Ewart Williams, governor of the Central Bank of Trinidad and Tobago. - File
Governor of the Cen-tral Bank of Trinidad and Tobago Ewart Williams sees losses to pensioners and policyholders and additional burdens on regional governments from the fallout of the CLICO and British American Insurance Company (BAICO) collapse, which he described as a costly failure.
The Trinidad Government has approved under US$1 billion to meet the statutory deficit of CLICO while the twin-island state and Barbados have also contributed to meeting the statutory deficits of the BAICO subsidiaries in the Eastern Caribbean.
"All this notwithstanding, when the dust settles there could be some losses to pensioners and policy-holders and additional burdens on the already stretched budgets of regional governments," Williams said last week at a conference in Port-of-Spain.
He said a new company was being formed to take over the liabilities of BAICO, which would require seeding of around US$400 million.
He noted that there were many lessons to be drawn from the CLICO crisis, including questions about the failure of regulation.
"If CLICO was too big to fail, it should have been subject to more up-to-date legislation," he said.
AUDITOR'S ROLE
There were also questions of the role of the auditors as CLICO has always been given a clean bill of health. Even insurance rating agency AM Best gave CLICO a BBB rating in 2007, though this was a slight downgrade from its previous A-rating.
There were also questions about market discipline.
"If you were being offered these high rates of interest, something must have been wrong," Williams said, adding that the failure of CLICO was a failure of governance and an absence of controls from the company's board of directors.
"CLICO shows what damage could occur when prudence is clouded by unbridled ambition. CLICO shows what can happen in the virtual absence of a risk management framework and the absence of internal controls. CLICO shows that we need to rethink corporate governance not only in Trinidad and Tobago but in the region as a whole," the central bank governor said.
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