Government Announces Protection For CLICO (Bahamas) Policy Holders

Parliamentarians, lead by Prime Minister and Minister of Finance the Rt. Hon. Hubert Ingraham, walk across Parliament Square to the House of Assembly where Mr. Ingraham delivered the 2009/2010 Budget on Wednesday, May 27, 2009. (BIS Photo/Patrick Hanna)

Nassau, Bahamas - Prime Minister, the Rt. Hon. Hubert A. Ingraham gave a statement in Parliament on Wednesday May 27, 2009, during the delivery of his 2009/2010 Budget Communication,  regarding decisions the Government have made in the matter of protection of  CLICO (Bahamas) Limited policyholders and annuitants.

The Prime Minister emphasized that the sale of some of CLICO’s business is necessary to meet the contractual expectations of paying policy holders, but there was a need to make the company more attractive to potential buyers.

“Many policyholders have expectations that day-to-day contractual obligations arising under the terms of their different policies should be honoured if they continue to keep such insurance policies in force, by virtue of the payment of their insurance premiums. In order for this expectation on the part of policyholders to have any hope of realization it is necessary to sell that part of CLICO’s insurance business relating to such policyholders liabilities to one or more active insurance companies with the capability of successfully managing the assets and servicing the liabilities” he said.

According to the Prime Minister, “…There is a gap between the assets and liabilities of Clico leaving a net liability of $42 million…We are advised that insurance companies are unwilling to purchase CLICO’s policies and assume the possible exposure of $30 million without a Government Guarantee. In order to facilitate the sale of CLICO’s policy liabilities the Government has agreed to provide such a guarantee. The Guarantee will be in relation to the following policies to the extent of the limits shown.” See Table I below:

TABLE I

The Government Guarantee, which is for a maximum of $30 million and for a period of five years, does not apply to policies and annuities of Directors and Senior Management of the company or persons closely related to them; nor does it apply to institutional or corporate policyholders or annuities.  The Guarantee was said to only cover policies which are currently in force, to the limits shown in Table I above, regardless of the number of accounts which any single policyholder has.

A Statutory Insurance Guarantee Fund, with the duty to provide protection for Bahamian policyholders in the event of failure of an insurance company engaging in domestic insurance business, will be established to accommodate the operational requirements necessary for the proposed insurance Guarantee.