Monday, March 16, 2009

Information which was challenged in column came from Insurance Commissioner’s office

Information which was challenged in column came from Insurance Commissioner’s office

Posted By Stabroek staff On March 15, 2009 @ 5:01 am In Letters | 7 Comments

Dear Editor,

The tone of the March 3 letter of Commissioner of Insurance Maria Van Beek seems to suggest that she is reacting to the pressure from several quarters over her supervision of Clico. To accuse sections of the victims of the worst insurance failure in the country under her watch of making “reckless, uninformed and irresponsible pronouncements” (GINA release published March 1) might seem to indicate that Ms Van Beek is reluctant to acknowledge the scale of the problem or the extent of public concerns about potential personal and national losses of billions of dollars. Even if the government gives a complete bailout of Clico it is we the taxpayers who will pay it, while those who contributed to the crisis lecture us on how much they have done to protect us.

A number of persons have suggested to me that I should respond to the three issues she challenged me on: 1) the statutory fund/assets; 2) her reason for the approach to the court for a winding up of Clico; and 3) the name of the company, Clico.

1. I never claim to be an expert on insurance, accounting or indeed on any subject. However Ms Van Beek can rest assured that the provisions of the Insurance Act, including the difference between statutory assets and the statutory fund, would not escape any practising accountant. It is Ms Van Beek who has some explaining to do for apparently missing the assertion in Clico’s 2007 financial statements that the company had a “statutory fund” of $46 million and not the $9B she says it should be! As the expert and regulator of the sector, Ms Van Beek should tell the public what steps she took to have such an error in the audited financial statements rectified in a timely manner.

2. Ms Van Beek claims that I accused her of saying that it was Clico’s business model and investment strategy from which its problem stemmed. I did not invent that. Ms Van Beek said so in paragraph 10 of her affidavit. Ms Van Beek has insisted that it was the decision by The Bahamas authority to liquidate their Clico that triggered her move to the courts. It is not that decision which imperilled Clico Guyana’s investments.

Those unlawful and injudicious investments were impaired long before the move by The Bahamas authorities and required action, not excuse. But no, she waited until the property market in the US had collapsed taking with it huge amounts of Clico’s funds and then waited even further and longer on the Bahamian authorities.

3. Ms Van Beek writes that I wrote from an uninformed position concerning the name of the company. In her very affidavit she also refers to the company as SA!

In other words, everything Ms Van Beek accuses me of came out of her office.

Finally let me say that I welcome the press statement made by Ms Van Beek on the state of the company and note that she has taken several of the steps I advocated some weeks ago, including calling in the debts and guarantees of the related parties and giving specific advice to policyholders about the state of their insurance coverage. However she continues to repeat the vague promise she “attributes” to President Jagdeo that “no policyholder in Clico (Guyana) will lose their money.”

By now she should have sought written confirmation from the Minister of Finance to whom she reports, and not the President, of the precise nature and scope of the guarantee which in my view has to have parliamentary approval. Perhaps Stabroek News can clarify their report that Ms Van Beek “re-emphasised the assurances given by President Bharrat Jagdeo and Finance Minister Dr Ashni Singh, that no one with investments in the company will lose their money.” That goes well beyond policyholders and was not contained in the statement issued to the press. It would however naturally raise the hopes of investors including the NIS. It would be painful if that assurance turns out to be false.

Yours faithfully,
Christopher Ram
7 Comments (Open | Close)

7 Comments To "Information which was challenged in column came from Insurance Commissioner’s office"

#1 Comment By colin2nice On March 15, 2009 @ 8:21 am

Thanks Mr. Ram for keeping them on their toes.

#2 Comment By Andy On March 15, 2009 @ 9:56 am

We thank Christopher Ram for his outstanding crystallization of the issues that only a man of his knowledge and expetrise can do. He is correct in keeping the focus on van Beek’s culpability in the CLICO (Gy)’s fiasco, because I understand - and Ram can verify it - there are clauses in the Insurance Act that stipulate insurance companies in violation of the Act must be fined GY$1M instantly and GY$100k a day for as long as the violation continues. If the Insurance Commissioner made CLICO (Gy) aware since 2007 of its violation by investing in excess of 15% of its local funds overseas, then where are the fines against CLICO (Gy)?

Second, the assurances by the President, Finance Minister and Insurance Commissioner that claims will be honored are not guaranteed, for the President previously made assurances that investors/depositors interests were protected, then there came the GY$6.9B loss! Why should anyone believe the government anymore? And even if the government backs claims, it likely will be dipping into taxpayers funds, which means the people of Guyana will be paying twice for the government’s failure!

#3 Comment By Christopher Ram On March 15, 2009 @ 3:12 pm

Note by Christopher Ram

Under S 19 of the Insurance Act the breach of any direction or requirement by the Commissioner constitutes an offence for as long as the offence continues.

In the case of a company, the company is liable. But if the offence has been proved to have been committed with the consent or connivance of or facilitated by the neglect of any director, principal officer, or other officer or actuary or auditor of the company, then that person is also liable.

The Commissioner of Insurance is required to appoint a Special Prosecutor for the case.

The fine for a company is $1 M plus $100,000 for each day the offence continues. In the case of the individuals mentioned in the preceding paragraph the fine is $100,000 or 3 years and $10,000 for each day after conviction.

The fines and imprisonment are maximum.

The appointment of a Judicial Manager or Liquidator does not affect the prosecution of the company/person(s) once the action is brought within 3 years after the offence has been committed. I believe there is authority for the proposition that continuing offences relate not to the first day of the offence but to the last date on which the offence continued.

#4 Comment By Brendan Samaroo On March 15, 2009 @ 3:16 pm

Chris Ram is in a different league than those in the government.

You would think if this government was serious about running a tight ship they would have more chris ram’s in the government running things.

But ahhhh Mr. Home Economics himself does not like free thinkers. It is about control freakism.

#5 Comment By Andy On March 16, 2009 @ 12:05 am

Thanks Chris! Now you should seriously consider writing a column on the punitive aspect of this saga that Van Beek overlooked in her handling of Clico (Gy), because not only was Clico (Gy) in violation, but so was its CEO! And how can we talk about fining Clico (Gy) and its CEO, which are yet to happen, but no action is taken against the Insurance Commissioner for her inaction in not upholding the law she is sworn to uphold?

In fact, how can goverment allow the Insurance Comissioner to now become Judicial Manager of the same firm that experienced a major loss under her regulation?

Isn’t this the height of arrogance and or ignorance?

#6 Comment By Prospector On March 16, 2009 @ 10:39 am

What Ram does not spell at clearly (as he only points out the facts that support his arguments after all) is that the appointment of a special prosecutor means that the case has to tried in Court - the ‘offence must be proved to have been committed’ S 19(2).

The average Court case takes six years to hear in Guyana. So perhaps in 2015 the fines will be paid.

#7 Comment By Prospector On March 16, 2009 @ 10:44 am


1) The Court appoints the Judicial Manager not the Government. As far as I know the Petition filed with the Court does not even mention the Government of Guyana and it was filed with a private lawyer not the Attonery General’s chambers.

2) S 69 (2) of the Act states ‘The Court shall appoint the Commissioner as Judicial Manager’

What nobody seems to realise is that even if the Commissioner had filed in 2007 against CLICO the matter would still be before the Courts, and the outcome would have been exactly the same.

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