Cayman National Corporation’s CEO and LoGB deny coercion

Danny Scott, CEO of CGI	Stuart Dack, CEO for Cayman National Corporation	Hon McKeeva Bush, Leader of Government Business

Thursday, April 7, 2005

Controversy still surrounds the settlement between the Government and the Cayman National Corporation (CNC) over Cayman General Insurance, (CGI) as both the Leader of Government Business, Hon McKeeva Bush, and the CEO Stuart Dack deny there was any coercion involved with the letter published as a full-page advertisement in the Caymanian Compass specifically thanking Mr Bush’s leadership on 7 March. 

Although Mr Dack was asked about the circumstances of the letter at the time, he said he could not discuss the details of the settlement, which was standard practice within the insurance industry. Mr Dack did not deny or confirm the possibility of coercion.

However, in an interview published with Cayman Compass three weeks later, Mr Dack said there was no coercion involved. 

A number of people connected to the organization including board members have reported under the condition of anonymity that they were required to sign the letter or there would have been no deal. 

Within the same week of the report in Cayman Net News that coercion was involved in the deal, on 16 March the stock price for CNC dropped 25 percent from CI$3.00 to CI$2.25 per share even though the settlement with Government had resolved the immediate issues surrounding the organization’s financial liability to its insurance arm.

With over $270 million in claims, CGI was facing bankruptcy with an estimated $70 million in claims above reinsurance. Negotiations are still continuing with the Barbados-based insurance firm Sagicor that is alleged to be taking a 51 percent ownership in CGI. 

In January, AM Best downgraded CGI from an A – (Excellent) to a B – (Fair) when it did not supply the company with information on a re-capitalization plan in the aftermath of Hurricane Ivan. Subsequently, CGI withdrew its rating from AM Best. Ratings from AM Best have become more valuable as thousands of Dyoll policyholders holding worthless insurance policies try to figure out which insurance companies will stay in business to pay their claims. 

Both Mr Dack and CGI CEO Danny Scott have stated they would reapply for an AM Best Rating when the deal with Sagicor was complete. 

However, AM Best Managing Senior Financial Analyst Peter Dickey has stated that it is doubtful there will be a rating assigned to CGI before two years, because the organisation doesn’t want insurance companies to jump in and out of the rating system just because they don’t like the rating. 

“It is unlikely that AM Best would break the two year moratorium to assign CGI another rating. Although CGI’s ownership may have changed, the management is going to be the same so the fundamental financial analysis would be the same.”

Mr Dack could not be reached for comment on the latest revelation from AM Best before press time.

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