Commissioner of Insurance Maria van Beek has recommended that Clico (Guyana) be liquidated now by the High Court saying that the time has arrived for a further order of court to wind up the insurance company.
Operating in the capacity of Judicial Manager of Clico, van Beek called on Chief Justice (ag) Ian Chang in an affidavit in report submitted late last month to grant the winding-up order. This has come nearly three months after the company was placed under judicial management.
“That in the light of all the foregoing and having regard to the previous affidavits and reports I have come to the conclusion that it is the best interest of all concerned that this honourable court now order the winding up and or liquidation of the company by due process of law…,” van Beek said in the report to Justice Chang.
She said such further action is “inevitable”, and restated a previous request for the court to permit an order for sale of the businesses.
The report by van Beek noted that the original petition presented to the court had asked that there be “a winding up in the first instance and only as an alternative was the placing of the company under judicial management sought,” together with any other under Section 67 of the Insurance Act. However, the court placed the company under judicial management and van Beek contended that given the facts and statistics then available, this would have been the correct course of action.
The report referred to the order of the High Court of the Commonwealth of the Bahamas on April 7, confirmed by the seal of its registrar on April 17, which authorised the liquidation of Clico (Bahamas) Ltd in which Clico (Guyana) had invested US$34 million. “This sum can now be treated as a loss, save for a probable return in years of less than 7% thereof, if no unforeseen eventuality arises,” the report said.
She also referred to an affidavit by Assistant Commissioner of Insurance, Tracy Gibson, which said that Clico (Guyana) has a deficit of over $1 billion, but noted that this is based on giving full credit for the company’s investment in the Bahamas. Taking into account the liquidation in the Bahamas, van Beek said the record should now properly show and be read as a deficit of over $7 billion.
“This is a serious defalcation and it is misleading for anyone to assert that any part of the company’s business is in surplus, the investments being made from the general resources of the company. If any surplus in the fund exists it is for the benefit of policyholders but that cannot be used to offset overhead and outstanding expenses”, the judicial manager added.
“I am unaware of and nothing has been shown to this honourable court which will salvage what is an irreversible failure of the company based on directions it felt constrained to carry out as to the above unlawful investment,” van Beek said.
She said she would not recommend nor “it is possible” for the company’s business to be compartmentalized and some aspects to be pursued. She declared that it is in the greater interest of equality of justice to all that the consequences of the general insolvency should be pursued.
Using the report by Nizam Ali & Company dated April 8, 2009, van Beek said that the amount of policy surrenders not paid by the company amounted to $1,711,207,778. This, she said, includes six per cent of the long-term portfolio, being approximately 829 policies. Further, she said that an unaudited estimate of the surrenders as at April 30, 2009 shows that the mentioned figure has now reached in excess of $9.6 billion.
Further, she said because of developments with Clico’s parent company (CL Financial) in Trinidad and Tobago, the company is unable to meet its obligations to its thousands of policyholders.
In her report on Clico (Guyana), which she presented to the High Court in April, van Beek had said “the directors and management of the company operated without a basic understanding of managing an insurance business or pursued a strategy that has resulted in significant losses to the company.”
The recent report by van Beek calling for liquidation comes even as Clico’s lawyers are in the High Court challenging a possible winding-up order.
Clico’s lead counsel Roysdale Forde has argued frequently for access to the auditor’s report on the company, which had been completed in part just over a month ago. He has argued that the report fails to accurately reflect the true financial position of the company, particularly as it relates to the statutory funds.
Forde said Clico’s statutory funds are in order and the company is in a position to conduct some lines of business. Forde, who is appearing in association with Attorney-at-law Stephen Lewis and Senior Counsel Keith Massiah has entered a formal appearance on behalf of Clico (Guyana) in the winding-up hearing before Justice Chang.
The Commissioner of Insurance had moved to the court over the state of Clico (Guyana) in February and was appointed Judicial Manager. Early last month the National Assembly passed the Insurance (Supplementary Provisions) Bill of 2009, which will see the Bank of Guyana (BoG) taking over the functions of the Commissioner of Insurance. The legislation, when assented to, will see the BoG administering the Insurance Act and nominating the judicial manager to be appointed by the court.