Life insurance policyholders of the defunct Bermuda branch of the British American Insurance Company will get back a maximum of 50 cents on the dollar of the value of their policies, the liquidator’s agents have revealed.The level of payouts depends partly on how much will be raised from selling the British American building on Front Street, which is up for sale with an asking price of $3.6 million. The building is 40 percent owned by BAICO and 60 percent owned by the BAICO Bermuda pension scheme.Tomorrow the Supreme Court of Bermuda will consider the scheme of arrangement - the document which proposes a plan on how the 6,000 existing policies can be settled with the 3,800 policyholders.If the court approves it, and if creditors vote in favour of the plan at the scheme meeting on May 19, cheques could start being sent out as soon as August.The team from KPMG Advisory Ltd, appointed by the Official Receiver to oversee the BAICO liquidation, said calculations of payments were based on actuarial valuations of the policies carried out over the past year.“People will have the ability to challenge our valuations through a scheme adjudicator,” said Mike Morrisson, of the KPMG team.Mr Morrisson described some of the complexities involved in bringing the British American saga to the brink of closure, after a challenging 20 months. The branch went into receivership in August 2009.The first efforts had been directed at ensuring health insurance clients had continuing cover, something that had been achieved through the formation of a liquidity bridging facility by Government, before Argus took on the clients.A similar solution had been sought for the life insurance policies, some of which had been in force for decades. But despite exhaustive efforts, there were no takers among local insurance companies.While these efforts were under way, policyholders were advised to continue to pay their monthly premiums to ensure their policies remained in force in case a transfer to another insurer was possible, with the promise that the premiums would be fully refunded if no alternative carrier was found.Premiums from that one-year period totalled around $2.5 million and refund cheques were cut late last year. Remarkably, many of those entitled to that money have not dropped in at the British American office to pick it up. Mr Morrisson said that, as of February 11, 277 people had yet to either pick up or bank cheques worth a combined $220,000.Finding no alternative carrier for the policies meant that liquidation was inevitable. One challenge was that the Bermuda operation was a branch of its parent company in the Bahamas.Had all the assets from Bermuda been sucked back to the Caribbean, things would have been considerably worse for Bermuda policyholders.The reason they were not is that regulator the Bermuda Monetary Authority had acted years before to ensure that funds relating to policies in Bermuda were “pledged assets” and were effectively ring-fenced.The cash and the stake in the building were not protected in this way so the liquidators had to negotiate a deal with the Judicial Manager appointed to oversee the Bahamian part of the company. The deal they struck allowed the funds to be kept in Bermuda and added to the “pot” to repay creditors.BAICO’s assets in Bermuda, including the stake in the building, are approximately $11 million and its liabilities are $21 million.If the Supreme Court sanctions the scheme of arrangement tomorrow, copies of the document will be printed and mailed out to policyholders around April 15.Mr Morrisson said the creditors’ meeting, provisionally scheduled for May 19, would be held in the Ruth Seaton James Centre for the Performing Arts, at CedarBridge Academy.For the scheme of arrangement to be passed it will require a 75 percent sample of the 3,800 policyholders to vote, and a straight majority of voters in favour of the plan.If the scheme adjudicator is faced with a large number of disputed claims, payments may be delayed until those issues are resolved.If the building is not sold until later in the year, a second separate dividend may have to be paid out following the sale.Queries should be addressed to infoba[AT]kpmg.bm or by calling the hotline at 294-2651. Information updates will be posted on the Internet at www.kpmg.bm/ba