Dookeran on CLICO: We will fix it
By Curtis Rampersad
Finance Minister Winston Dookeran yesterday promised that the insurance policies and investments of quarter of a million CLICO members will be honoured by the People’s Partnership Government, 18 months after CLICO’s parent CL Financial collapsed.
One hundred and sixty thousand investors in the bankrupt Hindu Credit Union will also receive their money back, he said. However, payments may have to be made to some depositors over the next 20 years.
In his first national budget presentation in Parliament in the Red House, Port of Spain, yesterday, Dookeran promised justice for the CLICO and HCU meltdowns.
“Those responsible for this crisis must also be held accountable,” he said.
He said the Government eventually plans to restructure CLICO and CL subsidiary British American to sell off the two combined companies.
He, however, criticised the handling of the CL Financial, CLICO and the HCU.
“The CL Financial/CLICO issue was handled badly by the authorities from the start. This fiasco was a colossal, inexcusable multi-billion dollar mistake,” Dookeran said.
“This fiasco has put on hold the lives of thousands and endangered their financial future.”
Total funding as at May by the Government and the Central Bank to rescue CLICO amounted to $7.3 billion, he said. In June, CLICO and another CL subsidiary, British American, had total liabilities of $23.8 billion but total assets of $16.6 billion, he said.
The number of long term policyholders affected, including pensions and life and health insurance, was around 225,000 people and accounts for $6 billion in liabilities.
CLICO’s short term investments, which were deposit accounts earning high interest rates, includes 25,000 customers with liabilities of $12 billion, Dookeran said. He said the Government had to take action.
“This is no easy task but we resolve to fix it,” he said.
After consultations, Government has agreed to separate the insurance business from short term investments, to protect policyholders, and the obligations of the 225,000 policyholders “will be honoured, backed by the statutory fund”, he said.
“We will also restructure and merge the traditional insurance businesses of CLICO and British American and prepare this merged business for divestment,” Dookeran said.
Depositors in the short term investments and mutual funds will receive an initial part payment of $75,000 from the Government. This will fully pay off 40 per cent of the 25,000 investors, including 140 credit unions and 15 trade unions, he said.
Short term investment depositors whose balances exceed $75,000 will be paid through a Government IOU amortised over 20 years at zero per cent interest, Dookeran said. This IOU would be structured so that it could be traded on the secondary markets, he added.
The cost of the $75,000 payments is estimated at $1.5 billion over the next four years as payments become due, and the Government will provide $1.8 billion over the next fiscal year for a funding mechanism for the 20-year amortisation.
In the case of the HCU, depositors and shareholders will be entitled to $75,000 and those with balances over $75,000 will be paid in equal annual installments over 20 years. Shareholders receiving these payouts will have to sign over their rights to HCU assets to the Government, and the State will then sell these assets to recover its injection of cash.
“This intervention will cost taxpayers an estimated $300 million and will benefit more than 160,000 people,” he added. (Trinidad Express)