Tighter rules to prevent another Clico
By Andre Bagoo Sunday, February 24 2013
FINANCE MINISTER Larry Howai last week dotted the i’s and crossed the t’s of a new law which proposes a revamp of the insurance sector in a move designed to prevent another Clico meltdown, a meltdown which is estimated to have cost taxpayers $19 billion.
On Wednesday, the Finance Minister held a meeting with technocrats at his offices at the Ministry of Finance, Independence Square, to finalise the provisions of the Insurance Bill, which is expected to revamp the current law in order to impose more robust requirements on insurance companies.
Sunday Newsday understands that one key provision of the new bill which was discussed at the meeting was a clause which proposes to amend Section 13 of the current Insurance Act. That section relates to the minimum amount of share capital — an asset regarded as seed money — which an insurance company must have on hand in order to be registered to function.
Currently, Section 13 only requires that insurance companies have $3 million in share-capital. This means that while Clico had billions in dealings, it was only required to have $3 million in share-capital in order to remain registered as an insurance company.
It is understood that the draft legislation proposes to increase the amount required to approximately eight percent of funds under management or, in the case of Clico, an approximate sum of $2 billion.
Howai had been due to table a bill in the Senate last week Tuesday in relation to provisions to introduce the electronic transfer of funds between Government agencies, however he stepped away from this in order to focus on continuing his work finalising the Insurance Bill. Instead, Minister in the Ministry of Finance, Vasant Bharath, tabled the bill, which was passed in the Senate on Tuesday.
The Finance Minister’s move to finalise the bill, which could be debated later this month in Parliament after debate on two other simple bills are completed, comes as the Clico issue once more takes centre-stage.
The Sir Anthony Colman Commission of Inquiry into the collapse of Clico is due to resume on Tuesday with evidence from Clico’s longstanding auditors PricewaterhouseCoopers. They are expected to answer questions as to how auditors could have approved accounts for years, when key problems existed.
On Thursday, High Court Judge Justice Judith Jones is also due to give a long-awaited ruling over whether or not the State’s bailout arrangements were lawful, in a lawsuit brought by former policyholders.
Sunday Newsday understands there will be some changes to the line-up at the Colman inquiry this week as it begins an 11th hearing.
While British barrister Peter Carter QC previously acted as counsel to the inquiry in the Clico portion of the inquiry (the inquiry is also probing the Hindu Credit Union collapse), his function will instead, during this phase of hearing, be performed by Edwin Glasgow QC, the counsel to the inquiry for the HCU portion of the proceedings.
Former CLF executive chairman Lawrence Duprey has reportedly lived up to his lawyer’s words at the inquiry and indicated that he will not be participating further in the proceedings, in the wake of public disclosures of the start of a criminal probe two years after the fact of the Clico collapse in 2009.
The witnesses expected to testify this week include several PwC officials including: Colin Wharfe (head of PwC Trinidad); Dwayne Rodriguez ; Keith Daniel (partner); Haseeb Mohammed (partner); and Nigel Panchoo.
The inquiry is due to sit on Saturday and continue into next week.
Next week the witnesses include Gerald Olliverre. Also expected to testify is former Clico Investment Bank President Richard Trotman, due to face cross-examination. Permanent secretary in the Ministry of Finance, Alison Lewis, is also due to testify on behalf of the Ministry of Finance. A directions hearing is also due to take place at the end of the 11th session.
Lawyers acting on behalf of the Ministry of Finance have reportedly indicated no intention to cross-examine the auditors.