Insurance regulator investigating Asian Alliance

Asian Alliance Insurance Company (AAIC), a subsidiary of Asia Capital, is to be asked to submit to a special audit by the Insurance Board of Sri Lanka (IBSL) for violating its rules.

This is the first time the IBSL is ordering an audit on a local insurance firm, a decision that is to be conveyed to the company in a few days time, an industry source said.

The source said that IBSL wrote to AAIC last month asking why it shouldn’t be audited under the IBSL Act after the regulator started investigating AAIC. In April this year the regulator was informed that the company does not comply with section 25 and section 30 of the Regulation of Insurance Industry Act (RII Act) No. 43 of 2000.

“The company has violated general provisions relating to reserve and fund being maintained by an insurer, which is specified under Section 25 of the RII,” the source said.

This section states that not less than 30 percent of the assets of the life insurance funds shall be in the form of government securities. It says that the balance assets shall be maintained in the form of other investments to be determined by the IBSL. The source said the IBSL is looking into the investments of AAIC. “The law says that not less than 20 percent of the general funds and 30 percent of the life funds should be invested in government securities,” he said, adding that the company’s investments in bank securities and bonds are to be investigated.

The source said Section 30 stipulates that the assets of insurer should be kept in the name of the insurer, but AAIC has also not complied with this rule.

Ramal Jasinghe, CEO AAIC vehemently denied the allegations. When asked whether IBSL is investigating AAIC, he said, “That is not correct. The returns that we send to IBSL have routine queries. There is no issue at all.” He said IBSL contacted the company for routine checks about three months ago.

The source said that IBSL is exercising its power under the RII Act where it says that where IBSL has reason to believe that the interests of the policy holders of an insurer are in danger or that any of the provisions, it may after giving the insurer reasonable notice and an opportunity of being heard, order an investigation of the affairs of the insurer. “IBSL has got strong evidence that the company has not complied with RRI Act rules and they (IBSL) will appoint an auditor this month,” the source said.

This investigation can be made by an auditor or an actuary or by both on behalf of IBSL and under the rules the cost of such an investigation must be borne by the company being probed.

When IBSL wrote to AAIC asking why they should not be investigated, the company had replied saying there is no need for an audit because all the relevant documentation has been sent to the regulator.

When asked about IBSL trying to appoint auditors, Jasinghe said that it is common to the entire industry. “Appointing auditors is done across the board for all the insurance firms,” he said. “We have been compliant and are above board,” he said.

IBSL Director General, Lasinee Seresinhe could not be reached for comment.