SIC accused of fleecing insurers as court orders it to pay GH¢19.3m

The seven insurance companies that joined SIC to provide a credit guarantee bond that have rattled the insurance industry in recent times have accused the company of misleading them on the deal as an Accra High Court has committed SIC to pay GH¢19.3 million to Ivory Finance.

According to the insurance companies, SIC presented the deal to them as an advance mobilization product instead of a credit guarantee bond.

As a result, the companies say SIC acted in bad faith which exempts them from claims and interests being made on the bond.

Presently, the credit guarantee product underwritten by SIC Insurance is a subject of an intense legal scuffle between SIC and Ivory Finance Company over the payment of several millions of cedis as the insured -- ITAL Construct International Limited – failed to fulfill its obligations under the credit guarantee.

Last week, an Accra High Court (Commercial Division) ordered SIC to pay GH¢19,303,800 to Ivory Finance Company Limited within 21 days pending hearing and determination of an alleged fraud suit filed by SIC against Ivory Finance, ITAL Construct, Doris Awo Nkani, the former managing director of SIC, and Kwesi Baidoo and James Kwegyir Agrrey- two directors of ITAL Construct.

Already, Ivory Finance has garnisheed the accounts of SIC; an action SIC has successfully filed a stay of execution pending the determination of the suit that alleges fraud on the part of Mrs. Nkani, ITAL construct and Ivory Finance.

Information available to the B&FT indicates that Ivory Finance will on Tuesday go to court to seek an order to withdraw funds in ITAL’s accounts- which have already been frozen- to defray its debt to Ivory Finance.

Official documents suggest that as at last week Thursday, the interest, charges and commissions on the GH¢14 million credit facility granted to ITAL Construct on a short term loan of six months have ballooned to GH¢160,834,493.19 since it was granted on April 10, 2013.

“If SIC was going to pay over GH¢160 million and the court has asked it to pay only GH¢19.3 million within 21 days, they will just even have to borrow money and pay.

“So if SIC pays the GH¢19.3 million, whatever money we get from ITAL’s accounts, we will just have to add it to it. If we could get up to the outstanding amount, we will use it. For now, interest will keep building up or be calculated until date of final payment,” a source close to the case explained to the B&FT.

It is, however, understood that in an event SIC loses the fraud case it has filed against the other parties, the company could be liable to pay the outstanding amount indebted to Ivory Finance.

However, the other seven insurance companies that provided cover for what the facultative reinsurance closing slip (final agreement) suggest was a request for an advance mobilisation through a facultative reinsurance scheme- a form of reinsurance where the main insurer decides what level of risk it should maintain on any one policy, and offers to share the remaining risk with another insurer(s) for a premium- say they are not liable to any claims whatsoever on the credit guarantee bond in dispute.

They explained to the B&FT that SIC misled them into believing that the credit guarantee bond was an advance mobilization and that even the GH¢350,000 premium that they had to benefit, was paid to them in December last year, with some even receiving their share in January this year- months after claims had been made on the facility.

According to the insurance companies, the advance mobilization cover they provided was only for six months, a period within which no claim was made, hence the position that they are not liable to the claims being made now.

ITAL -- a wholly-owned indigenous real estate company -- secured a US$200million government of Ghana contract to provide 4,120 affordable housing units in all the 10 regions of the country to enable public servants to acquire housing accommodation.

The housing project follows an Export Credit Guarantee Department (ECGD) loan agreement between the government of Ghana, Barclays Bank (as coordinating Mandated Lead Arranger) and the British Secretary of State for an amount of US$170million at a rate of 2.25% per annum, as well as a medium-term loan facility from CAL Bank Limited and other local banks of US$30million as co-financing for the buildings’ design and construction.

Each public servant is to pay at least US$37,793 per housing unit, a figure the Ministry of Works and Housing said informed the government to choose ITAL as the most price-competitive bidder to execute the project.

ITAL on securing the contract contacted Ivory Finance, which in turn asked for a credit guarantee bond from an insurance company before it would advance the credit facility to the developer to execute the design and full construction of two and three bedroom apartments.

So ITAL approached SIC Insurance for the credit guarantee bond, which was granted and issued on the 28th of March, 2013 for a period of six months.

Subsequently, on 10th April, 2013, ITAL and Ivory Finance reached a credit facility agreement with provisions that would yield incremental penalty charges should ITAL default.

The agreement reached indicates that the credit facility attracted an interest of 5.5% per month on the said sum and a penal interest of 8% per month on the outstanding amount till date of final payment.