The insurance industry is raising concerns over the hastiness in the Insurance Board of Sri Lanka (IBSL) temporarily suspending the country's third largest insurer, Janashakthi Insurance on solvency issues.
"It appears unreasonable to not grant sufficient notice to Janashakthi to rectify whatever the issues they faced," an industry analyst, who did not wish to be named, told The Sunday Times FT.
He said there will be a long-term impact on the company’s goodwill with such a move.
IBSL informed the Colombo Stock Exchange on Tuesday regarding the 3-week suspension in Janashakthi’s long term insurance business and general insurance business with regard to new policies. The announcement said that until the IBSL informs otherwise, the suspension remains unchanged till June 2.
IBSL Chairman Udaya Sri Kariyawasam refuted the allegations saying warning an insurance company beforehand in this instance is not a requirement. "There is no such provision in the Act to give a warning. Such a clause is specified only in the case of insurance brokers," he told The Sunday Times FT.
In response, Janashakthi said it is in the process of appealing against this sudden and unexpected imposition of a very severe penalty. “The suspension has been imposed due to a non-compliance with the Solvency Ratio, due in turn to the IBSL, not accepting certain specific assets as admissible even though these same assets had been previously accepted as being admissible for solvency since 2006 upto date. The company will continue to honour all claims that may arise during this period and appeals to all shareholders, customers and the general public to continue to have confidence in the Company despite this sudden imposition of a suspension,” the company said.
The Regulation of Insurance Industry Act has a list assets that could be used for solvency calculations of insurance firms.
While the Act specifies 11 possible reasons for suspension of registration, IBSL has not mentioned the reason for the suspension in this particular instance.
Mr. Kariyawasam declined to comment on the reasons why Janashakthi’s business was suspended.
“Solvency is the acid test for the insurance firms and solvency margins and the definitions of admissible assets were Gazetted by the IBSL in 2004. The Gazette articulates very clearly the definition with regard to the solvency margin and the assets that can be considered as admissible,” another industry analyst said. |
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