– ‘audited information’ disputes collapse claims
Chairman of the National Insurance Scheme (NIS) Board Dr Roger Luncheon says the scheme has a sound investment framework which the board will continue to apply to future investments by the institution.
Concerns have been raised about the investment policies of the NIS, especially as fears prevail that it will lose its almost $6 billion investment in the financially troubled local CLICO company, thereby leading to the scheme’s collapse.
President Bharrat Jagdeo, however, has repeated on several occasions that no CLICO policyholder or investor–including the NIS– will lose their money.
Speaking at a press conference last Thursday, Luncheon said that sound practices have been adopted by the NIS as it relates to its investment policies. He explained that the scheme is guided by a Prudential Investment Progamme which was “baptized by cabinet” and which was subsequently fully implemented by the NIS Board. Luncheon further said that at the level of the investment sub-committees, members of the private sector, officials from the government and members of the NIS Board versed in financial matters meet and make recommendations which are placed before the board for consideration.
He added that the law that governs the NIS and its investments (particularly those outside government paper) states that the scheme must get the approval of the Finance Ministry, before any investment decision is implemented. These measures serve to safeguard the investments of the NIS, Luncheon explained.
At his last press conference, Luncheon said that the scheme had invested in the local insurance company because of its high returns. He said that the decision was made by the board based on advice provided by the institution’s Investment Committee.
President Jagdeo, at a press conference earlier this year, had criticized the NIS for making the investment; calling it a “bad investment.” At that time, Jagdeo said that the scheme had pursued high returns instead of taking into proper consideration the risks involved. He had emphasized that whenever there was the promise of high returns, there was always great risk involved.
On March 12, Finance Minister Dr Ashni Singh told the National Assembly that over the years the money NIS invested in CLICO (Guyana) had seen a decline. He said that at the end of 2004, the NIS had invested over $9 billion in the insurance company which represented over 40 per cent of the company’s assets at that time. He stated that at the end of last year this investment had been reduced to $5.6 billion which represented about 20 per cent of the assets of the NIS. “These investments were made at rates of interest higher than the NIS was earning elsewhere at the time,” Singh said.
Luncheon meanwhile once again emphasized that the scheme remains sound and is not about to collapse. He said that there was enough audited information available in the public domain that would dispute any suggestion that the scheme was about to collapse. He criticized both the PNCR and the AFC for their recent comments about the future of the scheme and their call for an investigation into the institution.
When asked whether a criminal investigation should be launched into Globe Trust, Luncheon said that whenever there is need to address uncertainty whether it involves CLICO or Globe Trust, such investigations are always a consideration.
The likelihood that CLICO (Guyana) will retrieve any of its $6.9 billion (US $34 million) investment in CLICO (Bahamas) continues to grow dimmer as the Bahamian company was ordered wound up last week Tuesday. Prior to this decision being made, the Bahamian liquidator Craig Gomez had proposed that the amount dispatched from Georgetown to the Bahamian company be reclassified as unsecured intercompany advances.
President Jagdeo subsequently announced that the government would challenge this classification by the liquidator. It is unclear if any such challenge was mounted. According to the Head of State, this classification would mean that Guyana would have to wait until policyholders are paid out of the proceeds of the liquidation before receiving its share. “If it is classified as an inter-company loan then in the settlement of the liabilities, it will go down the hierarchy.
So first of all, from disposal of assets, they will settle policies and then whatever remains they’ll settle these other transactions. So now we are taking steps to fight that classification, to argue no, we had a policy there.”
