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02nd
March 2010
British
American Files for Bankruptcy
News
of British American Insurance Company, a Bahamas
based company, filing for bankruptcy in the
United States of America could have policy holders
of the local branch of the financially battered
company worried even more over their investments.
The court appointed judicial manager for the
local branch, Mr. Frank Myers is said to be
out of the country following inquiries by The
VOICE Newspaper as to what sort of impact the
above information would have on policy holders
here.
Calixte Leon, the Director of Financial Services
within the Ministry of Finance and the Registrar
of Insurance declined comment however scheduled
to meet with The VOICE to discuss the situation
today.
According to reports the company listed debt
of $500 million to $1 billion and assets of
more than $100 million in Chapter 15 documents
filed in US Bankruptcy Court in West Palm Beach,
Florida.
Chapter 15 protects foreign companies from US
lawsuits and creditor claims while a company
reorganizes abroad.
The petition was filed on behalf of Brian Glasgow,
as judicial manager of British American Insurance.
Mr. Glasgow was appointed by the Eastern Caribbean
Supreme Court in the High Court of Justice of
Saint Vincent and the Grenadines.
Background
For several months, the Governments of the Eastern
Caribbean Currency Union (ECCU) have carefully
monitored growing public concern about the financial
situation of British American Insurance Company
Limited (BAICO) and other subsidiaries of its
Trinidadian parent company, C.L. Financial.
BAICO itself is a private, limited liability
company incorporated in the Bahamas. Nevertheless,
the sheer size of BAICO and the significant
exposure of the Eastern Caribbean have made
it imperative for the ECCU Governments to adopt
a proactive and collective approach to this
challenge.
At the end of July/early August of this year,
regulators in the ECCU and The Bahamas intervened
in the operations of BAICO and applied to Courts
in the several jurisdictions to appoint Judicial
Managers. Consequently, Judicial Managers were
appointed in all ECCU countries with branches
of BAICO except Dominica. Since Dominica’s
law does not provide for the appointment of
a Judicial Manager, the Judicial Manager for
BAICO (The Bahamas) appointed an agent to take
control of the affairs of the branch in Dominica.
To facilitate cooperation, expedition and reduce
costs, these “ECCU” Judicial Managers
were all appointed from among professionals
of a single group, namely the highly respected
firms of chartered accountants known as “KPMG”.
Except for Dominica, the full reports of these
Judicial Managers were filed with the respective
Courts. On October 30, 2009. Dominica’s
report will be filed soon.
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Key Findings
of Judicial Managers
The reports of the Judicial Managers reveal
that:
The liabilities of the BAICO branches in the
Eastern Caribbean total EC$1.05 billion. Of
this sum, EC$842.4 million are annuities or
investment contracts.
There are branches in Anguilla, Antigua &
Barbuda, Dominica, Montserrat, Grenada, St.
Kitts and Nevis, St. Lucia and St. Vincent
and the Grenadines.
British American Insurance Company Limited,
a Bahamian company operated out of Trinidad,
with branches throughout the Eastern Caribbean
is insolvent. As of June 30, 2009 (unaudited
financial statements), the deficiency was
EC$775 million. This deficiency may increase
as there are significant concerns regarding
the values attributed to some of BAICO’s
intra-group assets, for example a loan note
due from C.L. Financial and its US property
investments.
The branches of BAICO in the Eastern Caribbean
are not stand-alone legal entities. As a result,
the liabilities of these branches are the
liabilities of BAICO and the assets of these
branches are the assets of BAICO unless such
assets have been legitimately set aside for
the benefit of local policyholders.
There is only approximately EC$30 million
of assets set aside (pledged) in the Eastern
Caribbean.
An amount of EC$301 million was taken from
the branches in the Eastern Caribbean to fund
certain inter-company transactions including
the purchase of property in Florida, United
States of America. The Judicial Managers have
filed a petition in US Court to be recognized
in bankruptcy proceedings started by BAICO
to obtain relief under Chapter 15 of the US
Bankruptcy Code. This relief, if granted,
will stay all actions against BAICO in the
US and will allow the Judicial Managers to
have a voice in any decisions regarding the
distribution of the US assets.
In the event of a liquidation of BAICO, policyholders
will not be paid in full. Indeed, it is probable
that if BAICO was liquidated, policyholders
will only get 10 cents on their dollar. This
means if you have an annuity of $1000, you
would only receive $100.
The facts revealed in the Judicial Managers
reports are troubling to say the least. However,
they are not entirely unanticipated, for over
the past few months many of the grim facts
concerning BAICO’s financial status
have become public knowledge. Moreover, the
Governments of the ECCU have actively sought
to obtain a better understanding of the situation
with a view to becoming part of the solution.
After considerable discussion and planning,
a new entity was proposed to salvage the ailing
ECCU operations of BAICO and we have worked
for several months to make this a reality.
Mindful of the grave consequences if British
American is liquidated, and having consulted
with ECCU Governments, the Judicial Managers’
Reports have now endorsed this approach for
the creation of a new entity and we are optimistic
that their recommendations will be accepted
by the Court. In that event, the ECCU governments
stand ready to participate in the proposed
new entity with a view to protecting the interests
of regional policyholders and annuitants.
Discuss
Story
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