Five firms miss split deadline

Five firms miss split deadline

By Arthur Wamanan
Saturday, 04 April 2015


Five registered composite insurance companies in Sri Lanka are yet to segregate their long-term and general insurance business in line with the segregation requirement laid down in the Regulation of Insurance Industry (Amendment) Act No. 3 of 2011, despite a lapse of over a month after the stipulated deadline for companies to do so, the Insurance Board of Sri Lanka (IBSL) confirmed last week.

All insurance companies were required to segregate their long-term and general insurance arms as two different entities by February this year. However, the IBSL stated that only seven insurance companies had adhered to the requirement so far.

According to the IBSL, 29 insurance agencies have been registered in Sri Lanka as of now, out of which five companies are composite insurance companies. On January 1 this year, the IBSL granted new licenses to the seven new companies that were segregated. The companies include, AIA General Insurance Lanka Ltd., Amana Takaful Life Ltd., Asian Alliance General Insurance Ltd., Cooplife Insurance Ltd., HNB General Insurance Ltd., Janashakthi General Insurance Ltd., and Union Assurance General Ltd.

However, the segregation process of the remaining companies is being carried out without a revised deadline. Chairperson, IBSL, Indrani Sugathadasa told The Nation that a fresh deadline has not been stipulated but added that the segregation process was ongoing nevertheless. According to the IBSL, the delay in segregating is due to external factors and issues faced by the respective companies that were beyond their control.

Sugathadasa said that the IBSL was working closely with the remaining companies, namely Ceylinco Insurance PLC, LOLC Insurance Company Ltd., MBSL Insurance Company Ltd., Seemasahitha Sanasa Rakshana Samagama, and Sri Lanka Insurance Corporation Ltd.

All composite insurance companies registered in the country are required to segregate their long-term and general insurance businesses into two separate companies according to the provisions of the Regulation of Insurance Industry (Amendment) Act No. 03 of 2011. In doing so, companies will be required to comply with all relevant laws, including the requirements stated in the Companies Act No. 07 of 2007, according to rules set by the Insurance Board of Sri Lanka (IBSL).

Certain insurance companies had earlier stated that the segregation would shrink the asset base of these firms thereby discouraging firms to stay in the field. However, Sugathadasa stated all companies had agreed to segregate the businesses after deliberations and discussions with the consultancy group appointed for the process through which a set of segregation guidelines were drafted.

“The deadline for segregation was 11th February 2015. This company had during the year
under review, taken decisive steps regarding the process of segregation and we would have completed this process well before the due date had it not been for factors beyond the control of this company,” Ceylinco Insurance Plc Chairman J.G.P. Perera told shareholders at the release of the 2014 Annual Report.
Attempts to contact LOLC and Seemasahitha Sanasa Rakshana Samagama for comments on the delay proved futile.

Despite the impending split of composite insurers into life and non-life companies, Fitch Ratings says its outlook for the insurance sector in Sri Lanka is stable This is, based on the view that most insurers will maintain stable financial fundamentals in 2015, supported by moderate sector growth. Fitch views the split of composites positively due to greater transparency and policyholder protection it will promote but recognises that some insurers may face operational uncertainties. It adds that post-split ownership structures and capital will have a bearing on the credit profiles of the individual life and non-life companies