Almost 180,000 beneficiaries of the National Insurance Scheme (NIS) can now breathe a sigh of relief with the government’s commitment to replace billions of dollars invested in the Colonial Life Insurance Company (CLICO) and were imperiled when the insurance company went bankrupt.
The Minister of Finance, Winston Jordan on behalf of the Government of Guyana, today, signed a Debenture Agreement with the NIS for an aggregated value of $5.6 B.
Minister of Finance, Winston Jordan hands over a debenture note to General Manager of the National Insurance Scheme, Doreen Nelson at the Ministry of Finance, Main and Urquhart Streets, Georgetown.
The Minister said that the signing of the agreement and handing over of the 20 debentures, which will cover the period January 1, 2016 to January 1, 2036 are in keeping with the current government’s commitment, while it was in opposition, that everything should be done to recover the capital invested. Each will be redeemed on January 1 of each year; the first will be redeemed in January 2017.
“The present government while in opposition did signal that this situation could not continue that it was untenable. A resolution to this effect that the then government should do what it can to help NIS get back their money was actually passed in parliament, but nothing else was done,” the minister said.
The NIS currently has approximately 50,000 pensioners and more than 130,000 contributors. It has been faced with rising administrative and other costs which include payments for pensions and other benefits to contributors exceeding collections.
“I think most of you know the story of NIS. Their deficit and actually eating into their capital to meet payments, so in keeping with our promise at the time, the Cabinet met, reviewed some options that the Minister of Finance presented to them and agreed to an option for the NIS to get back their money,” the minister explained.
Meanwhile, Minister Jordan pointed out that the money that will be paid to the NIS is not a loan, but rather an effort to strengthen the agency even while pursuing CLICO for what was lost.
“No we are not giving NIS a loan. What we are seeking to do is to give NIS as close as possible what they invested in CLICO. If by some miracle we were able to recover anything on behalf of NIS, it will go directly to the consolidated fund, but this is a final arrangement to NIS, so for NIS it’s a happy day for them,” Jordan noted.
While highlighting the social and economic cost of the payment to the scheme, the Minister urged caution when dealing with the public’s money.
“At all times, especially when you are dealing with other people’s money you have to be very cautious … it’s a sad day for the taxpayers of Guyana because it is the taxpayers who have to bear these sets of payments over the next 20 years and in excess of $5.89B will be diverted to meet these payments. Just consider what that kind of money could have done for other areas, be it wages, infrastructure or other running costs of the government,” the minister said.
The Bank of Guyana is the agency responsible for managing repayments to policy holders who suffered when CLICO collapsed.
According to Dr. Gobind Ganga, Governor of the Bank, “as of July 31, 2016, $6.9B have been paid to a number of policy holders, related party and organisations; 8882 cheques valuing more than $6B have been collected, and 2881 cheques valuing almost $133M remain unprocessed, awaiting the various policy holders.”
General Manager of the NIS, Doreen Nelson was high in praise for the government’s gesture.
Dr. Gobind Ganga, Governor of the Bank of Guyana
“It is certainly good to finally have this matter out of suspension and a decision made in terms of the guarantee that was given some years ago….. we find that this is a timely intervention. Our ninth actuarial review is due sometime next year… on behalf of the board management and particularly the pensioners and contributors of NIS, I certainly want to thank the honourable minister and the government for this intervention,” Nelson said.
Cabinet’s decision to pay NIS is in keeping with the Parliamentary Resolution No. 82 of 2009 and the Government’s commitment to assist the NIS to recover its investment in CLICO.
On February 28, 2009, CLICO’s liability to the NIS amounted to more than $5B for 13 Executive Flexible Premium Annuity (EFPA) Policies with maturity over the period 2009 to 2012.
In an effort to prevent the loss of benefits to the NIS contributors and beneficiaries, Parliament approved Resolution No. 82 of 2009, dated March 12, 2009 which called upon the then Government to secure the investments made in CLICO by the NIS.
Subsequent to that resolution, on September 10, 2010, CLICO was placed into liquidation by the High Court. On November 22, 2011, in keeping with the Government’s decision, the Camp Street CLICO building was transferred to the NIS at a cost of $600 million, thereby reducing the reconciled amount to almost $5B.
To date, policyholders have been paid more than $6.7B while approximately $5.9B remains due and outstanding to policyholders with balances in excess of $30M.
Government’s continued efforts will include the disposal of all remaining assets of CLICO by way of sale, recovery of money owed to CLICO through the courts and other processes inclusive of confidential out of court discussions with various entities (including the Deposit Insurance Corporation of Trinidad and Tobago) with respect to securing at least half of the money owed by Bosai group of Companies to CLICO Investment Bank.