Post-Ivan settlement ‘reasonable’

Legislators on Cayman’s Public
Accounts Committee have declared an insurance settlement made following 2004’s
Hurricane Ivan “a reasonable deal for government to agree to”.

The committee, chaired by
Independent lawmaker Ezzard Miller, and made up of three government
backbenchers and one opposition member, reviewed Auditor General Dan Duguay’s
February 2007 evaluation of the CI$70 million post-Ivan insurance settlement.

Mr. Duguay said, in his opinion,
the government did not receive value for money from the insurance settlement,
which had once been valued at as much as $108 million.

Government ended up getting $50
million in cash, along with 24 per cent shares of Cayman General Insurance –
which were valued at $20 million in the deal. Cayman General was later bought
out by Sagicor Life Jamaica Ltd.

“(Government) gave up its rights to
considerable additional consideration (between $20 and $58 million) and received
in return shares that were worth less than $3 million in the fall of 2005,” Mr.
Duguay’s report stated.

The Public Accounts Committee,
while not absolutely disagreeing with the auditor, stated there were other
considerations government had to take into account at the time the settlement
was reached.

“On a strict financial analysis…this
may not appear to be a good deal, but the committee does agree – and the
witnesses confirm – that given the circumstances…it was a reasonable deal for
government to agree to,” committee members commented in their review of the
auditor’s report.   

One of those witnesses who
testified before the committee was Financial Secretary Kenneth Jefferson. Mr.
Jefferson said that, in the interest of time and for the good of the Cayman Islands following Hurricane Ivan, both Cayman
General Insurance and the government wanted to reach a settlement quickly.

“Had the government challenged the
settlement, the process could have been dragged out for over 18 months,” the
Public Accounts Committee report stated.

Mr. Jefferson said that by holding
up the settlement process, the government would have prevented Cayman’s
citizens from receiving their claims.

The financial secretary admitted
that accepting the 24 per cent shares did not mean they were automatically
equal to $20 million, but rather that those shares would eventually be worth

The company those shares were
issued from, Sagicor General Insurance, recently sold its 75.24 per cent
ownership interest to Bahamas First Holding Ltd. That sale did not include the
24 per cent shares held by government.

Premier McKeeva Bush confirmed
Wednesday that the government was “looking at” selling its 24 per cent share in
the insurance company.   

“But we’re not agreeing to any sale
that leaves government with any responsibility,” Mr. Bush said, referring to
potential liability arising out of an on-going condominium complex litigation
in Cayman involving Sagicor.

A major sticking point on the sale
would be the purchase price. Mr. Bush said the government would “want to
receive what we put into it”, referring to the CI$20 million part of the
Hurricane Ivan settlement.  However, the Sagicor Group only paid US$10
million for 51 per cent of the shares of Cayman General in 2005, making it
doubtful a buyer would pay CI$20 million for just more than 24 per cent of the
shares today.

In the years following the Ivan
settlement, Mr. Jefferson told the Public Accounts Committee that government
diversified its insurance providers. In 2004, Cayman General was government’s
sole insurer.

A review of all government
properties is also being done to determine the full value of government assets.