Taxpayers bail out NIS

Sep 17, 2016 News

By Kiana Wilburg
It was a “happy day” for the National Insurance Scheme (NIS) yesterday. Finance Minister, Winston Jordan, made good on Government’s promise to service the debt NIS incurred when it made a reckless investment of over

Finance Minister, Winston Jordan hands over a copy of the Agreement to NIS General Manager, Doreen Nelson

$5B in the now defunct Colonial Life Insurance Company (Guyana) Limited (CLICO).
At a press conference at the Ministry of Finance Board Room, Jordan signed 20 debentures payable to the NIS for an aggregated value of $5.6B. This is also in keeping with the Parliamentary Resolution that mandated the government to provide financial relief to NIS for its misdirected funds.
At February 28, 2009, CLICO’s liability to the NIS amounted to $5,482,446,199 for 13 Executive Flexible Premium Annuity (EFPA) Policies with maturity over the period 2009 to 2012.
In an effort to prevent the loss of benefits to the NIS contributors and beneficiaries, Parliament approved Resolution No.82 of 2009, dated March 12, 2009 which called upon the then Government to secure the investments made in CLICO by the NIS.
Subsequent to Resolution 82 of 2009, on September 10, 2010, CLICO was placed into liquidation by the High Court.
On November 22, 2011, in keeping with the Government’s decision, the Camp Street CLICO Building was transferred to the NIS at a cost of $600 million, thereby reducing the reconciled amount to $4,882,446,199.
By way of a Cabinet decision, approval was granted for the Government to make payments to the NIS through the issuance of 20 Non-negotiable Debentures, to be redeemed annually over a period of 20 years, at a fixed interest rate of 1.5 percent per annum. The first payment of $317,359,002.94 will be made to NIS in January 2017.
Clico Life and General Insurance Company (South America) Limited is a wholly owned subsidiary of CL Financial Limited, a company incorporated in Trinidad and Tobago.
The Company was placed under judicial management on February 25, 2009 and subsequently ordered liquidated on September 10, 2010. The late Central Bank Governor, Lawrence Williams, was appointed as its liquidator.
Minister Jordan explained that since the appointment of the liquidator, the then PPPC government committed $3.6 billion received from the CARICOM Petroleum Stabilisation Fund to finance the pay-out to holders of investment annuity policies and other insurance liabilities not in dispute.
This was subject to a maximum limit of $30 million per policyholder.
‘Additional funds needed to meet outstanding balances to policyholders were met through the sale of the company’s fixed and moveable assets and monies recovered from its debtors.
To date, policyholders have been paid a total of $ 6.7 billion. According to Central Bank Governor, Dr. Gobind Ganga, approximately $5.9 billion remains due and outstanding to policyholders, i.e. policyholders with balances in excess of $30 million, government and related parties.
Dr. Gobind Ganga explained that the way forward includes a number of steps such as the disposal of all remaining assets by way of sale. The Government would also seek to recover moneys owed to CLICO through the courts and other processes.
This includes confidential out of court discussions with various entities including the Deposit Insurance Corporation of Trinidad and Tobago with respect to securing at least half of the moneys owed by Bosai group of Companies to Clico Investment Bank.
The Finance Minister explained that CLICO Guyana has caused approximately $4B to be paid into an escrow account pending resolution of court proceedings.
He said that collecting payments from agencies that have not yet concluded doing so, including sale of CRL’s property at Houston, East Bank Demerara.
Dr. Gobind Ganga said that moves would be made to encourage policyholders to uplift the 2,881 unprocessed cheques valued $132,739,438 as at July 31, 2016. It will also pay the remaining outstanding balances with respect to all policyholders.
Even though it was a happy day for NIS, the Finance Minister remarked that it was a sad one for taxpayers who would have to bear the burden of the payments.
Jordan hopes that the NIS has learnt its lesson when it comes to reckless financial investments.