Paul Berenger on the Insurance (Amendment) Bill – 28 April 2015

At the seating of the National Assembly on 28th April 2015, the Leader of the Opposition (Mr P. Bérenger) on the Insurance (Amendment) Bill (No. VIII of 2015) : Mr Deputy Speaker, Sir, I believe it is vital to go back to square one and to remind ourselves why have we come to where we are, an awful mess, a national catastrophe.

 

Why have we come to where we are, is because as from 2005, the then Prime Minister and Government did not allow either the Financial Services Commission or the Bank of Mauritius, or even more, to function as independent regulators. This is where all the troubles started. Did I have to remind the House that as the Chief Executive of the Financial Services Commission there – we had a brilliant lawyer. I won’t tell his name. We should know. Brilliant! He was doing great work and he has started handling that BAI issue. He was made to go away brutally after the 2005 election. He was done away with and we started going down.

 

Today, we talk about the Financial Services Commission, but in terms of politisation or manipulation politique which is even worse at the Bank of Mauritius. When you stopped and imagined that a few months ago, the Bank of Mauritius, the then Governor was plotting to absorb the Financial Services Commission. This is why we are where we are since 2005. But here what is of special interest is the Financial Services Commission have been polluted, sabotaged as independent strong regulators, but having said that, the solution is not more politisation. I will say that the solution is strengthening the independence, the powers of the Financial Services Commission. Today, I will not speak about the Bank of Mauritius, of course. I repeat the solution is not to go further down the road, allowing more politisation and whatever the good intentions of the Minister or of Government. What is provided, provides for still more political interference whatever be the intentions of the Ministers of the day.

 

On the contrary, I believe that – I will come to that at the end of my intervention – the way forward is consolidating the Financial Services Commission both in law, but also in practice like the appointments at the Head and the members of the Financial Services Commission, we are moving backwards and that is not the way forward, Mr Deputy Speaker, Sir.

 

Of course, before moving to that, we have been in disagreement, the Opposition and Government – at least, the MMM and Government – on the way this Bramer/BAI saga has been handled. But, in a way it is already behind us this. We have been in disagreement – I should not say day 1 – from night one concerning the revocation in the middle of the night of the banking licences. We have been in disagreement. We have not been in disagreement wherever fraud is to be found. We are in total agreement that wherever fraud is to be found, we should – on both sides of the House – be sans pitié and this is the attitude that we have adopted and that we will keep on adopting.

 

As I have said, we are in disagreement on the way the whole issue has been handled. I am glad that hon. Duval is back just in time for that debate. I am not going to marquer des points politiques. The situation is much too serious for that. And that brings me back with your permission, Mr Deputy Speaker, Sir, to the PNQ that I put. I was the first to raise the alarm. The IMF had done it. Confidentially others were aware, but my big mouth as usual, was the first one to open up on this issue. November 2013, hon. Duval was the Minister of Finance, therefore, he replied to my PNQ. If you would allow me, Mr Deputy Speaker, Sir, to read what he said and I quote –

 

“The IMF itself says that (…)” And he quotes –

“(…) the present efforts to find a solution are satisfactory and it should be allowed time to work”.

 

It is the Minister quoting the IMF. And then the Minister goes on –

 

“The whole thing is about allowing time to work. Any drastic solution will achieve the opposite. Government is following the situation very carefully. The regulators are following very carefully. We are addressing situation in a satisfactory way to the satisfaction of all concerned and there should not be, Mr Speaker, Sir, anything that would create any undue reaction or panic”.

 

 

 

I am quoting the Minister in November 2013, that is, slightly more than a year ago. And my reaction to that after those words of the then Minister of Finance –

 

“Of course, I am not suggesting any drastic action”.

 

This is the line – although we were in the Opposition – that we kept. Today we are in disagreement because this is not the way the crisis has been handled since the revocation of the Bramer Bank licence. This is where we are in disagreement, Mr Deputy Speaker, Sir. But where I agree with the hon. Minister that the follow-up – after what the Minister Duval said in November 2013 – has not been what it should have been. I beg to disagree with the hon. Minister in his tone hitting at the FSC above that there was the then Government and the then Prime Minister over the head of the Minister of Finance also, so the follow-up I agree fully was not what it should have been. It is my opinion. That has been the case under hon. Duval as Minister of Finance, but also under hon. Pravind Jugnauth as Minister of Finance. The Prime Minister was there. I place the main responsibility on political interference, ingérence right  from  the  top  and  with  the  collaboration  of  the  former  Governor  of  the  Bank  of Mauritius, whenever his help – if that is the word – was required.

 

I am not in agreement also with the way things have been handled because there has been too much improvisation. I listen carefully to hon. Lutchmeenaraidoo, the Minister of Finance. He nearly admitted that it is good to be wise after the event. He read one point and he said: ‘when your house is on fire, you don’t choose the quality of water which you pour on the fire’. But also he should not pour petrol on the fire in the hope that you are going to put off the fire. Okay, we run the pressure, but I cannot agree with such drastic actions which have been taken as from the revocation of the Bramer Bank licence without proper preparation. I agree that it was a crisis situation. But my good friend hon. Lutchmeenaraidoo, the Minister of Finance will understand that I cannot agree when he comes forward saying, loud and clear and repeatedly, that the State Bank of Mauritius (SBM) is going to absorb Bramer Bank and then no. It seems that it is afterwards that the SBM was asked whether they would agree or not. Well, that is not the way to move forward. The hon. Minister of Finance referred repeatedly to 14,754 policyholders, investors in the so-called Super Cash Back Gold and then days later, he came to realise that it is not 14,754, but 8,240.

 

I mean, at that level, that kind of non-preparation, I cannot find acceptable. There are plenty of good lawyers, not only at the State Law but in Government, and none of these brilliant  lawyers,  now  Ministers,  saw  the  trouble  coming  between  Conservator  and

 

 

 

Administrator. Come on! I warned, and it was so clear that the BAI group and it’s part of the game that the BAI group and its lawyer were going to find ways and means of ‘mettre baton dans la roue’, as we say in creole, and they did, and they found a gros baton and a weak la roue. So, they found the legal way of putting an Administrator under one law, on piece of legislation, the Insolvency Act against the Conservators appointed under another piece of legislation. But, we should have seen all this coming. We should have prepared ourselves much better and that brings me to the beginning of it all – of the beginning of the end in a way! That is, the revocation in the middle of the night of the banking license of Bramer Bank. I cannot agree, and I don’t agree at all with the Minister of Finance when he says that there was no other way. Factually it’s wrong, legally it’s wrong! There was nothing, parce que under the law an Administrator could have been appointed, a Conservator could have been appointed in the case of the bank just as in the case of the insurance company.  And don’t tell me that this would have resulted in a run on the bank! No! If they had been appointed, they could have temporarily close all the branches, the operations so that there would be no run and taken the time required to see what can be done, what must be done. I think we all realise, I hope we realise now, by revoking the license we killed the whole chain of value. If the license had not been revoked, I am sure we would have found people, not me, the people concerned would have found purchasers. Inside Mauritius there were people queuing up to buy the license and whatever assets and business were left.   But when we kill the license straightaway  like  that,  we  bring  down  completely  the  value  strategic  and  financial completely.

 

But I say all this in a way, this is passed history already, things have moved so fast and now I cannot accept that a piece of legislation that is already having an impact on our image, on our economy, on our financial system, on our flow of investments from overseas if approved by Cabinet on Friday and brought here, Tuesday, while 1st, 2nd, 3rd  Reading, how can this be right? I am sure à tête reposée everybody agrees that this cannot be right – and without  consultations!  But  I  won’t  say  more,  without  consultations  with  the  people concerned.  But I won’t say more on that because I have never heard such a deafening silence from the people concerned. You would have expected the big brains in the private sector, in

the insurance and pension sector to have, at least, found something to say yesterday and today. It is true we got the piece of legislation. I, the Leader of the Opposition, got the piece of legislation only on Saturday. It’s not good; it’s not fair, it’s not normal. Sunday is Sunday. Monday, nothing in the press! No reaction from the big brains of the private sector and so on,

 

 

 

and all silence complet, silence radio totale and even today, yesterday afternoon. This is bad for Mauritius. Very serious! So, I won’t insist more but there should have been consultations. It is bad that we come with that important piece of legislation, agreed by Cabinet on Friday, circulated on Saturday, First, Second, Third Reading on Tuesday. It is a complicated and very important piece of legislation. Having said all this, let’s call a spade a spade. I don’t agree with the hon. Minister; at one point, he seemed to say that but later on he said something else.

 

At one point, he seemed to say that the main purpose is to plug loopholes in the legislation and then later on, he said, ok, the truth is that the main reason is to kill the Administrator, appointed under the Insolvency Act.

 

(Interruptions)

 

This is the truth! It is so obvious and you said it. It is so obvious that the point is that Government is convinced that, if he does not act urgently, clearly Government is convinced that Administrator, appointed by the companies under the Insolvency Act, is going to play murder with the assets of the group, of what is left and, therefore, the interest of the policyholders. So, it is clear that the main purpose is éliminer en catastrophe à toute vitesse, First, Second, Third Reading the Administrator, appointed under the Insolvency Act by the company.

 

Well, the Rt. hon. Prime Minister and others are listening. This cannot be normal, an Administrator is appointed under the Insolvency Act by companies and we come now and amend the Insurance Act to kill…

 

(Interruptions)

 

Yes, we know! We are all trying to protect the policyholders but there are ways and ways of doing it! He has been appointed under the Insolvency Act, and now,we amend the Insurance Act to do away with him en quatrième vitesse, en catastrophe.

 

I take into consideration the Government is convinced that if it does not act urgently, but there were other ways, and now that we’ve reached where we’ve reached, I am going to suggest the way forward. We have no choice today, we are going to vote it; but I am going to propose  what  we  should,  in  the  interest  of  our  financial  sector  and  of  Mauritius,    do afterwards, Mr Deputy Speaker, Sir.

 

I don’t agree with the hon. Minister.  It is not as simple as that! He just says it does not have an effet rétroactif and we all  …

 

 

 

(Interruptions

 

Of course, it does! Conservators – I get mixed up with – have been appointed in the recent past. Now, the companies have appointed an Administrator, now with this piece of decision we go retroactive and we kill the Administrator. It will end up in Court. It is obvious! So, I am not going to say that it is against the Constitution, but what I am going to say is that the risk that the Court finds so, rules so – the amount of money involved, tells me that this will go before our Supreme Court and, if required, before the Privy Council. So, I am not going to pass judgement, but the risk that this whole thing be found to be anti-constitutionnel, I think we can all agree, we should all agree, is bad.

 

En tout cas, constitution no constitution, it cannot – you know, from a distance, we follow the cases Ramgoolam, les coffres-forts we follow that every day and we follow the Bramer Bank/BAI; and from the outside this is not – they don’t go into the details. The message sent when we abolished what has been done a few weeks, a few days ago avec effet rétroactif, we kill what has been done, this is perceived, as in India recently, with the best of intentions, but this is perceived by the outside world as légiférer avec effet rétroactif.  And it is very, very bad for investment, for the image that Mauritius projects, Mr Deputy Speaker, Sir, and that is the wrong signal. Even if we leave aside the Constitutional dimension, but sending that kind of message and also there is a phrase that literally eliminates policyholders and creditors. There is one sentence in the Bill. Whereas now, the law as it is, policyholders have to be consulted. Mais d’un trait de plume, in this amendment, the policyholders and the creditors – but I am more worried about the policyholders than the creditors – are brushed aside. This is also going to be challenged in Court, not just the effet rétroactif, but the property protection. I am sure the creditors are going also to go to Court. It is obvious. So, there is a big risk which will bring me even more to what I will propose later on, Mr Deputy Speaker, Sir.

 

Now, what is a completely wrong signal – I am sure the hon. Prime Minister must have  thought  about  that  –  we  are  putting  in  our  insurance  legislation,  supposedly on  a permanent basis, for a special administrator to be appointed partly by the Minister with an interaction between the Minister and the Financial Services Commission which is very bad, I will come to that later. But we are putting in our legislation that if an insurance company has a deficit of more than Rs1 billion between its assets and its liabilities, then there is this special administrator, but c’est un aveu d’échec. If we reach that point, it means that the FSC has failed all the way. The FSC is there, the law is good. I disagree with the Minister. Our law,

 

 

 

our insurance legislation is good. Our legislation as far as the FSC is concerned, is good. But now we are going to put into the law, hon. Prime Minister, that if we reach a stage where the deficit is more than Rs1 billion, then – it means as if we are preparing ourselves for the next

‘fané’ which the FSC is going to ‘fané’. If you follow that logic, in the agreement, we might as well put in the law: where the FSC has failed miserably in its duties and the deficit is more than …, then…That is what, in effect, we are putting in the law. I repeat; for a deficit of more than Rs1 billion to develop, it means that the FSC has failed totally in its mission. So, this is what we are putting in our legislation. That is why I’ll say un peu avec un peu d’humour, but, in fact, yes, we should put it in: where the FSC has failed miserably in its duties, and so on, and the deficit has been allowed to crawl over Rs1 billion, then…It can’t be proper to put things like that in the law and to denigrate the Financial Services Commission in that way, Mr Deputy Speaker, Sir.

 

And that brings me again to my PNQ, and I am not saying that to be nasty, but that brings me – hardly a year ago, the hon. Minister of Finance, then hon. Duval, said –

 

“And I repeat, Mr Speaker, Sir, this is a company that is regulated. It is a group that is regulated by the Financial Services Commission. It has auditors.”

 

And he adds, a year ago, slightly more than a year ago, I am quoting –

 

“It has just published its financial statements for 31 December 2012, which shows

 

Rs6 billion of excess assets over liabilities, Mr Speaker, Sir.”

 

The reply is hardly a year ago, a bit more than a year ago. Don’t tell me that we moved from that situation to where we are today and now, we say only Rs1 billion deficit will trigger the action.

 

So, things have gone very, very wrong and I appeal to Government and I’ll make a concrete suggestion later on, we should not put that in our insurance legislation. It is the wrong signal completely and it is an aveu de défaite prématurée. We say that the FSC is going to ‘fané’ encore, therefore, whenever it ‘fané’ more than Rs1 billion deficit, then the special administrator will come in, Mr Deputy Speaker, Sir.

 

Let  me come now,  because the words  used  by the hon.  Minister were ‘extreme urgency’. Yes, there is extreme urgency as a result of the actions taken and beginning with the revocation of the licence and the effet de cascade, there is now extreme urgency, I agree. But I don’t agree that the right choice was made and is being made. First thing which Government could or should have done is to target the BAI group and the BAI group only;

 

that is what we are talking about. We are putting a general clause in our general insurance legislation which is very bad. Well, the hon. Prime Minister will remember, there have been cases like the MCCB where we came with legislation, call it by whatever name MCCB Rescue Bill, BAI Rescue Bill, by whatever name, but we could have done what we are doing through this general piece of legislation that will apply dangerously to the insurance sector in general. We could have done that by a piece of legislation doing the same thing, but targeting the BAI group only. Of course, they would have gone to Court. Anyway, it will go to Court. Whatever Government does, this is going to end up in Court. But this was a first option which we could, and I say we should have taken instead of this general piece of legislation that refers to insurance in general. That’s one.

 

Secondly, the hon. Minister gave us the impression that we are inventing something with this general administrator, special administrator or rather let me get the exact – the appointment of a special administrator. We are not!  The Insolvency Act already provides for the appointment of a special administrator for important companies in financial difficulty and when the going down of such a company will hurt the economy in general, the financial sector. It is in the law. He knows everything as usual. You will see, hon. Prime Minister, how this country is going to end up if he does not even listen to points made by others that have no axe to grind and are only thinking about Mauritius. But he knows everything. He won’t even listen. He can’t even keep quiet.

 

(Interruptions)

 

So, this is in the law. In the Insolvency Act, it provides for the special administrator, he can be, as I said, appointed when an important company is going down and it’s going down, it is going to hurt the economy as well, but there is a hic. There is a hic. Just as when I raised the issue of compensation fund that should have been set up years ago, everybody is to blame, all of us, all those who have been Ministers of Finance since 2007 and now, the hon. Minister rightly says that that fund is going to be set up. Bien bon!  Better late than never! But again, to appoint a special administrator more or less the same kind of administrator that we are appointing under the Insolvency Act, the administrator is appointed by une bébête qui s’appelle le Companies Supervisory Committee.

 

But again we are being wise after the event just as in the case of the Compensation Fund.  That bébête has never been set up.  It provided for in the law, but it has never been set up.  The Companies Supervisory Committee  – I said commission, I think, wrongly – under

 

 

 

the Insolvency Act is composed of one member appointed by the Financial Services Commission, one member appointed by the Bank of Mauritius, three members from the private sector, the Registrar of Companies and the Director of Insolvency Service which is defined in the law; therefore the Director of the Insolvency Service or his representative. Unfortunately, therefore, this option should have been before us but, right now, it is not before us as in the case of the Compensation Fund I mentioned earlier on. So, I was going to insist that we do not debate today, but the good example set in the – what is the name, I forgot

– penalty point system, abolition. That is the way we should proceed with difficult pieces of legislation.  The Minister makes his second speech, we study and then we come. That should have been the way adopted. So, I was going to propose, but I am not proposing because I agree that there is extreme urgency.

 

(Interruptions)

 

Now, as a result of actions taken which brought us where we are, we could have taken other decisions; we could have handled the thing differently.

 

(Interruptions)

 

I have said, if you had listened instead being full of yourself including your ears. I have said from day one we are in disagreement. That licence should not have been revoked and I said what other options were available including the piece of legislation specific to the BAI Group as we did in other cases. He won’t listen. But, what I am going to suggest is that there is extreme urgency because of actions taken and where we have reached. We will vote. Government does not need our vote.   I won’t request a postponement, but what I would suggest strongly is that we go ahead with that and then, à tête reposée we review the whole situation.  That amendment that targets the whole of the insurance sector is very bad. The perception from outside is very, very bad.

 

Therefore, what I suggest is that we go forward today. Anyway Government has a majority. We go forward; the special administrator is appointed.  There will be people going to court, but it will take the time it takes. In the meantime, à tête reposé, Government should look anew at this special administrator appointed under the Insolvency Act. What we have done today is we make a nice piece of legislation, but I would suggest to the Insolvency Act protecting the insurers, the insurance company also, the policyholders, that is, integrating in a well point out, à tête reposée, piece of legislation amending the Insolvency Act to provide for the special administrator to integrate what we will be voting today and which is going to be

 

 

 

challenged. When it is ready, in a week or two weeks, whatever, as soon as possible, but well thought at, then we repeal this piece of legislation that we will be voting today which sends the wrong signal to the insurance company in  general. This is what  I would appeal to Government  to  do.  But,  anyway,  even  if  you  don’t  do  that  it  is  clear  that  there  is harmonisation to be made urgently between the Companies Act, the Insolvency Act, the Financial Services Act, the Insurance Act. That is obvious. But my suggestion, as I said, is that there is extreme urgency, we go ahead. We prepare a well thought out, à tête reposée, piece of legislation. I would suggest to the Insolvency Act which integrates all the powers, if any, that are not already provided for in the case of insurance companies and then when that is ready, we come back to the House, we repeal the piece of legislation that will be voted and we go to a permanent Insolvency Act that provides for the appointment of a special administrator to the satisfaction of one and all.

 

My second suggestion is an appeal. The way forward is not in doing things that will weaken the Financial Services Commission, its independence in law and in its functioning. We should be very careful. From the outside, it should be perceived, clearly perceived that our regulators are really independent, that Ministers are not involved or appointment of course:  Bank of Mauritius, Financial Services Commission and this bringing in the Minister for financial services – nothing personal, I am talking about institutions – he must receive the report   by the Financial Services Commission which tells him that there is a company in default by more than Rs 1 billion and that, therefore, it is a threat and so on. The Minister requests the Commission to appoint a special administrator. It is not good. I don’t think we should bring in a Minister into the machinery.  We need to vote it.  You have the majority and I agree that there is extreme urgency, but when we prepare à tête reposée the amendment that I am suggesting, we should not bring in Ministers in any way.  But, Mr Deputy speaker, Sir, it is not just in legislation, I don’t agree with the Minister on that point that our legislation as far as the Financial Services Commission is not good and so on. I don’t agree. It can be improved, of course. It can always be improved. But it is in the appointment and political interference  that  we  have  hurt  ourselves,  that  we  have  hurt  the  country.  There,  I must disagree, we are not moving forward, on the contrary, in that piece of legislation which we will vote, but we are bringing in the Minister for Financial Services we should not. We should find a way round that. Especially, Dev Manraj is a good friend, that is not the point, I am not personal, but it is a huge step backwards, the wrong signal being sent that the Chair of the Financial Services Commission is a fidèle serviteur le l’État, the Financial Secretary. It is

 

 

 

not in order. It is not a step forward. We have had in the past when we started the Financial Services Commission, it was the number two at the Bank of Mauritius for a while, but we must  have  a  respected  independent  Chair.  It  is  unhealthy  that  we  have  the  Financial Secretary. Anyway, the amount of work which you give him, you are trying to kill him. I have to protect him.

 

(Interruptions)

 

Therefore, this cannot be a way forward.  It is a step backward when we have the Financial Secretary – nothing personal – appointed Chairperson and 4 out 6 members are Government servants and we want the outside world to perceive that as a truly independent regulatory body.  No way! Therefore, again, à tête reposée, when we get over at this point in time, I am sure the Rt. hon. Prime Minister and the Government will agree with comments which I am offering.  I am very worried. Very worried!  I was also worried about what will happen after the Budget. I was very worried about the current account deficit.   Then came this Bramer Bank/BAI which is having an impact way outside Mauritius and outside the insurance sector. I am very worried!

 

This morning, at the end of my PNQ – I do not know if, in the meantime, the hon. Minister has checked – yes, there is already a drastic slow down since this Bramer-BAI Saga has started on the number, compared to the past, of fresh requests for licences and so on, submitted to the FSC. It is not a coincidence that since the saga started, more than Rs1 billion have been  withdrawn  by foreigners.  I am  not  saying that  to  be un  oiseau  de malheur, prophète de malheur! No! But the situation, I believe, is very serious. We will go along. I have been critical where I believe I should be critical, but I have offered a way forward.  We get over this difficult moment, and then à tête reposée, we amend our legislation, because this Belvédère, the economist, all this is getting mixed up. There is really a perception that Mauritius is an international Ponzi hub, which is not the case, as we all know, but perception in cases like that is as important as the reality.

 

So, this was my contribution, Mr Deputy Speaker, Sir. It is an important moment. We disagree on certain things that have been done. Mais, c’est déjà chose du passé! We are where we are.  We have to act, I agree and then, we think after we agree we have acted today, then we think ahead, both in the legislation and in giving the FSC the means to perform its duties under the law as a really independent regulator.

 

Thank you, Mr Deputy Speaker, Sir.

 

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