The past two years has been characterized by the bursting of the US housing market bubble and the emergence of a crisis in the US market for sub-prime mortgages which quickly transmitted into global financial contagion, with state intervention in financial institutions becoming necessary in Belgium, Germany, Iceland, Luxembourg, the Netherlands, the United Kingdom, and a number of other countries.

Even though the Caribbean’s main exposure to these developments might have initially been seen to be indirect, especially through such channels as reduced demand for our exports and services such as tourism with attendant implications for our productive sector, it has also become clear that any exposure by our major conglomerates to the global financial, real estate, and commodity markets would also have grave potential implications for our Region. The latter has clearly been the case with the CLICO Group of companies.

The following is a history of events as it relates to CLICO Guyana:

2007 – August 2008
CLICO Guyana established its statutory fund and was instructed by the Commissioner of Insurance, Maria van Beek, to reduce its investment in CLICO Bahamas to be compliant with the Insurance Act 1998.

In response, the company started to repatriate some funds. The audited financial statements of the company and the audited forms which include the statutory fund statement for the year ended December 2007 were submitted to the Commissioner in April and August 2008 respectively. The forms showed that while the assets held in the fund were of sufficient value, the company still had invested too great a proportion overseas and was therefore in breach of the Act.

September 2008
President Bharrat Jagdeo requested that all insurance companies report on their exposure to the international financial crisis. CLICO Guyana assured the authorities that it was not exposed to the crisis.

December 2008
The Commissioner wrote to CLICO Guyana requesting an update on the status of the company’s investments and restating concerns over the statutory fund. The company responded by stating that it was in the process of attaining full compliance.

January 30-31, 2009
Minister of Finance, Dr. Ashni Singh, met with the Commissioner of Insurance and the Chief Executive Officer (CEO) of CLICO Guyana, Geeta Singh-Knight, to receive a briefing on the intervention by the authorities in Trinidad and Tobago and its implications for Guyana. Information was requested on the financial status of the CLF Group, details of the intervention, and the implications of these developments on the operations of CLICO Guyana.

In a press release, Singh-Knight reassured Guyanese that CLICO Guyana was a separate entity and its operations were not intertwined with those in Trinidad.

CLICO Guyana was again ordered to return its investments to Guyana.

In addition, the Commissioner of Insurance instructed the company to pursue other options that could remedy its deficiencies with respect to the requirements of the Act. These included the option of having the Group inject additional capital into the local company, and having the real estate holdings in Florida owned by members of the Group assigned to the local company, until the matter was satisfactorily concluded.

February 5, 2009
President Jagdeo, at a press conference, announced that Government was monitoring the domestic situation closely. He also indicated the existence of short-term risk through potential mismatches in the maturity of the company’s assets and liabilities that could arise in the event of significant changes in its overseas investments.

February 25, 2009
Pursuant to a petition made by the Commissioner of Insurance, the High Court of Guyana placed CLICO Guyana under judicial management and appointed the Commissioner of Insurance as the Judicial Manager in accordance with the Insurance Act.

Since the appointment of the Judicial Manager, the following actions have been taken to secure and realize the assets of CLICO Guyana, especially in relation to sums owed to the company by other members of the CLF Group:

* A request has been made to CLICO Bahamas for the immediate return of the US$34.1 million receivable from that company. In addition, representation has been retained in the Bahamas to pursue this matter, including by requesting CLICO Bahamas to call in the guarantee issued to that company by CLF in respect of the loan granted by CLICO Bahamas to CLICO Enterprises to purchase real estate in Florida;

* Letters of demand were issued against Caribbean Resources Ltd (CRL) for $1.9 billion owed by that company, as well as against the parent company CLF, which had issued a guarantee to cover this receivable; and

* A letter of demand was issued against Premium Security Services Inc. (PSSI) for the sum of $235 million owed by that company.

In conjunction with this course of action, the Judicial Manager has petitioned the Guyana Courts for an order restricting movement of the assets of CRL and PSSI, wholly-owned subsidiaries of CLF, the parent company of CLICO Guyana.

In addition, the Commissioner of Insurance as Judicial Manager has engaged on behalf of CLICO (Guyana) a firm of Chartered Accountants, Nizam Ali and Company, to perform certain special audit and accounting services, including for the purposes of aiding the Commissioner of Insurance to ascertain the true financial position of CLICO Guyana. This is in addition to the annual audit currently being performed by the statutory auditors of CLICO Guyana, Deloitte and Touche, in relation to the year ended December 31, 2008.

Further, Prescience Insurance Consultants and Actuaries, a Canadian actuarial firm that has previously provided actuarial services to CLICO (Guyana), has been retained to perform an updated actuarial assessment of the company’s insurance business.

March 3, 2009
President Bharrat Jagdeo, in response to comments by the Bahamian Prime Minister, Hubert Ingraham, that there appeared to be no evidence of CLICO Guyana’s investment in CLICO Bahamas, noted that there was a significant paper trail to prove the existence of the investment. He also guaranteed that no policyholder will lose his/her money that was invested in CLICO Guyana.

March 9, 2009
President Jagdeo, at a press conference, reiterated his guarantee to CLICO policyholders and called for the establishment of a regional regulatory framework to oversee the functioning of Pan-Caribbean entities and reduce the risk of such a crisis from happening in the future.

March 12, 2009
After the opposition People’s National Congress Reform moved a motion to suspend the National Assembly to debate the CLICO crisis, Minister of Finance, Dr. Ashni Singh, addressed the House making a detailed presentation. He summarized the policy efforts that Government has made in recent years to develop the financial sector, paying particular attention to strengthening supervision and oversight. He also briefly described the global and regional context within which the CLICO matter has occurred, after which he outlined the regional and domestic developments as they relate to the CLICO Group of companies, and concluded with an update on the current status in relation to CLICO Guyana.

The National Assembly unanimously supported President Jagdeo’s guarantee to CLICO Guyana policyholders.

The Commissioner of Insurance and judicial manager of CLICO Guyana held a press briefing to inform CLICO policyholders and the public on:

1. The actions taken by the Judicial Manager in the last two weeks;

2. The status of policyholder claims and information to policyholders; and

3. The status of CLICO Guyana’s investments.

March 12-13, 2009 – Region’s response
At the 20th Inter-Sessional Meeting of the Conference of Heads of Government of CARICOM in Belize City, Belize, it was agreed that the CLICO meltdown is a regional problem which warrants a regional response.

In a statement issued thereafter, it was noted that “the experiences relating to the CL Financial Group and the Stanford Group of Companies have demonstrated the need for strengthening the regional regulatory framework, particularly in the non-bank financial sector and more effective cross-border supervision of Pan-Caribbean companies.”