The Trinidad and Tobago government says "substantial progress" has been made in resolving the financial troubles of regional insurance giant Colonial Life Insurance Company (CLICO).
Trinidad, in 2009, mounted a multibillion-dollar rescue plan for CLICO and its parent CL Financial group, then controlled by Lawrence Duprey.
Finance Minister Larry Howai, delivering the twin-island's TT$58.4 billion budget to parliament on Monday, said that the CLICO issue had dragged on "for far too long" and that he intends to bring it to a close this year.
He said that the cost to the government for CLICO, as well as the Hindu Credit Union, "has been substantial - an amount of TT$19.7 billion or 13 per cent of our current GDP".
Howai defended the expenditure, saying it was necessary and decisive for containing an economic and financial crisis.
"However, we took steps to ensure that the CLICO impact on growth and employment was not as severe as has occurred in other countries affected by their own financial crises," he told parliamentarians.
"As part of the overall solution, we shall incorporate a new insurance company into which those traditional policies and other assets will be transferred from CLICO. That new company will continue to manage the traditional policies."
The Kamla Persad-Bissessar government last year said it would make an initial partial payment of a maximum of TT$75,000 to depositors in the short-term investment and mutual funds and those whose principal balances exceed TT$75,000 will be amortised over 20 years at zero interest.
"We are discharging the liabilities held by individual and corporate investors in short-term investment products (STIPs) in two components," Howai told legislators.
As of September 18, some 25,115 STIP holders, including credit unions and trade unions - accounting for TT$10.268 billion - have accepted the government's settlement offer.
NEW INVESTMENT FUND
The government will launch the new CLICO Investment Fund (CIF) on November 1, and two months later, on January 2nd, 2013, the units of the fund offered to holders of 11-20-year bonds, will begin trading on the Trinidad and Tobago Stock Exchange.
"This action will bring the CLICO matter to an end, having settled all the obligations committed by this government. In keeping with arrangements in place for similar funds, we have arranged in the budget for the income generated by the fund to be tax-exempt in the hands of investors," Howai said.
The CLICO rescue mounted In 2009 under the Patrick Manning administration gave the government control of 49 per cent of the insurance company's shares.
The Manning government injected TT$7 billion into CLICO in 2009 to keep the collapsed insurance firm running and protect policyholders.
Last September, the Persad-Bissessar government introduced new legislation that committed an additional TT$13 billion (US$2.01 billion) to keep the insurance group afloat.
CLICO, in its finances made public in January, posted a deficit of TT$9.4 billion for the year ending December 31, 2009.
In his more than two-and-a-half-hour address, Howai said government would also waive any applicable stamp duty on the transfer of the 51,858,299 shares of Republic Bank Limited from CLICO to the government as well as on the transfer of the 51,858,299 Republic Bank shares from government to the CIF, and on the transfer of units in CIF to bondholders.