More Patience and Further Consultation is Required

The resolution of issues surrounding the insolvency of BAICO is a complex undertaking. However, the ECCU Governments believe that the proposed plan, subject of course to judicial approval, can work. The alternative of immediate liquidation is, in our view, unacceptable.

The ECCU Governments understand the concern and anxiety of policyholders and have crafted this plan with them in mind; however, the policyholders of British American will need to continue to be patient and realistic.

At this juncture and quite understandably, policyholders and investors have many questions.

The ECCU Governments are asking the Judicial Managers to make appropriate arrangements to receive feedback from policyholders and the public on the plan and to provide available information to policyholders.

Furthermore, over the next few weeks, our Governments will be arranging meetings with staff and policyholders and investors to explain the proposed plan and to receive their views and suggestions.

The Governments of the ECCU are also aware that many individuals rely upon British American Life Insurance policies as collateral for loans and will be consulting with Banks in the region in an effort to address their concerns in this regard.

Why did this happen and how can it be avoided?

In as much as BAICO is a private, limited liability company, matters related to internal corporate governance and management are most properly addressed by its shareholders and its creditors.

Even so, to the extent that the failure of a company like BAICO can have such wide reaching socio-economic effects across the region, the ECCU governments must next ask some salient questions: "Who is responsible for this difficult situation in which we find ourselves?" and "How can this be avoided in the future?"

These are important questions which must be addressed. However, the ECCU Governments' first priority in this regard has been and continues to be to craft a viable and sustainable solution for its affected citizens and residents. No doubt, as the smoke clears, further investigations into the underlying reasons for the collapse of BAICO will likely be an important next step and once again regional cooperation will be critical.

Yet, even before we know the exact actions which precipitated this crisis, we can begin to grow from the lessons of this experience, both as individuals and as nations. The legal and supervisory frameworks within which insurance companies are regulated require re-examination and to some extent, that review has already begun across the region. As individuals too, we can learn from this process the importance of investment diversification, "not putting all one's eggs in one basket", as well as the need to understand the nature of the investments we make and the risks attached to them.

Conclusion

A difficult challenge is on our hands. However, a strategy for recovery has been prepared by the ECCU Governments, and the Judicial Managers have made recommendations that are consistent with that strategy. Further, the plan is subject to Court approval. This judicial safeguard will ensure that the interests of all affected parties will be comprehensively considered before any implementation begins.

The ECCU Governments firmly support this approach and believe that it is a much superior alternative to liquidation.

The choice is clear:

Liquidation: policyholders get 10 cents on their dollar.

Proposed New Plan: policyholders have an opportunity for greater recovery over time.

At this juncture, we are reminded of the old adage: "we do it best when put to the test". This situation is indeed testing but out of this difficult chapter will emerge a stronger insurance industry and a stronger regional economy.

Issued by Governments of the ECCU
November 02, 2009