Those with savings or investments with the British American Insurance Company (BAICO) have been warned they face losing some of their money, after winding-up proceedings began against the insurer's Bermuda branch yesterday.

But BAICO's health insurance policyholders will continue to receive medical cover after the Official Receiver moves in to liquidate the company.

The Argus Group has agreed in principle to take on BAICO's health insurance clients, who will in the short term — before the transition to Argus is completed over the coming weeks — have their claims met by Government.

Financial regulator the Bermuda Monetary Authority (BMA) announced yesterday it had applied to the Supreme Court to wind up BAICO's Bermuda branch to protect its customers in light of "the continuing severe financial difficulties" faced by BAICO and its parent company, CL Financial Group of Trinidad and Tobago (CL). CL was taken over by the Government of Trinidad and Tobago in February this year after running into financial trouble.

"It is apparent that as a result of the financial difficulties faced by BAICO, policyholders, particularly those with investment or savings products, will very likely face a potential shortfall," read a statement from the BMA yesterday.

The "liquidity facility" provided by Government will enable all claims for periodic and ongoing medical care to be paid in the short-term under the existing terms of the policies, the statement added.

Deputy Premier and Finance Minister Paula Cox said: "The BMA and the Government of Bermuda are very grateful to the domestic insurance companies who have worked hard to find this solution and in particular to the Argus Group for their efforts to assist BAICO Bermuda branch's health policyholders during this difficult time.

"It is our hope that solutions for the non-health policyholders also will be identified as we work through the transition for the health insurance policies."

BMA chief executive officer Matthew Elderfield commented: "The financial problems of British American are affecting tens of thousands of policyholders across numerous jurisdictions. The actions being taken today to secure local assets will help minimise the impact on local policyholders, but it will take some time to assess the financial position and the options for the future before the exact size of any shortfall for non-health policyholders can be determined.

"I'm very grateful to the Government for providing a liquidity facility to ensure continuity in health coverage, and to the Argus Group for demonstrating this extended level of community support by offering to assume the health policyholders of BAICO Bermuda branch, which will ensure that local health policyholders will continue to receive medical care."

The Bahamian insurance company has its headquarters at 133 Front Street and has been operating in Bermuda since 1953.

The Official Receiver has appointed KPMG Advisory Ltd. to administrate the provisional liquidation. Policyholders or creditors can obtain further information on BAICO's Bermuda business at www.kpmg.bm/ba or by contacting KPMG Advisory Ltd. at infoba@kpmg.bm or by calling the BAICO hotline on 294-2651.