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:-

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?

Notes From a Native Son: Insurance Companies Are a Licence to Print Money: Who Insures the Insurers?

Hal Austin

Hal Austin

All financial firms should by law be compelled to submit an annual business model to the regulator and supervisor for assessment if they are to continue to trade. This should be a basic condition to provide adequate consumer protection and the integrity of the financial supervisory and regulatory systems.
As has been stated before, the business models of insurance companies and banks, the two major financial sectors, are totally different. While banks borrow short and lend long, a flawed business model if ever there was one, insurance companies are often compelled to have a capital adequacy of at least 110 per cent of its likely liabilities. And, of the various branches of insurance – unemployment, health, home, motoring, disaster, etc. – the greatest moral hazard is motor insurance; it is the low hanging fruit, in that it is the easiest for insurance companies to make lots of money while paying out a relatively low percentage of claims.

First, unlike life and health insurance, or even unlike home and contents insurance, motorists are compelled by law to have insurance. Unlike life and pensions insurance, for example, there is no need to base actuarial assumptions on a continuous mortality investigation report and the one in two hundred event assumption is in many ways only theoretical since there is no longevity risk. Generally, there are two broad kinds of insurance regulation: firm-specific and industry-wide. Firm-specific regulation and supervision is when the authorities are focusing on a single firm, going through its books, interrogating its staff, and talking to a sample of its customers. This may arise out of a formal complaint, market rumour, suspicion or a randomised stress test.

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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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Question For The Supervisor Of Insurance – Are All Insurance Companies Equal?

The CLICO challenge remains. The former Acting Prime Minister Fruendel Stuart promised Barbadians to expect an announcement on the matter soon. Minister of State in the Prime Minister’s Office Darcy Boyce signalled in a press conference recently what maybe in the offing for CLICO investors. He suggested Barbadians who invest in financial products out of sync with the market should be prepared to accept the attendant risks. We are paraphrasing.

A discussion point in the CLICO Saga has been the role of the Office of the Supervisor of Insurance. All are agreed several months into the CLICO crisis that the Office of the Supervisor of Insurance fell asleep at the switch. There is no excuse to offer.  The Insurance Act empowers the Supervisor of Insurance with wide ranging  powers to act decisively in situations which demand it. The CLICO matter exposed a very high level of incompetence. The first line of oversight is the Office of the Supervisor of Insurance, closely followed by central government through its agent the Permanent Secretary in the Ministry of Finance and the Minister responsible.

Of concern to BU is the lack of ongoing public discussion regarding the role of the Office of the Supervisor of Insurance in the wider context. Yes we have the CLICO challenge but are we confident the insurance sector is being efficiently regulated by this office?

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The CLICO Political Football

The CLICO Saga seems to be regaining some steam. It probably has something to do with those rapidly maturing flexible annuities (time deposits) reported to be about 300 million dollars. The Nation newspaper along with the Barbados Labour Party (BLP) have been accessing all avenues opened to them to sensitize Barbados about the horror which is about to descend on CLICO policy and annuity holders. There is the wider implication for the Barbados financial landscape and economy.

BU have to confess we are amazed at the haste which Opposition Mia Mottley and the BLP were persuaded to bring a no-confidence motion to parliament arising from the unfortunate circumstance of CLICO.  When the no-confidence motion failed the BLP promptly took its position on the road. It is only a naive group of people who would support a no-confidence motion supported by public meetings and expect that it would not defeat the government’s preferred strategy to maintain confidence as the circumstance would allow while it look for buyers for the beleaguered company. The protection of CLICO was and still is important to the national interest, in this regard the government and the opposition should have closed ranks on this matter.

Those companies in the region which have been placed under judicial watch what have they accomplished so far regarding the liquidation of assets to the satisfaction of policyholders?

Recent media reports have confirmed the imminent sale of the general and mortgage divisions of CLICO Barbados. The continued negative publicity which has been fuelled by the BLP has effectively destroyed any possibility of the life division being sold for fair value. The hole which will be created by the commitment to honour the maturing flexible annuities will obviously create pressure for any buyer. Who wants the grief of acquiring a portfolio with a customer base whose priority would be to appease a pent-up anxiety?

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Is CLICO Being Used As Target Practice?

Parris (left) having a chat with director Leslie Haynes, QC, minutes after the meeting. (TM) (Picture by Nigel Browne of Nation newspaper.)

Parris (left) having a chat with director Leslie Haynes, QC, minutes after the meeting with Prime Minister David Thompson. (TM) (Picture by Nigel Browne of Nation newspaper.)

The expected deal between CLICO Holdings Barbados Limited and Insurance Corporation of Barbados Limited seems to have gone off the boil. Terse announcements from ICBL and CLICO suggest that both parties were not satisfied with the tenor of the negotiations. No sooner the announcement was made the Opposition Barbados Labour Party (BLP) reinstated its call for the regulators to take hold of the company.

BU in a previous blog has expressed our concern at the haste with which some parties in Barbados seem to want to dismantle CLICO Holdings Barbados Limited. This is despite the assurance by Prime Minister David Thompson that the government of Barbados will protect the policyholders and investors of CLICO Holdings, the Opposition Party led by Mia Mottley seems hell-bent on escalating the call for the liquidation of CLICO’s assets.

The question to be asked is why no similar concern expressed at the recent downgrade in A.M Best Rating of Sagicor? ALICO which is a subsidiary of AIG has not raised even a murmur. AIG we know is the US based holding company which has been deemed to large to fail and has been on life-support for over six months now.

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Treading Carefully In The CLICO Debate

Minister of Social Care, Constituency Empowerment and Urban Development

Minister of Social Care, Constituency Empowerment and Urban Development

The CLICO Affair has occupied our region for more than five weeks now. We suspect that it will continue to do so for a little while longer. Underlying the cause of CLICO’s problem maybe a combination of a lack of a harmonized regional regulatory framework to manage our Pan-Caribbean companies, and the global financial meltdown which has dried-up cash flow for many companies. There are some people who might suggest that the Lawrence Duprey company has not endeared itself to regulators in the region over the year, a story for another time. This might explain the haste with which the CL Financial empire is being dismantled across the region.

Barbados has long been rated as a stable financial market. Unlike Bahamas, Guyana, Belize and others the Barbados authorities (government) have elected to manage the CLICO crisis in a different way. The Opposition Party in Barbados has shown its displeasure by tabling a motion of no confidence in the government which was predictably defeated on Friday (6 March 2008). Our style of government entitles the Opposition Party to table a motion of no confidence in their judgement.

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What Can We Say About The CLICO Affair?

clicoThe T&T based CL Financial saga rages on in Trinidad. Its configuration as a pan-Caribbean company ensures that decisions currently being taken in Trinidad will have implications for most of the countries in Caribbean where it does business. The irony of course is the lack of a harmonious regulatory framework in the region given the push to mobilize CSME. It is known that in the Caribbean we do very well at formulating policy, however we fall flat in the execution.

A recent blog submitted by BU family member TRAINED ECONOMIST has generated interesting discussion. In contrast we became turned off when we read the front page editorial which appeared in the Advocate newspaper today titled Hands Off CLICO. We found the content of the Advocate editorial interesting when compared to the contributions (RA’s comments one, two, three) by BU family member RA. Continue reading

Prime Minister David Thompson And Opposition Leader Mia Mottley Expose Weakness In The Office Of Supervisor Of Insurance


PRIME MINISTER David Thompson (right) with Supervisor of Insurance Carlos Belgrave and Barbados Central Bank Governor Dr Marion Williams/Nation Newspaper

A member of the BU household was fortunate to listen to the mid-day call-in program hosted by veteran journalist David Ellis. If we were not convinced that politics has enveloped the CLICO Affair, we are now convinced after listening to Mottley and the Prime Minister on the call-in show. Previous blogs have discussed the unravelling CLICO saga ad nauseam.

Our concern centres on the admission by Leader of the Opposition Mottley that she left government not knowing that the CLICO statutory fund was in deficit. She confirmed that the Supervisor of Insurance report for 2005 was only submitted in early 2008. The Prime Minister put forward the very logical argument that if Mottley can claim ignorance after years in office how could he be expected to know a deficit existed after one year in office.


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CLICO Bailout, Implications For Barbados

Executive Chairman of CL Financial, parent company of CLICO

Executive Chairman of CL Financial, parent company of CLICO/Trinidad Express

Barbadians in the understandable emotion of the moment should resist the irresistible urge to discuss the current bailout of CLICO by the Trinidad government in a parisian and or political manner. This approach should extend to those who resent the lavish lifestyles of the CLICO Barbados executives who are known to ride around Barbados in high-priced luxury vehicles, and we understand there is an executive jet which is for the exclusive use of Chairman Leroy Parris and others of his bidding. Perhaps in the current climate the local CLICO management maybe persuaded to behave like a company which has modestly performed in comparison to a SAGICOR.

Back in July 2007 we hinted our concerns that Trinidad and Tobago had become the hegemonist of the Caribbean. At the time former Prime Minister Owen Arthur with lead for CSME matters seemed prepared to expose Barbadian companies to the highest bidder. The Arthur approach fitted well with the Port of Spain expansionist strategy given their cash rich position derived from a petro-based economy operating in a bullish global petro-market. The end result is that our largest conglomerate BS&T, our Barbados National Bank and other home-spun entities were gobbled-up by Trinidad investors. While the advantages of the Arthur strategy made a good economic argument BU has always been concerned about our ability to cope with the downside of such a strategy i.e. the mitigation of risk associated with the heavy concentration of Trinidadian ownership in a small Barbados market.

The inability of CARICOM to date to implement CSME has seen with it the inability to harmonize a regional financial regulatory body of any significance. The implication of not doing  so is stark given the current unravelling of  T&T government’s financial bailout of CLICO. Interestingly Neal & Massy, Ansa McAL and  One Caribbean Media are other Trinidadian controlled pan-Caribbean company operating in Barbados. It seems ironic that CSME was so widely touted under the previous administration but as far as we are aware there is no legislated unitary governance structure in place to manage pan-Caribbean companies. Continue reading

Barbadians Told To Select The Right Insurance Company

central_bankManaging Director of the Insurance Corporation of Barbados (ICBL) Wismar Greaves has been on radio recently warning Barbadians to be judicious when selecting the insurance company to do business. When someone of the stature of Mr. Greaves speaks the BU household is driven to listen and read between the lines if required.

In case the BU family has forgotten Mr. Greaves would have played a key role in growing the successful ICBL before it was sold by the former government to a Bermudan concern.

To paraphrase what Mr. Greaves said: he warned Barbadians that all insurance companies are not equal. He suggested that some insurance companies may not be in a position to settle claims efficiently. As always it is left to the blogs to ask the hard questions. We imagine that a man of Mr. Greaves stature in the insurance industry would have based his pronouncement on a factual position. It drives BU to wonder if the Supervisor of Insurance has taken an interest in Mr. Greaves’s statement, it does have a foreboding feel to it given the prevailing financial meltdown in many of the developed markets around the world. Continue reading

Barbados Police Force Being Hoodwinked By Sleazy Tourists

index_logo.jpgWe have been receiving emails querying the state of negotiations regarding the Royal Shop and Sandy Lane industrial disputes. BU readers may remember that a national strike was recently averted at the eleventh hour when as all Barbadians anticipated, the new Prime Minister David Thompson intervened. The reason offered and accepted by the union we understand was the ‘newness’ of the Democratic Labour Party (DLP) government. Apparently, it was felt by Sir Roy Trotman using all of his superior wisdom that Prime Minister Thompson and his government needed some time to acquaint themselves with all the matters involved in the dispute. What made matters worst was the national strike action being strategically called on the eve of the departure of Prime Minister Thompson to Trinidad on an official trip.

Several issues have arisen from the disputes currently simmering which involves Sandy Lane and Royal Shop. We highlighted the accusation by the person at the centre of the Sandy Lane dispute alleging police brutality while giving his statement in the custody of the police. But there is another issue, one which has been known to the authorities and ordinary Barbadians alike for many years now.

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Has Hilary Beckles Traded His Soul To Ensure His Legacy?

The politics of globalization are about asserting one’s identity. If you can’t assert the authenticity of your culture…your nation, state and your culture will be rendered obsolete.

Hilary Beckles – Principal of the University of the West Indies (2002)

Does anyone think Hilary Beckles remembers the quote above? What the BU household remember is his valiant effort to gain a seat on the Board of Directors of what was the Mutual Assurance Society, since converted to a stock company and currently trading under the name of Sagicor. The fact that he lost the battle will not resonate in the history books as much as the raising of a black consciousness which a generation of black Barbadians have benefited. It was the classic David and Goliath confrontation, the established company successfully managed by the whites for many years off the backs of black policyholders, confronted by a black intellectual who was the beneficiary of a post colonial free education policy. Let us remember that the late Right Excellent Errol Walton Barrow asserted that free education was to be the right of every Barbadian. The impact which the intervention Hilary Beckles has had on the landscape of Barbados will probably not be adjudged for another generation. We can probably agree that his single-handed battle interrupted the course of events and the consequence of it all is that black Barbadians and civil society took a giant leap forward.

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Barbadians Continue To Be Shafted By The System

Ok, I just had to listen to my neighbor venting about how the system is bent to unfair poor people. What incite my normally affable neighbor to reach the tipping point where he had become so vitriolic? It all had to do with the way motor accidents are being treated by the police and the insurance companies.

Here is a synopsis of his story:

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