Identifier
Created
Classification
Origin
09NASSAU159
2009-03-16 16:14:00
UNCLASSIFIED
Embassy Nassau
Cable title:  

CLICO BAHAMAS LIQUIDATED FOLLOWING COLLAPSE OF TRINIDAD'S

Tags:  EFIN ECON ETRD BF 
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VZCZCXRO0758
RR RUEHGR
DE RUEHBH #0159/01 0751614
ZNR UUUUU ZZH
R 161614Z MAR 09
FM AMEMBASSY NASSAU
TO RUEHC/SECSTATE WASHDC 6211
INFO RUCNCOM/EC CARICOM COLLECTIVE
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
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