to support such an accusation against CLICO, the question which must be asked is why has no one as yet to date been made to account for such activities? It is known that the supervisor of insurance had misgivings about the Executive Flexible Premium Annuity product and had ordered that it be withdrawn from the market pending a review, but CLICO reportedly failed to comply.
Government’s CLICO bail-out means Barbadian taxpayers have been left to foot the hefty bill of a private company’s costly errors in order to protect the savings of investors. It must not be allowed to happen again. Citizens must lobby for tougher legislation to ensure good corporate governance, especially from entities which invite citizens to invest with them, so that they too are held to the same high level of accountability that the private sector often demands of public officials.