What a CLICO MESS!

The following extracted from the Barbados Investors & Policyholders Facebook page – David, Barbados Underground

Barbados Investors & Policyholders Alliance

5 hrsBIPA is aware of the cessation of premium payments to ResLife with immediate effect and understands that as the Government of Barbados is pushing ahead with its mandate to dissolve the ResLife operations, then this first step in the process is a necessary one.However, BIPA continues to be in communication with the Boards of ResLife and NLICO to make sure that BIPA is kept informed of developments as we wish to avoid any more unpleasant surprises causing shock and awe to policyholders, especially our most vulnerable policyholders; the elderly. Their lives have already been disrupted and devastated by this injustice and they simply cannot take any more grief.

BIPA has submitted over 60 questions anticipating those which are likely to be asked by policyholders and will keep its members informed as responses to those questions and other details come to hand.
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Is the BSE Regulated?

This really is not acceptable. Is the FSC in a position to address these issues?

 

 

-Interneter

The Barbados Stock Exchange Inc. (BSE) wishes to advise that trading in the security – Barbados Dairy Industries Limited – has been suspended until further notice effective November 20th, 2018 pursuant to Rule 3.01.5 1(a) and (b) of the Rules of the Barbados Stock Exchange Inc.

The Barbados Stock Exchange Inc. (BSE) wishes to advise that trading in the security –

 

 

 

Banks Holdings Limited – has been suspended until further notice effective November 20th, 2018 pursuant to Rule 3.01.5 1(a) and (b) of the Rules of the Barbados Stock Exchange Inc.

 

Related Link: Trading Report 21 Nov 2018

Mia Promises Jail time to CLICO Offenders

The cut and thrust of the 2018 Barbados Election campaign has tossed up many issues which confirm the political party that wins the election will have to hit the ground running to rescue and restore the country to the pedestal it once occupied in the region and the world.

There is one issue which has not received the airplay it deserves in the opinion of the blogmaster.

On more than one occasion the leader of the Barbados Labour Party (BLP) – delivering on the 2018 election campaign platform – hinted at the fact should her party win the government, there will be an effort made to hold certain actors involved in the CLICO mess accountable. The blogmaster is aware promises made in the heat of a political campaign must be taken with some salt. However, given the black eye the CLICO collapse has given to Barbados, AND, the potential it poses to continue to deliver given its impact across the region, the blogmaster will continue to invite discussion on the matter in future blogs.

What the CLICO debacle exposed was that there was a catastrophic failure of the regulatory system- of which the political class and other key actors were complicit- to more efficiently manage the downside risk of the local insurance sector. An IMF report leaked in December 2017 identified the systemic risk posed by Sagicor – the dominant insurance player in the region – and the challenge posed to the local regulator (Financial Services Commission (FSC)) to effectively regulate given the complexity of Sagicor’s business model.

The IMF report found that the FSC, which was established in 2011 and is assumed to be the group supervisor of Sagicor, has neither developed, not implemented group-wide supervision processes and practices since its establishment.

It should be noted that to its credit the FSC was responsible for commissioning the report.

What has intrigued the blogmaster is the recent announcement that Sagicor acquired Harmony General insurance company. Harmony General was a small player in the sector, however, if the size and complexity of Sagicor was identified before the acquisition as a source of concern in the IMF report- the acquisition will serve to add a few more questions.

The blogmaster has no interest in the sale directly, it is more a quiet concern about how the sector is being regulated to militate against a recurrence of a CLICO.  The NEW leadership of Barbados must demonstrate firm leadership to implement learnings arising from the collapse of CLICO. We must punish those who failed to honour fiduciary responsibilities.  In this regard we have taken careful note of the lead role being played by Leslie Haynes Q.C. in BLP affairs. You may recall Haynes was very close to Leroy Parris and CLICO before its demise.

The blogmaster has also observed – lost in the din of the 2018 general election – general insurance companies have been disclosing end of year financial statements as required by law. A perusal of ALL of the finacials published so far list companies under financial stress. What is not clear to the blogmaster is how a sector that is under ‘financial pressure’ has not seen the urgency to significantly raise premiums to bolster the profit and loss. What is the blogmaster missing?

It is the expectation of sensible Barbadians the incoming government will demonstrate the leadership required to make available adequate resources to the FSC to do its job effectively. The other expectation is that players responsible for the CLICO collapse will do the ‘time’.

See the Financials of CGI, Brydens and Sagicor General insurance companies:-

Another Heather Cole Column – JERK HAM AND BALONEY

Minister of Finance Chris Sinckler

Just before Christmas 2017, the Print Media published an IMF Report that had been commissioned by the Financial Services Commission (FSC) of Barbados on the Supervisory Framework for Sagicor Life Inc. The report revealed the dismal state not only of the Insurance Industry but for the FSC itself. It alluded to the lack controls, of compliance, oversight; of an agency not equipped or staff trained; and without technical expertise and knowledge. In other words the report stated that the FSC has a mandate that is above its capacity to implement.

The FSC did not disclose the contents of the report which was subsequently published by the Print Media. The Chairman of the FSC, Dr. Frank was quick to berate the Press for making the report public; for disclosing the damaging and secretive report.

The events that led to the publication of the IMF report are somewhat disturbing. The IMF came to Barbados and their consultancy lasted from October 9th to 13th 2017 and the Report was issued on October 13th 2017.

On Friday December 11, 2017 the Minister of Finance informed the House of Assembly that all the operations of CLICO would be transferred to a company Resolution Life Insurance Limited (ResLife) by December 31, 2017.  He also stated that the process by which the assets and liabilities would be transferred would commence in January 2018. He also stated that government would “issue bonds to facilitate the restructuring of CLICO, preserve the investments of policyholders and transfer the real estate assets to New Life Investment Company (NLICO).”

Firstly, it is regrettable that the Minister of Finance chose to ignore the recommendations of the IMF. If there is no credible oversight for the Insurance industry why choose to go ahead and create a new company that will operate under conditions where the industry is a law unto itself? Why choose to continue operations within the same environment that caused CLICO to fail.  Why choose to continue when the IMF has warned that Sagicor has the propensity to fail. 

Putting the proverbial new wine in old skins will only cause the old skins to burst.  One cannot expect to reap success with any new insurance company in Barbados that exists under the same old rules.

Secondly, based on the timeline it suggests that even though he was warned by the IMF on October 13th 2017, the Minister hurried to Parliament with the Resolution.  In his haste, he also did not state who the owners or principals of NLCIO or who the owners or principals of ResLife. There was no mention of the relationship between these two companies.  It is therefore unclear if the present policy holders of CLICO will have a stake in the real estate assets once the new company NLCIO is formed.  I have not read the CLICO International Life Insurance Resolution so I am therefore not in a position to discuss any further based on the contents of the Resolution.

What stands out in my mind about this debate is Maxine McClean ranting and raving about the Resolution preventing vultures from getting their hands on CLICO’s lands. To me that was a big red flag and I wondered if it was the lands of CLICO that made the Minister of Finance disregard the recommendations of the IMF that were intended for the well- being of the industry to give the lands to his friends.

Thirdly, could it be that the Media’s publication of the IMF Report actually thwarted the secret Christmas gift of Jerk Ham and Baloney? If so, the swift actions of the Minister of Finance had nothing to do with the policy holders of CLICO but to ensure that the title deeds would be delivered well before the next general election.

Middleclass Caught Between the FSC and Sagicor

Sir Frank Alleyne, Chairman of the FSC

A report prepared by the International Monetary Fund (IMF) that reviewed the robustness of the operations of the Financial Services Commission (FSC)- specifically as it pertains to the supervision of Sagicor-  has triggered alarm bells in the local and regional financial market.   Although there is no evidence based on any public reporting Sagicor is not a well run company, the findings of the IMF report, commissioned by the FSC- supports the view that oversight body cannot conclusively give the green light to the good health of the Sagicor operations because it is under-resourced and therefore unable to execute a quality full scope review.

Based on recent reporting many have focused on the lack of adequate supervision of the insurance sector by the FSC, however, the BU household is acutely aware that the FSC ALSO has oversight for Credit Unions, Securities and Mutual Funds AND Pensions – see FSC website.

BU is very interested in the integrity of the pension slice of the market at a time when the National Insurance Scheme is ALSO under the microscope. It is no secret NIS expense will exceed revenue in the near future and necessitate drawdown on investments and possibly the need to extend the pensionable age to 70+ in the near future. Barbadians until recently were encouraged through tax breaks to open Registered Retirement Savings Plans (RRSPs) to supplement government pension in order to sustain a reasonable standard of living and create peace of mind in the golden years.

Relevant Link: IMF FSC Confidential Report

The catastrophic regulatory failure of another pan Caribbean insurance company is still fresh in the minds of a CLICO fatigued public. The findings contained in the IMF report leaked by Barbados Today should be the cause of worry for people of the region. It reveals that Barbados through its agent the FSC has not been aggressive in the  post CLICO period to strengthen the oversight framework to efficiently mitigate risk in the sectors it has responsibility to supervise.

There is a large middleclass in Barbados with a significant number holding RRSPs with Sagicor AND the employer’s pension is ALSO managed by Sagicor. If there was a financial failure by Sagicor the impact on Barbados and Caribbean economies would eradicate personal wealth by greater than 50% in BU’s estimation. The fact that the CLICO meltdown occurred in 2008 and the quality of supervision continues to be deficient suggest heads need to roll.

The FSC and government owe it to the people they serve to be as strategic, efficient and transparent as practicable in this matter. BU appreciates this is a confidence sensitive issue, however, the regulator must publicly demonstrate that it has a grip on the issue. Given the deep penetration of regional markets by Sagicor and high contribution to GDPs, a catastrophic event must not occur because of weak supervision.   Surely we learned from the CLICO mess?

By the way, why is June Fowler commenting on the matter? Does she possess the expertise or competency to comment with any certainty regarding the integrity of the regulatory framework?

Cable & Wireless ‘Amalgamation’ and Lack of an Operational Barbados Stock Market

Submitted by Crusoe

The Nation news reports that C&W is seeking to purchase all remaining shares in the company, from minority shareholders ”Under the proposed amalgamation, shareholders will surrender their shares in Cable & Wireless Barbados in exchange for a cash payment of BBD$2.86 for each common share.”

For a company that has not paid a dividend for years, yet made substantial profits, how can such a low share price be substantiated?

Surely the FSC should examine the calculations supporting such a share price, including the expected future earnings potential of the shares, as a share price should be calculated.

That C&W Barbados has not paid a dividend in years would, while making profits, is shocking, would surely not be allowed by shareholders in North America (the directors would have been roasted, as NA shareholders in any company expect a dividend every quarter) and this ridiculously low share price merely adds insult to injury.

What exactly is the FSC in Barbados doing to protect minority shareholders?

This event adds credence to the assertion that there is no real stock market in Barbados, that any semblance of such is a veneer, with no real possibility of small shareholders earning via dividends or share appreciation. Add to this, that profitable companies locally are mostly privately owned and the whole thing becomes a joke.

If one believes that assertion and I do, then the conclusion is that Barbadian citizens should be allowed to invest in international stock markets, to have every opportunity that others have. Handcuffing Barbadians in using their earned income to invest is idiocy. Government policy on investments, limitations on overseas investment, is nonsense and needs to change.

There is not and will never be a viable stock market in Barbados.

Notes From a Native Son: Pressuring Credit Unions to Shore up Foreign-owned Banks is a Missed Opportunity

Hal Austin

Hal Austin

Introduction:
There is a lot of back room chat about whether or not the Financial Services Commission has been putting one or more credit unions under pressure to move capital to foreign-owned commercial banks. Although this is wrong, based on the principles of financial regulation and financial management, the only legitimate exclamation has got to be political.

The other exclamation, of course, and one that neither the government nor central bank would entertain, is that the economy is in such bad shape that the ministry of finance, through the proxy of the FSC, has moved to capture all available institutional cash in the economy in order to meet its day-to-day costs. Whatever the official or unofficial explanation, it is simply wrong.

Credit Unions:
The key principle behind the creation of credit unions is to allow members to pool resources in order to provide alternative services to more commercial retail banks and at reasonable costs. They are not meant to operate in the same financial space as banks; their business models are different and their democratic decision-making may be cumbersome, but allows members to have a say in the management of the society. In Barbados, and indeed globally, they have been enormously successful, particularly so since the 2007/8 banking crisis, which has largely left mutual societies undamaged.

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Credit Unions Must Deposit With Banks According to the Law

Hally Haynes, president of the Barbados cooperative Credit Union League

Hally Haynes, president of the Barbados Co-operative Credit Union League

The issue which has erupted about whether credit unions have been directed by the  Financial Services Commission (FSC) to shift deposits held with non banks to commercial banks continues to gain momentum. The President of the Barbados Economic Society Ryan Straughn added his voice today. The unravelling saga has raised several issues which should concern Barbadians whether members of the credit unions or not.

The Barbados Co-operative and Credit Union League (BCCUL) is the umbrella body of credit unions in Barbados and should be the only entity making statements on the matter.  The matter which is playing out in the media makes it seem that it is a City of Bridgetown and Financial Services Commission affair.  Of concern to many is the statement issued by the BCCUL which was reported in the Barbados Today “…further, the Barbados Co-operative & Credit Union League Ltd., the apex body for credit unions and co-operatives in Barbados, totally rejects the notion of any ongoing row between the FSC and credit unions on this or any other issue. The pertinent facts surrounding the issue are as summarised below”.

For anyone to suggest that the FSC has issued a directive to force credit unions to transfer all deposits held with non bank institutions to banks in order to force a take up of government treasuries is speculative at this stage. BU is willing to be proved wrong. Further, BU has had a look at the Co-operative Societies Act Section 34A and the law supports the fact that credit unions must be placed funds with banks or other credit unions regulated by the Act.

What it says to BU is that we should be also asking why under the old dispensation credit unions were allowed to contravene the Act. We have been critical of the Office of the Supervisor and its weak supervision of CLICO Insurance Ltd. Should we be similarly critical of the former Registrar of Cooperatives?

Here is what the Act states:

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Hidden Agendas?

Submitted by Old Onions Bag
Financial Services Commission drops the hammer on credit unions

Financial Services Commission drops the hammer on credit unions

Latest move by Government through a directive coming from the Financial Services Commission (FSC), to curtail the credit unions as to where they can invest, has stirred up a hornets nest. Now investing for them is all but limited to commercial banks and government paper. Really now, how much money can be made with commercial banks, 2 % or  5% on fixed deposits if you are lucky? Can be liken to operating in a piggy bank environment, risk aversive for sure, but at what loss of possible profits?. All that’s left is government bonds and paper instruments. Such directives most probably  have been influenced by the Clico paviova, and a protectionist policy for investors, but could there be more, given that commercial banks’ interest in government bonds and instruments have declined considerably.

So why must the credit unions  always play whipping boy with obvious mollycoddle ? Must these institutions (peoples money) be always corralled to suit others agendas all the time? Why can’t the credit unions be allowed to grow as with most financial institutions, for one, like allowing them their own bank? Surely we could venture a guess, that commercial banks would see an exodus of the ‘peoples deposits’ to where, policies and interest rates and sharing of profits would be much more fertile.

Credit unions you are being served notice….bail bonders extraordinaire‘….

Financial Services Commission Needs To Deliver on its Remit

Bruce Bayley, Chairman of CGI

Bruce Bayley, Chairman of CGI

The observation has been made by BU et al from time to time that there is a lack of financial analysis by the local traditional media. While there is reporting about financial matters, the public continues to be cheated out of billions invested in the education system through the years which continues to produce accountants and graduates in many disciplines a dime a dozen. Our observation pertains mainly to financial entities where consumer risk is greatest for many.

Section 4.(e) of the Financial Services Act 2010 states that the Financial Services Commission (FSC) was established “to promote stability, public awareness and public confidence in the operations of financial institutions”. The last five years have wreaked havoc on the economies of countries all over the world, Barbados being no exception. It is therefore not unreasonable to expect that companies operating in Barbados are currently managing declining balance sheets and are therefore under financial stress.

BU believes that in the current environment the dearth of financial analysis has accentuated the risk for the general public. There seems to be the acceptance that if Company X meets its legal obligation to publish its Balance Sheet and Profit and Loss in the newspaper all is well. Unfortunately BU does not have the expertise and resources to effectively fill the void although we have sensitized our readership from time to time of the need to be vigilant in these matters.

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Another CLICO Mess On The Horizon Maybe?

A.M. Best Headquarters

What is of even greater significance is how we will respond to the revelations from a policy perspective. What are the changes that will be made to ensure that the same thing does not happen again or that there is reduced risk of its recurrence? – Mariano Browne

The quote by former CEO of a CL Financial subsidiary and minister in a T&T government is insightful. Political junkies become mired in ‘CLICO personalities’ but  BU insists we should focus on the catastrophic failure of the regional regulatory framework to alert the market that something was amidst at CL Financial. Three years after the collapse of CLICO and there is still doubt that any serious regional regulatory framework has been established to prevent a recurrence. In every territory that CLICO operated in the Caribbean there was a predictable response by the regulatory body. What does it tell us?

It must be stated that Barbados has moved quickly to establish the Financial Services Commission (FSC) with the objective to strengthen the regulatory environment relating to insurance, credit unions and functions administered under the Securities Act. In the case of the insurance sector, the office of the Supervisor of Insurance (SOI) was woefully inadequate and it is God’s mercy we have not experienced more failures in the industry. In fact under the watch of the SOI CLICO Barbados accumulated a short  reserve position which started in the boom years under the Arthur administration.

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