Finance Minister Omar Davies made clear yesterday that there would be no Government financial bail-out of the bankrupt Dyoll Insurance Company, saying that any state intervention would be limited to the regulatory obligations of the Financial Services Commission (FSC).

Davies’ stark warning to investors and policyholders of Dyoll came as GraceKennedy prepared to acquire Dyoll’s Jamaican portfolio after the collapse of an initial joint effort by Grace and Michael Lee Chin’s AIC Group to mount a rescue effort for the insurer.

The agreement covers policies without claims, but precisely what this meant for Jamaicans was not immediately clear.

The GraceKennedy deal was announced last night by the FSC, meaning that Dyoll’s big portfolio of clients in the Cayman Islands, where a hurricane last year brought down the company, will likely have to scramble for what is left for creditors in a wind-up of the company.

“There will be no bail-out by the Government of Dyoll,” Davies told the Observer.

In other words, the Government would not repeat what it did in the second half of the 1990s during the melt-down of the financial sector when it went into banks and insurance companies to prop-up savers and policyholders.

For that intervention, which eventually cost taxpayers more than $140 billion, the Government used a vehicle, the Financial Sector Adjustment Company (Finsac).

“There will be no Finsac 2,” Davies said.

The FSC sent a temporary manager into Dyoll on Monday after it became clear that its capital impairment was far deeper than had been previously thought and that there were no white knights waiting to inject globs of new capital into the insurer and its parent firm, Dyoll Group.

The FSC said that it was misled about the depth of the problem and the Dyoll Group board claimed that it was misled by the insurance company’s executive management.

Dyoll was among the firms that nearly went belly up in the 1990s financial sector turmoil and was shored-up by Finsac.

The group, however, made a dramatic recovery, paying off its Finsac obligations ahead of time and up to last September was showing shareholders equity of over $1 billion.

But September was when Hurricane Ivan cut a cruel swath across the Caribbean, doing severe damage in the Cayman Islands where more than 60 per cent of Dyoll’s clients were estimated to have filed claims.

The claims were far higher than the risk ratio that actuaries normally project for the Cayman Islands and well above the cap reinsurers place on a country for a single disaster, insurance officials said.

The upshot was that Dyoll, on its Cayman Islands claims, faced a a substantial gap between its reinsurance coverage and the demands being made on the company.

Yesterday, sources close to the Dyoll issue were insisting that the shortfall was closer to the US$30-million (J$1.8-billion) originally suggested by some analysts than the US$100-million (J$6.2-billion) that emerged this week.

“The estimate that I have heard is between US$25 million and US$27 million,” said one source.

Last night, the FSC said that it had accepted the recommendation from Kenneth Tomlinson, the temporary manager, that it go along with an offer from GraceKennedy for the purchase of Dyoll’s insurance portfolio in Jamaica.

GraceKennedy is using its insurance subsidiary, Jamaica International Insurance Company (JIIC), for the deal.

“This covers policyholders without claims whose policies will be transferred to JIIC upon completion of this agreement and the required regulatory procedures,” said a statement issued by the FSC on behalf of the parties.

Tomlinson was quoted as saying that the contracts “should be finalised early next week”.

Don Wehby, GraceKennedy’s chief financial officer, said that JIIC was prepared to retain all existing Dyoll insurance staff for up to six months “under fixed-term contracts”.

Earlier, Wehby had said that GraceKennedy had hoped to buy Dyoll as a going business but had changed its position after completing its due diligence, including extensive reviews of the Cayman Island situation.

“The exposure was too much for my comfort,” Wehby said. “I couldn’t recommend it to my board.”