PORT-OF-SPAIN, Trinidad, Tues. Feb. 17, 2009: A regional economics professor believes the current debacle facing Colonial Life Insurance Company (CLICO) highlights the need for greater regulation of the financial services sector and has sought to warn Caribbean Community (CARICOM) governments that they should not wait to “close the gate after the horse has bolted”.
Under a Memorandum of Understanding (MOU) signed with CLICO’s parent company, CL Financial, the Trinidad and Tobago Government on Friday announced that it would provide funding to the company, which also has significant interests in other parts of the Caribbean, in exchange for collateral and an equity interest in the CLICO.
The move to avert a possible collapse of CLICO and its investment bank has sent shock waves throughout the region and has served to undermine public confidence in financial institutions operating within CARICOM.
In light of the bail out announcement, Professor Norman Girvan of the University of the West Indies, St. Augustine, believes it is now necessary for regional governments to equip themselves “in a timely manner” with the necessary legal tools and supervisory instruments to effect adequate regulation of financial entities in the public interest and “not seek to close the gate after the horse has bolted”.
Bahamas Press warned on January 6th of the concerns coming to us of a possible collapse of a major insurance company here in the Bahamas.
The popular Plymouth Jazz Festival of Tobago has been called off for this year, leading to speculation on whether the collapse of CLICO, one of the event’s biggest sponsors, was the cause.
Clico was one of the main sponsors of the festival for the past four years, pouring in thousands of dollars to help pay for the big names the event showcased, including Whitney Houston and Diana Ross in 2008.
But on Monday, CL Communications CEO and promoter of the annual event, Tony Maharaj, said the event planned for April 24 to 26 at the Plymouth Recreation Ground will be cancelled for this year.
Maharaj, however, blamed the cancellation on the global economic meltdown and not on Clico’s woes.
Maharaj`s comments come on the heels of comments by Ewart Williams, Trinidad & Tobago’s Central Bank Governor, that the Clico debacle may be worse than originally thought.
`The information that we have received so far points to a range of complex financial arrangements which have ended up with CLICO as either direct debtor or guarantor,` he said, adding that while CLICO had surpluses in the Statutory Fund in 2004, 2005 and 2006, these surpluses shifted to a deficit of about TT$600 million (US$95.8 million) in 2007.
Additionally, the unaudited accounts for 2008 showed that the Statutory Fund deficit has ballooned to TT$5.1 billion (US$814.6 million), he added.