Regulators have pounced on a second local insurance company caught up in the meltdown of regional conglomerate, CL Financial.
The Cayman Islands Monetary Authority on Tuesday issued a cease and desist order against British American Insurance, also known locally as BAICO, barring them from issuing any new insurance policies.
While British American insisted Tuesday that its policy holders are safe, if the company falters, the fallout could rock the Cayman Islands economy.
The company is understood to have as many as 4,000 health insurance policies, over 5,000 life insurance policies, about 1,500 home insurance policies and at least 1,000 annuities.
British American’s focus on the lower end of the insurance market means those likely to be affected by any collapse include some of Cayman’s most vulnerable.
The Monetary Authority said it had taken the move to safeguard the public interest and to protect the company’s policy holders while the authority looks over British American’s books.
‘The authority expects BAICO to continue to honour its obligations to its policyholders,’ the Monetary Authority said in a statement. ‘The ongoing examination of the Company by the authority does not preclude the company honouring these obligations.’
The move comes amid new fears about the insurer’s ability to meet liabilities and follows similar action against the insurer CLICO, another subsidiary of CL Financial, in March. That company has since been placed in the hands of controllers.
The order asks that British American increase the assets in its statutory fund within 30 days.
Whether administrators at British American and CL Financial will heed that order remains in doubt; CL Financial did not comply with a similar order when the Monetary Authority took action against CLICO in March.
General Manager of British American’s Cayman operations, Roy McKenzie, insisted Tuesday that policy holders have nothing to worry about.
‘Their policies are safe and they should just make sure they keep it in force; pay their premium and don’t let it lapse,’ Mr. McKenzie said.
‘We will pay their claims the same way,’ he added. ‘We don’t have a problem.’
While rumours have been circulating for months that the company was underfunded, CIMA refused to say how short of cash the company’s statutory fund is.
Mr. McKenzie said the company was roughly $2 million short of the $21 million it should have in the fund.
The CIMA order also bars British American from moving any of its assets out of the Cayman Islands.
The move comes amid reports CL Financial took profits from otherwise profitable regional insurance companies and ploughed them into other investment schemes, including a colossal $300 million, 6,000 acre property development in Florida that has since gone bad.
Mr. McKenzie confirmed that British American’s head office in Trinidad had taken about $8 million of the local branch’s profits over the last two years to invest elsewhere.
The Monetary Authority said the situation with British American is an ongoing matter, and, as such, it is restricted it what details it can release to the public.
It said policy holders with questions about their policies should contacted British American, although they can contact the Authority’s Insurance Division if British American doesn’t help them.
The insurance division can be reached on 244-1663.
British American has been in business for over 46 years in the Cayman Islands and has two local branches, employing 16 people.