The Governor of the Central Bank Jwala Rambarran has issued a news release on the CLICO matter that enlightens us about their handling of the takeover and raises some deeply troubling issues. In this short document I will try to address the most alarming of them.
Firstly, we are told an actuarial valuation of CLICO’s traditional insurance business is being undertaken but has not yet been completed. The Governor is telling us that five years into the takeover, they are only now valuing such an important asset. What value was placed on this business asset when citizens and policyholders were being traumatised by tales of assets being worth billions less than liabilities. Was it even included? Here is another example of why so many commentators insist that the figures behind the minister’s various statements be published.
Following on from that, one must ask how much of that value has been lost in the five years that have elapsed. Very little effort was made to retain valuable business and we are aware that managers and agents left for other agencies, and took a great deal of business with them. Had the insurance asset been sold expeditiously, CLICO would quite likely be billions of dollars better off. The Central Bank should tell us how much value has been lost, that is if they even know, or care to know.
Secondly, the Governor speaks about reporting regularly on progress. He says this even though the news release only came about in response to an article in a newspaper. This is information that should routinely be in the public domain. I take this opportunity to congratulate the newspaper and the writer for prompting the Governor to share this limited insight into their management and thinking with us.
Thirdly, the Governor for the first time refers to statutory mandate under the Central Bank Act to safeguard the interests of creditors and depositors. This they have singularly failed to do, something I will elaborate on at another time. He also alluded to the need to protect our financial system. I will show in another paper how the Central Bank has achieved exactly the opposite. The methodology of the takeover has damaged our financial systems, and along the way, decimated our already weak financial regulatory regime.
Fourthly, we are now being directed to an outcome where CLICO would be wound up with the insurance business sold to a third party. When and how was this decision made? Repeatedly, throughout the takeover we were told that CLICO was to be rescued and returned to its former strength. What events have forced a change of plans? Why are we not told of the reasons for a change to their oft repeated intentions.
I have written extensively on the key elements of a going concern solution, one that would result in the best possible return for taxpayers. I have always been in agreement with their position on keeping CLICO alive and profitable. We must have an open discussion on this matter before taking such drastic action as is being suggested.
My fifth and final observation at this time is that the Governor speaks of the need for an independent valuation in order to comply with the Central Bank Act. This requirement applies to all significant disposals, not just the insurance business, and is explicitly stated in the Act.
More than a year ago, I requested copies of the independent valuations in support off all qualifying disposals. This was done via a Freedom Of Information Act application. To date I have not had a response. At least we now have agreement from the Governor that independent valuations are required by law. I will be pursuing those valuations vigorously in the near future.
There is much more that I plan to say on the implications arising from the Governor’s news release but I also wish to keep this communication short. I will be exploring the matter in much greater detail at www.alcindorwalker.com/media. While the website is still under development, I am making it public now because of the importance of debate on this matter.