CLICO BAHAMAS LIQUIDATED FOLLOWING COLLAPSE OF TRINIDAD'S

UNCLAS SECTION 01 OF 02 NASSAU 000159 SIPDIS E.O. 12958: N/A TAGS: EFIN ECON ETRD BF SUBJECT: CLICO BAHAMAS LIQUIDATED FOLLOWING COLLAPSE OF TRINIDAD'S CL FINANCIAL ¶1. (U) SUMMARY: Nearly one hundred agents were laid off from one of The Bahamas largest insurance companies, CLICO Bahamas Ltd., the week of March 2 as the company goes into liquidation. Concerns were raised when Trinidad based parent company, CL Financial, collapsed due to massive losses and subsequently received a government bailout. Liquidation negotiations with at least four companies are currently in progress. In the meantime several creditors (including banks, personal policy holders, and even the Guyanese Government) have demanded debt repayment from CLICO Bahamas. Although CLICO Bahamas representatives assured local media that the interest of policy holders will be protected, Prime Minister Ingraham announced that the GCOB cannot guarantee a complete repayment to creditors or policy holders. End Summary. -------------- A STORIED PAST -------------- ¶2. CLICO's challenges began as early as 2004, when it started sending money to its parent company, CL Financial, in Trinidad in order to invest in U.S. real estate. It is alleged that this move was an attempt to evade Bahamian exchange control laws. James Smith, former Minister of State for Finance, told local media that the Registrar of Insurance met with CLICO several times about the matter. Smith indicated that CLICO Bahamas was eventually ordered to repatriate USD $53 million of the funds, which the company never did. Smith also alleged that the Registrar did not disclose this piece of information to the Ministry of Finance, an omission he speculates was a result of a strained working relationship between the two entities. -------------- LIQUIDATION -------------- ¶3. CLICO Bahamas' liquidation was ordered when the company's liabilities were found to exceed assets by USD 9 million. Craig Gomez, the appointed liquidator, told local media he has spent the last two weeks ascertaining the company's financial position and four companies have already expressed interest in purchasing CLICO's life and health policies -- British American, Colina Imperial, Family Guardian and Atlantic Medical. The annuity policies, however, remain a source of concern as there has been no interest to date in purchasing the company's annuity policies. In a statement to local media, Gomez said it is too early to make any definitive statements on the extent of compensation clients will receive if the company is not sold. He also highlighted that liquidations are normally lengthy process, lasting up to five years in some cases, and assured the Bahamian public that the liquidators will protect the interest of policy holders. ¶4. Shortly after the liquidation announcement creditors began pursuing CLICO Bahamas for owed loans and investments. Among these is FirstCaribbean International Bank (who has called in a nearly USD $500,000 loan) and Belize Bank (who has called in a USD $1 million loan). In addition, the Guyanese Minister of Finance recently petitioned the GCOB for a share of the assets, claiming CLICO Bahamas owes CLICO Guyana USD $35 million. GCOB officials have denied the claim made by the Government of Guyana and have made no payments to any companies to date, though Craig Gomez told local media he is in negotiations with several creditors. In the meantime, several Bahamian owned properties have been used as collateral, including the property on which CLICO Bahamas is situated. -------------- NO ASSURANCE FOR INSURANCE -------------- ¶5. In an uncharacteristically gloomy announcement to the press, Prime Minister Ingraham said annuity holders have little protection under the law and there is no guarantee that they will receive full value for their investment. CLICO Bahamas estimates that USD $23 million is owed in annuities alone. This news is especially worrisome for the Broadcasting Corporation of the Bahamas and Bahamasair, both quasi-government agencies that invested their pension funds with CLICO. Prominent religious leaders and other professional private citizens have voiced their real concerns as to whether they will see their investments again. In addition, health policy holders received a shock when Doctor's Hospital, one of two main hospitals in Nassau, announced that it will not honor CLICO claims. This latest news creates an especially difficult situation for the GCOB since both the PM and the liquidators have continuously advised clients to continue paying their premiums. ¶6. Nearly 100 employees were laid off from CLICO Bahamas the week of March 2 and there is a real fear that more lay-offs are to follow. These lay-offs add to the country's struggle to maintain the economy during a time of recession. The tourism sector lost 1000 jobs within the last six months and the public is worried that the financial services sector will be hit next, a loss that would create significant problems for the little-diversified economy of The Bahamas. -------------- COMMENT NASSAU 00000159 002 OF 002 ¶1. (U) SUMMARY: Nearly one hundred agents were laid off from one of The Bahamas largest insurance companies, CLICO Bahamas Ltd., the week of March 2 as the company goes into liquidation. Concerns were raised when Trinidad based parent company, CL Financial, collapsed due to massive losses and subsequently received a government bailout. Liquidation negotiations with at least four companies are currently in progress. In the meantime several creditors (including banks, personal policy holders, and even the Guyanese Government) have demanded debt repayment from CLICO Bahamas. Although CLICO Bahamas representatives assured local media that the interest of policy holders will be protected, Prime Minister Ingraham announced that the GCOB cannot guarantee a complete repayment to creditors or policy holders. End Summary. -------------- A STORIED PAST -------------- -------------- ¶7. The failure of CL Financial has resulted in yet another blow to the already weakened Bahamian economy. How badly the collapse of CL Financial will hurt The Bahamas is not fully known. The potential collapse of the financial services sector is a real fear among the Bahamian public. The GCOB continues to encourage the population to see this as a time of frugal spending, even as nervous policy holders line-up outside CLICO offices in an attempt to verify personal solvency. For the moment, the GCOB maintains its tenuous hold on the financial situation, though the Bahamian public is losing confidence as layoffs continue to mount. ZUNIGA-BROWN