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BAICO settlement nears

Just over four months from now the assets of the collapsed British American Insurance Company (Barbados) Limited (BAICO) should be transferred to insurance giant Sagicor, as agreed under the restructuring plan late last year.

In its detailed final report filed in the Supreme Court on March 14, 2016, the judicial manager of BAICO, KPMG, outlined an estimated timeline for the assets.

The final report is available for inspection during official hours at the Registry of the Supreme Court or at the Financial Services Commission (FSC) during the period April 11 to April 27, following 24 hours’ written notice.

The judicial manager estimates that following a court hearing on May 18, court approval of the special purchase agreement restructuring plan will be secured, and the transfer should begin, resulting in a “winding up of BAICO’s residual business”.

The report added that a bar date×303.jpg and lapsed policy offer deadline were expected to be set after three months, bringing “certainty to the terms and values of the policies that will be transferred to Sagicor”.

“The bar date will help to achieve certainty over the value of BAICO’s liabilities as well as to ensure that every potential life and annuity Policyholder has the opportunity to be included in the solution. It will also enable a crystallized position with regards to BAICO’s assets and liabilities to be ascertained as at the court approval date,” it said.

This should be followed by a transfer completion date “up to a month after”.

The restructuring plan of the failed insurance company includes a topping up of an $84.6 million deficit by Government, which includes over $26.6 million in property assets contained in BAICO’s statutory fund.

Government will also be expected to fill a shortfall of about $8 million in the BAICO employee pension plan for 72 former staff members.

“The judicial manager has negotiated with Sagicor to pay consideration of $1.4 million for the transfer of BAICO’s Life and Annuity Policies,” the report said.

The judicial manager stated that the plan to transfer the remaining life and annuity policies to Sagicor was the most advantageous to the policyholders as opposed to liquidation, which would increase the deficit.

The judicial manager said as at its appointment date of September 30, 2010, BAICO had policy liabilities in the region of $126.9 million and assets in the Statutory Fund with a market value of less than $70.1 million, which resulted in the more than $56 million shortfall and ultimately the bankruptcy of the company.

However, for the transaction to be commercially viable for all parties, there are a number of stipulations.

These include the restriction on the surrendering of policies until five years after the court approval date except for death claims and policy maturities that will be paid out in the normal course of business.

Policy loans will be restricted to varying maximum loan percentages following the court approval date.

“If the policy loan balance already exceeds the initial maximum loan percentage limit on the court approval date, then the limit will not apply, but no further loan may be taken until such time as the loan balance becomes less than the applicable limit,” it said.

“These restrictions on accessing policy loans have been proposed in order to increase the level of certainty for Sagicor over future cash flows and to preserve value in the life policies,” it added.

In relation to annuity policies, surrenders and withdrawals will be prohibited from the appointment date until a revised policy maturity date. (MM)

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