Introduction to the Clico Collapse
The lawsuit surrounding the collapse of Colonial Life Insurance Company (Clico) has finally begun, over a decade after proceedings were initiated. The case started with testimony from former Central Bank governor Ewart Williams, who took the witness stand at the Waterfront Judicial Centre in Port of Spain.
Background of the Case
Williams was questioned extensively about regulatory oversight of Clico prior to its collapse. Under cross-examination by Christopher George, attorney for defendant Andre Monteil, Williams was asked about a December 2005 investigation into Clico’s operations. The investigation produced a report recommending that the company bring its operations into compliance with the Insurance Act. Williams accepted that Monteil was not among Clico’s senior management officials involved in that exercise.
The Investigation and Its Findings
The investigation found that Clico’s records reflected an excess of approximately $500 million at the end of December 2007. However, Williams told the Commission of Enquiry (CoE) that Central Bank assessments showed a deficit of about $600 million. Williams described the shortfall as a technical one, explaining that the Central Bank’s calculations did not include fixed deposits that matured and were renewed in January 2008.
The Lawsuit
The lawsuit was filed in 2011 by the Central Bank and Clico against the late CL Financial founder Lawrence Duprey, Monteil, former corporate secretary Gita Sakal, and several affiliated companies. The claims arise out of Clico’s failure, which led the Central Bank to invoke its emergency powers under section 44D of the Central Bank Act. The suit alleges that Clico’s operations were "grossly deficient" and that funds belonging to policyholders and mutual fund investors were diverted to support personal lifestyles and related private companies.
Consequences of the Collapse
Clico and its banking and insurance subsidiaries were taken over by the Central Bank and the Government in January 2009. The group was soon overwhelmed by lawsuits from policyholders as it struggled to meet claims as they fell due. At the time, Clico was reported to have policyholder liabilities exceeding $12 billion. The collapse of Clico had significant consequences, including the absorption of more than $5 billion in public funds.
Conclusion
The collapse of Clico has had far-reaching consequences for the economy and for those who invested in the company. The lawsuit, which is ongoing, seeks damages, restitution, and recovery of losses said to total several billion dollars. As the case continues, it is likely that more details will emerge about the circumstances surrounding Clico’s collapse and the role of its former executives. The outcome of the case will be closely watched, as it has significant implications for the financial sector and for those affected by the collapse.
