Cayman National Corporation president and CEO Stuart Dack said Thursday the parameters of Cayman General Insurance Company’s Hurricane Ivan settlement with the Cayman Islands Government were consistent with what would be expected in with such a claim.
Speaking in response to some of the criticisms levelled at Cayman National Corporation and the Government because of the negotiated settlement, Mr. Dack said the deal was in the best interest of all concerned.
‘We discussed a settlement with Government in order to avoid a long, drawn-out process that would have required a substantial amount of information, much that wasn’t available.’
Mr. Dack explained that, as with any other claimant, Government would have had to substantiate its claim with the proper supporting documentation, much of which was destroyed in the hurricane or was otherwise unavailable.
Partially because of the lack of the documentation, Mr. Dack said, contrary to some speculation, the Government’s claim was never precisely determined.
Other factors, like determining the value of the Tower Building, which was slated for demolition, also complicated the issue.
‘There was no final quantification of the Government’s claim, so it was decided on both sides to take a pragmatic view and seek a settlement.’
Mr. Dack said that following events like Hurricane Ivan, all insurance companies are keen to settle claims, particularly the large ones.
‘Until they are settled, the reserves that an insurance company have to carry in their books have to be larger,’ he said.
Had a settlement not been reached, the matter could have dragged on a long time, Mr. Dack indicated.
‘At the end of the day, even a lengthy settlement would have ended up with some sort of negotiated settlement, and it could have gone on for months, even years.’
Mr. Dack said negotiated settlements are the norm with events like hurricanes, and that larger claims can be settled for up to 50 per cent of the initial insurance adjuster estimates.
‘Even with house claims, the initial loss adjustment reserve can come down 30 per cent,’ he said, noting that at least one other commercial claim has been settled at less than 50 per cent of the initial drive-by loss adjustment estimate.
‘It’s very mistaken to think the initial figures of loss adjusters are going to be the definitive settlement.’
The Government was equally keen to get a timely settlement, Mr. Dack said.
‘For most clients, getting cash in hand through a quick settlement is very important.’
Mr. Dack said it was not fair to say Government ‘bailed out’ Cayman General.
For one thing, he pointed out that the Government paid no cash over to Cayman General.
‘Agreeing to a full and final settlement to their claim was something that Government did to ensure that Cayman General could deal with all the claims in a timely fashion, and to allow the company to seek a new partner.’
It has been announced that Cayman General is currently in negotiations with Sagicor to purchase a significant stake in the company to complete its recapitalisation.
Mr. Dack discounted suggestions that the 24-per-cent stake of Cayman General that Government received as part of the settlement had little value.
‘Given the survival of the company and its potential with a new regional partner, its future fortunes and value could be considerably enhanced from even its pre-Ivan position.
‘We’re excited about the prospects for the insurance company in the knowledge that the products we will be able to offer will be more sophisticated and competitive than those Cayman General were able to offer in isolation.’
Mr. Dack said he was not overly worried about not currently having an A.M. Best rating.
‘An international rating for Cayman General is not essential to its business, which until now has been very much focussed in the Cayman Islands,’ he said.
‘But for the future of the business, given an expectation for growth, we fully understand the value of a rating and would expect Cayman General to achieve a very satisfactory rating following its re-capitalisation.’
There have been suggestions that Cayman National Corporation should have proceeded with a right issue to help it recapitalise.
‘That idea was given very careful consideration and discussed with external advisors,’ Mr. Dack said.
The plan was ultimately dismissed.
‘Given that the majority of shareholders are Caymanians, we felt it was an inappropriate time to be seeking an additional amount of cash from our shareholders,’ he said.
‘What probably would have happened as a result was that ownership would have skewed toward off-shore ownership, something which we did not want to see happen.’
Mr. Dack said Cayman National Corporation shareholders are not all wealthy.
‘There are nearly 1,500 shareholders,’ he said. ‘The majority of these by number are Caymanians of modest means that have put their faith in Cayman National Corporation.’