Dyoll Insurance company is to be liquidated by the Financial Services Commission (FSC), the regulatory agency yesterday declaring it to be the best option for the claimants on the company that collapsed earlier this year after customers in Cayman suffered billions of dollars in damage from Hurricane Ivan in September.

The liquidation route would allow Jamaicans and Caymanians who have unsettled claims against Dyoll to recover some money, but given the state of the company, they will face a combined shortfall of $1.1 billion.

Kenneth Tomlinson, the forensic auditor whom the FSC sent into the failed insurer on March 7, recommended to the agency that the company be liquidated, but cautioned that the insurer had an asset deficiency of $1.1 billion.

“At this point, liquidation is the best option,” said the FSC’s executive director Brian Wynter in yesterday’s press statement.

Dyoll’s Jamaican portfolio that had no claims up to the time the company collapsed was already taken over by GraceKennedy’s subsidiary, Jamaica International Insurance Company, so the latest development will not affect them.

But customers, including most of the 4,000 in Cayman who were affected either by the hurricane, or others who suffered by some other event (like motor vehicle accidents), will be able, through the liquidation process, to recover a portion of their claim. How much is recoverable is not immediately clear.

Yesterday, Wynter sought to further explain the series of events that will precede the actual liquidation.

“The temporary manager will seek to terminate active policies before liquidation because they [policyholders] don’t have any insurance cover with Dyoll, that is, if they make a claim, Dyoll can’t pay,” he told the Observer.

Part of the asset that Dyoll will be able to use towards settling some of the outstanding claims is a deposit of $500 million that Wynter said the company now held in various institutions.

The liquidator will apparently apply a standard formula to determine what percentage of a claim from a Dyoll customer will be met.

“No one can be paid ahead of anybody else, there are rules that have to be followed when a company is winding up,” explained Wynter. “The liquidator will look at all debts and assets owned by the company and determine how much can be paid to claimants.”

As at March 14, there were approximately 4,000 active policies in the Dyoll Cayman portfolio. Most of the tens of thousands in Jamaica were taken over by Jamaica International.

It was, however, claims from many of the customers in Cayman that triggered the crisis at Dyoll, with the severity of the catastrophe and the volume of claim far exceeding the re-insurance cover that Dyoll had in place for its liabilities in the tiny island.

In fact, in what appears to be a move at pre-empting the Dyoll assets, the Caymanian authorities placed Dyoll in provisional liquidation on Monday. Wynter said yesterday that this move could disrupt the liquidation process in Jamaica.

“I was made aware of that [the suit], I got a letter from Cayman,” he said. “It appears to be a pre-emptive manoeuvre by some claimants in Cayman that would be disruptive to the process of temporary management under the FSC act and the step to liquidation… you can’t have two different liquidators. We [FSC] are taking legal advice on the matter.”

Most of Dyoll’s assets that the Caymanians would be seeking to grab are in Jamaica.