Caribbean Insurance Company Clico Faces Liquidation

March 5, 2009

A bailout of troubled CL Financial Ltd. by Trinidad and Tobago’s central bank has been having ripple effects across the Caribbean, where regulators are liquidating the sprawling firm’s insurance subsidiaries to protect depositors.

The Trinidad-based conglomerate, weakened by bad real estate investments and the global financial crisis, was the beneficiary of a Jan. 30 rescue package intended to help prevent a meltdown after high levels of withdrawals rocked its investment bank. Now, the fallout has reached the struggling conglomerate’s insurance subsidiary, Clico Limited, which has offices in several Caribbean countries.

Bahamian regulators have ordered Clico Limited to be liquidated after it was unable to pay claims of $2.6 million in the Turks and Caicos Islands and its liabilities were found to exceed its assets by $9 million. Regulators in Guyana and Belize are doing the same to calm jittery depositors.

On Tuesday, industry observers said the governments’ actions appear to be easing nerves about a month after the bailout of the Trinidad investment holding company — whose interests include manufacturing, health services, spirits, real estate, and energy — sent shockwaves across the Caribbean.

“This situation is regrettable, but we support the various steps the regulators have taken,” Steve Stoute, a director of the Insurance Association of the Caribbean, said from Barbados. “We had been getting quite a few calls from worried consumers. Now that is not occurring so much.”

Government leaders, including Bahamian Prime Minister and Finance Minister Hubert Ingraham, said it is still too early to tell whether any Clico depositors will lose money. He said he was hopeful that the policies can be sold to a viable insurer in the Bahamas that can provide the coverage.

In an update to Parliament, Ingraham said 23,000 Bahamian depositors accounted for 68 percent of Clico’s total premiums in 2008. He said liquidation was ordered because “drastic steps had to be taken to protect the policyholders” in the Bahamas subsidiary and in its regional jurisdictions of the Turks and Caicos Islands and Belize.

“It was felt that to delay taking action would only further erode the assets of Clico to the detriment of policyholders,” said Ingraham, arguing that Clico had repeatedly failed to present a credible plan to address its shortfalls in liquidity.

The Bahamian liquidator could finalize a financial package by this weekend, Ingraham said.

Representatives of CL Financial, the parent company for Clico Limited insurance companies across the Caribbean and Clico Investment Bank, did not return several calls and an e-mail seeking comment.

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