News
Proposed insurance supervisory framework disrupted
A World Bank (WB) funded initiative to introduce an insurance supervisory framework beneficial to Sri Lankan policyholders is in danger of being derailed owing to a dispute between its Dutch consultant and the industry regulator, official sources said.
The Netherlands-based insurance expert has complained to the Finance Ministry Secretary and the Presidential Secretary that he does not believe the implementation of a risk-based supervision system (RBS) for insurance in Sri Lanka will happen under the purview of certain senior officials in the Insurance Regulatory Commission of Sri Lanka (IRCSL).
In 2017, Sri Lanka signed up for a five-year WB loan of US$ 75mn for a Financial Sector Modernisation Project (FSMP). Two years later, it was announced that part of it, US$ 400,000, will be for the IRCSL to hire a consultant to help strengthen legal, regulatory and supervisory frameworks.
The adviser would also produce recommendations to introduce an RBS, which is a system that requires supervisors to review the manner in which insurance companies identify and control risks. This is not typically popular among insurers as it requires a separate accounting system to what they normally use.
The IRCSL advertised and hired a Dutch actuary – a professional who deals with the measurement and management of risk and uncertainty – named Teus Mourik on a two-year contract starting September 2020.
But according to a letter written by Mr Mourik to the Finance Ministry and the President’s Office last month, at least two senior IRCSL members “do not want RBS for insurance in Sri Lanka” because, among other things, the insurance industry “does not want to be told by the IRCSL to do proper risk management in the interest of policyholders”.
In total, two complaints were sent by Mr Mourik to Finance Ministry Secretary S R Attygalle and President’s Secretary Gamini Senerath. The Sunday Times was shown these letters by Government sources. The second letter even alleges that, since the two senior IRCSL employees “do not want RBS”, “they have developed a strategy to make the project, at least the RBS part of it, fail”.
Mr Mourik provides several examples – some of them technical – in an effort to substantiate his claims against the IRCSL management. He also alleges that his invoices have not been settled despite him having delivered on key components of his contract. The Sri Lankan people are paying for the loan, he says. But he has ended up supporting part of the costs as his full fee has not been settled.
It was a policy decision to introduce RBS to the insurance industry. But, while he was hired to teach the IRCSL about this system, Mr Mourik has been confronted with “a deliberate strategy to mislead the government, the WB, the policyholders, the general public and me”. “They simply do not want RBS for insurance in Sri Lanka,” he writes.
IRCSL Director-General Damayanthi Fernando, confirmed to the Sunday Times that Mourik was hired through a Cabinet-appointed procurement committee.
“We assigned him specific tasks to perform and he was required to be based in Sri Lanka to carry out the tasks assigned to him under the agreement entered into by the IRCSL and the consultant,” she said, in response to email queries. “However, due to Covid-19 he was not able to come, and alternate arrangements have been made for him to carry out and continue the work, which is yet in progress.”
“The IRCSL has sought further clarifications to initiate the implementation of his recommendations,” she maintained. “However, some recommendations have been already implemented. Feedback on his reports was also given to him.” (Mr Mourik’s letter claims there was “no interest” shown on RBS issues or reports, only in non-RBS matters).
“As for Risk Based Supervision (RBS), we are practising it and planning to further improve the supervisory regime in line with best practices,” Ms Fernando said.
“The consultant has given his recommendations on reforms to the Risk Based Capital (RBC) framework introduced in 2015 and we are awaiting papers from him to start discussing the reforms which would require impact studies to be performed, parallel runs to be carried out, etc, prior to implementation,” she maintained. “Please also note that the IRCSL at no stage has opposed any reform which would protect policyholder interests.”
The best way to say that you found the home of your dreams is by finding it on Hitad.lk. We have listings for apartments for sale or rent in Sri Lanka, no matter what locale you're looking for! Whether you live in Colombo, Galle, Kandy, Matara, Jaffna and more - we've got them all!