The Resolution Strategy (The Plan)

The Plan is predicated on four guiding principles, which were endorsed by the Monetary Council at its meeting in Dominica on July 10, 2009. They are:

(i) To ensure that British American does not become a systemic risk to the financial system;

(ii) To protect, as far as practicable, the interests of depositors and investors;

(iii) To keep British American as a "going concern" in a form to be determined; and

(iv) To craft a solution that is regional in nature.

The Council also approved the appointment of a Ministerial Sub-Committee on Insurance to provide oversight on this important matter. The Sub-Committee comprises: Prime Minister Ralph Gonsalves of St. Vincent and the Grenadines (Chairman), Prime Minister Roosevelt Skerrit of Dominica, Minister Nazim Burke of Grenada and Minister Timothy Harris of St. Kitts and Nevis. This Committee is supported by a Core Technical Team and a Committee of Regulators. All have been working diligently on this matter for several months.

THE ESTABLISHMENT OF A NEW INSURANCE COMPANY

The proposed new company would have its headquarters in the Eastern Caribbean and would assume the traditional life insurance, medical insurance and annuity business of British American branches in the Eastern Caribbean.

The challenge posed by BAICO's insolvency is not only a concern for the Eastern Caribbean, it is a regional problem. BAICO, though incorporated in the Bahamas has its operational headquarters in Trinidad and Tobago through its parent company. Questions relating to corporate governance and management by the C.L. Financial Group certainly arise, especially in view of the apparent use of monies from BAICO policy holders in the Eastern Caribbean to fund risky real estate investments in Florida and elsewhere. Indeed, the Government of Trinidad and Tobago intervened into the operations of C.L. Financial earlier this year and entered into a Memorandum of Understanding with that company in an attempt to address some of these issues.

Consistent with the principle of crafting a solution which is regional in nature, the new company will be capitalized by ECCU Governments, the Government of Trinidad & Tobago, the Government of Barbados, and one or more strategic investors. Policyholders may also have an opportunity to obtain equity in the new company.

Of course, it is evident from the extent of BAICO's deficits that some losses will be inevitable. Policyholders should not expect the new company to cover all the benefits and interests to which they may be entitled from BAICO. Intrinsic in the high returns offered by BAICO is a certain level of risk for which policyholders must accept some responsibility. The capital injection required to preserve even the principal amounts invested by policyholders is daunting. Thus the goal in funding the new company will be primarily to cover as far as possible the principal amounts invested by ECCU policyholders and annuitants.

The process of forming and funding the proposed new company is one that will take some time. Indeed even after the company is established, it will take time before there is sufficient liquidity to allow for payouts to any policyholders. Policyholders and annuitants should therefore not expect to have immediate access even to those funds which may ultimately be recoverable.

The Court may ultimately find that it is in the best interests of policyholders to approve a plan which proposes a reduction in future interest rates as well as a reduction in accrued interest. Annuitants may be required to continue to invest their funds for a prescribed time and/or may have options to acquire equity in the new entity. These details are still being worked out. The Governments of the ECCU are committed to preserving the principal investments of its citizens and residents in BAICO as far as practicable. However, British American policyholders need to be realistic about what they are likely to recover. Every policyholder and annuitant of BAICO will have a critical role to play in ensuring the success of the proposed recovery plan.

At this juncture, it important to reiterate two things: if British American is liquidated, policyholders are likely to get 10 cents on the dollar. If the Court approves this plan, policyholders will recover some funds and may have an opportunity to participate in mechanisms for an even more substantial recovery over time.

Much work remains to be done but the ECCU Governments wish to see the new company set up within six (6) months of Court approval of the plan.

ESTABLISHMENT OF A MEDICAL CLAIMS SUPPORT FUND

The Governments of the ECCU are keenly aware of persons who are awaiting funds from British American to settle their medical insurance claims. It is understood that there may be as many as 7,700 medical insurance policyholders in the Eastern Caribbean.

Governments are especially concerned about such persons and recognize the fundamental importance of health care for the well-being of our people and the development of our region. As a consequence, and for a limited period pending the establishment of the new company, the ECCU Governments have agreed to establish a Medical Claims Support Fund. The resources for this Fund will come from the Liquidity Support Fund that was established earlier this year.

The intention here is that the Governments will provide resources to assist, within certain parameters, those ECCU policy holders who would otherwise have been entitled to receive payments of claims under BAICO medical policies. It should be noted that this fund will be an independent, governmental fund rather than a part of the existing BAICO operations. However, the establishment of this fund will require some collaboration with the Judicial Managers and will ultimately need to be incorporated into the proposed new company. Thus, it too will likely require court approval before full implementation.

It should be noted that this Fund will not apply to holders of annuities who are seeking funds to pay medical needs. Annuitants can expect some recovery only after the establishment of the proposed new company.

TRANSFER OF THE PROPERTY INSURANCE PORTFOLIO

The ECCU Governments further endorse the recommendation of the Judicial Managers to transfer BAICO's property insurance portfolio within the ECCU to an existing insurer, rather than including it in the assets of the proposed new company. The reasons for this decision are several, however among the most compelling is the fact that BAICO's reinsurers have cancelled reinsurance contracts with British American due to its insolvency. Given the size of the ECCU property insurance portfolio (3500 policyholders), the cost of such reinsurance is prohibitive at this time.

The Governments of the ECCU are of the view that ECCU property insurance policyholders would be best served by the proposed transfer to ensure that all property claims can properly be met.

Once again, it must be noted that this proposed transfer is subject to Court approval.

LATEST DEVELOPMENTS ON CLICO

CLICO Holdings Barbados Ltd is another subsidiary of the Trinidadian company C.L. Financial Limited. The Governments of the ECCU are aware that some CLICO companies in the Eastern Caribbean have recently been slow in paying claims.

Once again it should be noted that this is a private company. Nevertheless, in the interest of the public, the Governments of the ECCU and Barbados are in an ongoing dialogue on the status of CLICO Holdings (Barbados) which is the parent company for all CLICO branches in the Eastern Caribbean.

The Government of Barbados has informed that two CLICO subsidiary companies, CLICO Mortgage Finance Company and CLICO General Insurance, have already been sold and discussions underway for the sale of CLICO International Life Insurance. It is the understanding of ECCU Governments that the completion of these sales will provide CLICO Holdings (Barbados) with resources to meet its obligations to all of its investors and policyholders, including those in the Eastern Caribbean countries.

The ECCU governments will continue the dialogue with the Government of Barbados to monitor this situation to the fullest extent possibl