IBSL exemption of SLIC in separating life and general units irks industry
The Insurance Association of Sri Lanka (IASL) has recently written to the Insurance Board of Sri Lanka (IBSL) raising concerns on providing exemptions to Sri Lanka Insurance Corporation (SLIC) from being segregated (broken up) while others are compelled to do so, IASL officials said.
The IASL letter has been referred by the insurance regulator to the Ministry of Finance, according to IBSL officials.
“The insurance industry has discussed this and except for SLIC all members are of the view that the law should apply equally to all. It appears that those companies which have complied with the law are being punished for compliance and that others which have not complied with the law are not penalized in any way,” an official told the Business Times. The IASL has acknowledged the letter to IBSL saying this matter has been referred to the Ministry.
Last year the former Secretary to the Treasury, Dr. P.B. Jayasundera gave an undertaking in a letter to the SLIC trade unions that the SLIC isn’t required to segregate the Life and General Insurance businesses and also that they need not list on the Colombo Stock Exchange (CSE) – both rules that had to be followed by all other private insurance companies.
The Regulation of Insurance Industry (Amendment) Act, No.03 of 2011 requires an existing insurer to be listed on the CSE. Companies were asked to segregate their business into two separate companies prior to obtaining a mandatory public listing to promote greater transparency and encourage better governance.
The timeline to segregate was February this year, which some firms couldn’t adhere to (according to IBSL) due to external factors and issues that were beyond their control. “But the process is ongoing,” an IBSL official said, adding that two firms are yet to complete the segregation. He added that these firms – Sanasa Insurance and LOLC Insurance – are nearing the completion of segregating.
The IASL letter urged the IBSL to spell out the measures that they would take in the event of non-compliance by individual companies. The letter reiterates that the IASL is extremely concerned that the concept of a level playing field is not being upheld and “that in the best interests of the public and the industry as a whole, that this matter be dealt with as a matter of utmost urgency”.
The insurance industry comprises more than 20 companies of which 12 companies engage in composite insurance (Life and Non Life), and six transact only Non- Life. Despite the presence of so many entities, the penetration of life insurance still stands at a mere 12.1 per cent of the population, and 29.1 per cent of the working population.