With bids already in on the majority of the immovable properties of Clico (Guyana), the High Court will soon consider whether to wind up the company as repeatedly argued by the Judicial Manager, and or allow some lines of business to continue in keeping with submissions made on behalf of the troubled insurance company.
Chief Justice (ag) Ian Chang called on the attorneys appearing in the matter to make final submissions on Friday when the hearing continued, and in a brief address Senior Counsel Ashton Chase, representing the judicial manager, argued that Clico is effectively crippled without the US$43M invested in the Bahamas, while adding that his side would be willing to start a dialogue about the company continuing to do business should the funds reappear. “The investment in the Bahamas was unauthorized because no permission was given by the Commissioner of Insurance, the instructions came from Trinidad, but if they can say that the money is coming back then we can have a dialogue,” Chase said on Friday. He identified the Bahamas investment as the key issue, ranking above all other matters affecting Clico.
But Clico’s lead attorney Roysdale Forde maintained that the company is still solid as evidenced by its existing statutory fund. He again mentioned that former Judicial Manager Maria van Beek failed to reflect a true financial position of the company. Forde was unable to conclude his arguments due to time and will conclude on Monday when the hearing resumes.
Prior to his submissions, Forde argued strongly that the Bank of Guyana (BoG) could not lawfully take over the role of Judicial Manager and dismissed the recent Act of Parliament which made the change as merely transferring the powers, but lacking the authority to do so. He said that the court is the sole place empowered to appoint a Judicial Manager not Parliament. In reply, Chase noted Parliament is supreme and that it has the authority to pass title onto the bank. However, Justice Chang said he was interested in the final submissions rather arguments about the Judicial Manager.
In its capacity as Clico’s existing Judicial Manager, the BoG has added its voice to calls for the company to be liquidated, saying that since assuming the new role it has checked the relevant statements and reports of its predecessor and has concluded that they are true reflections of the financial state of the company. The bank also examined the financial statements prepared by Nizam Ali & Company as well as the relevant records and asserted that they are substantially correct. “Further the Bank is satisfied that the Company has committed breaches of the Insurance Act No. 20 of 1998. These are serious offences particularly against section 55 of the said Act. The investment of the company in the Bahamas of approximately US$43M is a major reason for the company’s inability to meet its commitments. This was a major breach of the aforesaid Act unauthorized as it was by the Insurance Commissioner…,” the bank said in an affidavit filed in the High Court recently.
BoG, which took over Judicial Management of the company in July, said it is a paradox that the same Directors who were responsible for the dilemma in which policyholders are now placed, “should be now belatedly considering their interests.” It referred to statements filed in the High Court by Clico as largely personal attacks, adding that it holds to the position there is no proper entry of appearance by the company.
Not viable
The bank said the lines of business of Clico were not financially viable, which it said was an indication the company was paying out more money in claims than it was receiving in premiums. As a result, it said the cost of reinsuring the said general lines of business far exceeded the actual value of the policies and that in the circumstances a refund of unearned premium income was made to policy-holders and proved more economical. “That notwithstanding the foregoing the magnitude of the investment by the company in the Bahamas and the general breaches by it of the Act, it is not recommended nor it is possible for the company business to be compartmentalized and some aspect still be pursued. It is in the greater interest of equality of justice to all that the consequences of the general insolvency should be pursued,” it stated.
Further, the bank said the bulk of the company’s business was long term insurance policies (Executive Flexible Premium Annuities and Flexible Premium Annuities) which it said are impaired by virtue of the heavy loss suffered and to be suffered by the company through its investment in the Bahamas and hence contributing to the company’s insolvency. It dismissed the assertion by Clico that it has much liquid cash saying that after operational expenses the total bank balance is around $2.7M dollars. It said too that Clico’s present view of the contracts/policies made with the National Insurance Board and other named bodies differ from the understanding and expectation of the bodies.
Substantial losses
But in an affidavit in answer to the petition to wind up the company, Clico said the present contention and controversy is in relation only to the long term insurance business of the company, adding that it also engages in the General Insurance, fire and auto insurance business. The company argued that the general insurance and auto insurance business have its separate statutory funds which are not under any peril or in question and as such those classes of insurance business ought to be removed from under the Management of the Judicial Manager. It argued that the effect of placing the entire company under judicial management has caused Clico substantial financial loss, since in those areas of business the existing policies cannot be reviewed or continued.
Clico urged the court to consider with great caution the final recommendation of the judicial manager and again charged that Maria van Beek never managed or attempted to carry out any part or portion of the business. It accused van Beek of concealing substantial and material facts which it said should have been produced in court. The company said that the policies relied on by judicial manager to establish a deficiency of the statutory funds do not constitute policies within the meaning of the Insurance Act.
Bids tendered
Following an unsuccessful High Court challenge by Clico to stop the sale of several of its immovable properties, the buildings went on the market and bids were recently tendered. In an affidavit filed in the High Court on Wednesday, Assistant Director of Insurance Supervision of the Bank of Guyana, Tracy Gibson reported that tenders were received on all of the properties save one.
Clico’s yet to be completed modern office block at 200-201 Camp Street received a highest bid of G$500M. Other properties at Lamaha Street; Lamaha Gardens; Queenstown; Camp Street and Essequibo received highest bids ranging from G$38M to G$65M. No bids were tendered for a property at New Amsterdam.
Clico had challenged the valuation of the properties which were conducted by the Ministry of Finance saying that the value of the properties was seriously understated. The company then hired Valuations Systems Specialist Hugo Curtis, who detailed what he said was appropriate valuations of the properties in an affidavit filed in the High Court. The difference between the Ministry’s valuation and Curtis’ was significant.
