Will Ennia’s policyholders pay the price?

By Hilbert Haar

Insurance company Ennia is struggling, to put it mildly. Its management and members of the supervisory board, including major shareholder Hushang Ansary, have been fired and the company is now controlled by the Central Bank of Curacao and St. Maarten. Ennia’s insolvency deficit is a dazzling number and in the poker game between major shareholder Ansary and the Central Bank millions of dollars are at stake. What does all this mean for Ennia’s clients, the policyholders?

Let’s first put Ennia’s position in the insurance market in Curacao and St. Maarten into perspective. According to court documents, the company’s assets are worth more than half of the combined annual revenue of the two countries.

Annually, Ennia pays out 28 million guilders in pensions and 12 million guilders on life insurance policies. Its general insurance unit (Schade) pays out 24 million and its healthcare unit (Zorg) another 6.6 million guilders. Altogether: 70.6 million guilders or approximately $39.4 million. Ennia pays its suppliers annually another 31 million guilders ($17.3 million).

The thought that this company is too big to fail easily comes to mind though I don’t think that there is a government – in Curacao or St. Maarten – rich enough for a bailout.

In July 2018, the Central Bank voided Ennia’s permit and issued the so-called emergency measure that puts The Bank in control of the company.

While Ansary, who just turned 93 in January, is fighting the emergency measure in court in Willemstad, the Central Bank is fighting in American courts to get access to the $287 million Ennia holds in an account at Merrill Lynch – reportedly $117 million in cash and another $170 million in securities.

That money has to come back to Curacao, otherwise Ennia won’t be able to meet its obligations towards its policyholders.

If I’d had a life insurance with Ennia, I would have switched to another provider years ago because the first signs of trouble surfaced already in 2013. I know, that’s water under the bridge and people who are currently relying for their pensions on Ennia, cannot buy bread for this wisdom.

The Central Bank has made clear that it is not after Ennia’s bankruptcy but from a layman’s point of view the situation does not exactly look brilliant. I think that the threat of bankruptcy is real.

What will happen to the interests of Ennia’s clients in that scenario? According to the national ordinance supervision insurance companies they are first in line. They will get paid from the value of the assets that underpin Ennia’s worth.

That’s where things get hairy if you ask me, because one of those assets is Mullet Bay. This property represents a value of 771 million guilders ($430.7 million) – in Ennia’s books. But independent appraisers hired by the Central Bank put its value much lower: at 89 million ($49.7 million).

Mullet Bay will only be turned into hard cash if the Central Bank manages to find a buyer for it. It is unclear to me whether the low appraisal is the market value or the auction value. If Mullet Bay goes under the hammer it could very well bring in much less than that $49.7 million.

Ennia’s annual obligations towards its policyholders alone are $39.4 million so in an optimistic scenario the company will only be able to pay out for fifteen months or so, unless there are other assets.

When that money runs out, the policyholders will have to take a backseat. Whatever money remains goes first to the trustee in the bankruptcy, the tax inspectorate and several other creditors. Ordinary creditors (like policyholders) are fifth in line and they will usually receive less than 4 percent of their remaining claim.

According to the Central Bank, Ennia currently has a solvency deficit of more than $800 million. That’s an alarming number and it was also reason enough for the bank to issue the emergency measure.

The main question is now whether The Bank will be able to access the millions that are currently frozen in the Merrill Lynch account. That money – $287 million – will cover the insurance payouts for the next seven years, but without a real solution the policyholders will pay the price in the end for what looks very much like a case of serious financial mismanagement.

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