Provides reassurance to Hand In Hand Trust depositors
President Bharat Jagdeo announced last evening that the Government has obtained a Court order placing Clico under judicial management in a move to protect the interests of policyholders and depositors.

Following is the text of the President’s statement made at a press conference at Office of the President:

I wish to announce that yesterday, through the Commissioner of Insurance, the Government of Guyana approached the High Court and obtained an Order placing Clico Life and General Insurance Company (South America) Ltd., otherwise known as Clico Guyana, under judicial management. In this regard, the Commissioner of Insurance has been appointed the judicial manager of the local company in accordance with the Insurance Act 1998, and will be taking steps to protect the interest of policyholders.

Clico Guyana
The move to the Courts by the authorities in Guyana follows recent developments in Trinidad and Tobago and other Caribbean territories and, in particular, the reported events of 24th February 2009 in the Bahamas with respect to the Clico Group.

On 30th January 2009 the Trinidad and Tobago authorities announced moves to take control of three subsidiaries of the CL Financial Group namely Colonial Life Insurance Company (Trinidad) Ltd., Clico Investment Bank Ltd. and British American Insurance Company (Trinidad) Ltd. This was necessary as the financial condition of these entities threatened the interests of depositors, policyholders and creditors of these institutions and posed dangers to the financial system of Trinidad and Tobago.

The Government of Guyana immediately sought updated information on the local company’s exposure and assurances regarding the security of local policyholders. The information received showed considerable exposure to the Group, in particular to Clico Bahamas, despite instructions from the Commissioner to the company over a year ago and more recently to reduce this exposure. Further, although the investments held in Clico Bahamas were liquid on paper, investigations by the authorities revealed that the Bahamas company was exposed to real estate investments in Florida through related party transactions with other subsidiaries in the Group.

Subsequently, the local company began to experience sizable claims which resulted in a liquidity strain. While the company has so far managed to meet its claims, it has been forced to dispose of some of its investments.

On Tuesday 24th February 2009, the Bahamian regulator announced that they had obtained from the courts a winding-up order in relation to Clico Bahamas Ltd., previously known as British Fidelity Assurance Ltd. This action was taken in order to protect the interest of the policyholders of the company after failure by the principals of Clico Bahamas to inject additional capital and liquidity into the company despite many months of urging and directing by the Bahamian authorities. The press release by the Office of the Registrar of Insurance Companies in Bahamas cites the inability of Clico Bahamas to pay claims/surrenders of policies in one of the jurisdictions where it operates, among other concerns.

Based on the information received, Clico Guyana has $6.9 billion or approximately US$34 million invested in Clico Bahamas which represents 53% of the Guyana company’s total assets. Furthermore, Clico Guyana has not been able to exchange its illiquid assets for more suitable investments despite repeated instructions by the Government of Guyana to do so. Given the action taken by the Bahamian regulators as well as the significant exposure that the local company has to Clico Bahamas, the authorities here yesterday moved immediately to the courts to seek a judicial manager in order to protect the best interests of Guyana policyholders.

With this move, it is anticipated that a fuller assessment of the financial position of the Company will be obtained and greater protection would be offered to policyholders. Government intends to work towards recovering the sums outstanding from the Bahamas, and to protect the interests of all policyholders of Clico Guyana. In this regard, policyholders will be contacted and provided with further information shortly

Hand in Hand Group
In relation to recent developments in the Stanford Group, the Government of Guyana has been closely monitoring the situation and the Central Bank has had several meetings with the institutions under its supervision.

In the case of the Hand in Hand Trust Corporation Inc. (HIHT), total current exposure to the Stanford Group amounts to $827 million or US$4 million, in addition to $297 million or US$1.5 million invested on behalf of pension funds. The direct exposure represents 9 percent of the total assets of HIHT.

The Trust is a strong financial institution with capital adequacy ratio of 26.9% as at the end of January 2009. Since the seizure of the Stanford Investment Bank the management of HIHT has been proactive in putting together a strategy for mitigating any potential losses and ensuring that depositors’ funds are protected. This strategy has been submitted to the Central Bank for its study and approval. The Central Bank is examining the proposal to see if it meets the demand of depositor protection.

It should also be emphasized that the HIHT is a completely separate legal entity from the Hand in Hand insurance companies which have no exposure to these developments.

Conclusion
Against this background, the total exposure of the Guyana’s financial system to the Clico and Stanford Groups currently amounts to approximately US$41 million. This amounts to 3 percent of the total assets of the financial sector and does not pose a systemic threat.

The Government of Guyana wishes to assure the public that, unlike in some developed countries, steps will be taken to protect the pensions of those who have saved and invested in the institutions affected by these recent events.

Yesterday at 12 noon I briefed the Leader of the Opposition on the situation and on Government’s intentions to approach the courts to seek an order with relation to Clico Guyana. I was therefore extremely disappointed, and regard it as most regrettable, that the Leader of the Opposition would have sought to engage in grandstanding in Parliament earlier this afternoon, claiming that the Government and regulator have said nothing on this matter. Such action could only have been designed in pursuit of narrow political interests, and hardly serves the cause of reinforcing confidence in Guyana’s strong financial system.

The local financial institutions are strong and well capitalised. The current capital adequacy ratio is 15% which is well above the international benchmark of 8%.

The Government of Guyana will continue to closely track developments in these areas to ensure that policyholders’ and depositors’ interests are protected.