Will we get our money back?

Up to 5,000 people who bought life coverage have been told they will not get all their money back.

They will be repaid a percentage of their policy’s net value but not all of it.

The news comes as little comfort to people like pre-school teacher Karen Joyiens and her husband, who paid more than $50,000 to the firm over 25 years.

Mrs. Joyiens is “hurt and upset” that years of putting aside $100 each month for her children had apparently gone to waste. Other disappointed customers, profiled in the Bermuda Sun today, spoke of their anguish at losing thousands of dollars.

KPMG executive Mike Morrison, who is handling the winding up of the company, said he understood the frustration of policyholders, who say they have been left hanging since it went bust last July.

He could not say how much they will get except that it will be more than the 10 cents on the dollar paid to customers in Antigua, Dominica and St Lucia.

“We have not just been sitting back delaying the process,” he said yesterday. “We’ve been trying to search for a solution other than this.”

Collapse of British American potentially leaves thousands of islanders out of pocket

How much did I lose?

That’s the question British American Insurance customers are asking after finding out that no other company will pick up the defunct insurer’s business.

The simple answer is some, but not all.

After that it gets complicated.

The company’s 5,000 Bermudian life insurance policyholders have been in limbo since the Caribbean firm went into provisional liquidation in July last year.

Initial efforts by KPMG, which was brought in to handle the winding up of the insurer, focused on trying to convince rival firms to pick up the policies — something that would have saved a substantial amount of money for British American’s customers.

But the Registrar of Companies announced last week that those efforts had failed.

Now a team of accountants will begin the process of working out just how much the defunct company can afford to pay and — more crucially — who gets what.

British American has a total of $11.5million in cash assets in Bermuda, which will be used to pay back the 5,000 policyholders.

The money is not nearly enough to cover what the company’s customers are owed.

In Antigua, Dominica and St. Lucia, where British American also has branches, liquidators have already started down this road.

Customers in those countries have been told they can expect to be paid around ten per cent of what their policy is worth.

Mike Morrison, managing director for KPMG Advisory Limited, said Bermuda based customers would get “significantly” more than that. But he couldn’t say how much more until the scale of British American’s liability in Bermuda was calculated.

He said the first issue to resolve was how much each of the 5,000 polices is worth.

The process is a simple one for policyholders that have died — a $100,000 policy is worth a $100,000 on death.

For those that have not died a team of actuaries will be asked to work out a dollar-value for the policy based on several factors including how long they have been making payments, how old the customer is and what the policy would have been worth on death.

Dollar value

Once the dollar-value of all 5,000 policies has been calculated, KPMG can work out what percentage of that value each customer can be paid.

Mr. Morrison said that would happen close to October 31. At that point the customers will be given a document explaining how the policies are being valued and will have a chance to vote on it.

He accepted that some would lose a substantial amount of cash but he said this was now considered the best way for them to get some of their money back sooner rather than later.

If they vote yes, payouts could be made early next year.

If they vote no, the alternative is a liquidation mechanism which he described as ‘very cumbersome’ and it will take much longer for payments to be made.

British American’s customers say it has been a frustrating 14 months since the company went belly-up.

Limbo

They feel they have been left in limbo with no answers over how much money they may have lost.

Mr. Morrison said he understood their concerns. But he insisted the company had been doing everything it could to save their money.

And he said they had set up a dedicated hotline and e-mail address to answer customer questions and concerns — sometimes dealing with up to 200 calls a day. He said the end was in sight.

“No doubt, it’s been frustrating waiting for some news. We have not just been sitting back delaying the process. We’ve been trying to search a solution other than this type of outcome.

“We just got to a point where we had to make a decision. This is the only viable way forward whereby we can get money to policyholders as quickly as possible.

“Now that we have that decision to go this way, we are working as fast as possible to put together the scheme of arrangement to pay policyholders.”

Stephen Lowe, the Registrar of Companies — which is the official receiver, said the best solution would have been for Bermuda’s other insurers to take on the policies.

But he said that method hadn’t worked out and now it was time to get moving on an alternative solution.

“We really, really tried to find someone to pick up the policies. I give full kudos to the four local insurers.

“They really did bend over backwards, but we couldn’t make it economically feasible in terms of using the existing policies.

“We just couldn’t make it work and we really did try.”

He added that the longer the issue dragged on, the less money there would be.

“Every day this stays open, the clock is ticking on the monies that are expended and that depletes the estate so we are trying to do this in the most expeditious manner possible”.

How the firm went belly-up

So why did British American go bankrupt?

Stephen Lowe, The Registrar of Companies, said: “This is not a Bermuda problem per se. This was a branch of a group of companies that was headquartered in the Caribbean, and this was their problem but because this branch was here we kind of got stuck with it.”

Mike Morrison, managing director for KPMG Advisory Limited, liquidator for British American, said there were a couple of factors involved.

British American was headquartered in the Bahamas, but its parent company, C.L. Financial Limited, was headquartered in Trinidad. British American had 19 offices in the Caribbean and Latin America.

Mr. Morrison said: “C.L. Financial Limited is a very, very significant conglomerate in Trinidad and they ran into severe financial difficulties and as a result were no longer able to support British American.

“There were a number of inter-company transactions, whereby monies were taken by C.L. Financial.

“Secondly, not only did British American have a problem with the parent, but in addition to that, they had real estate investments in the United States. Those types of investments fell in value considerably.”

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