Regulations of Insurance Industry (Amendment) Bill approved in P’ment

By Ashwin Hemmathagama

 – Our Lobby Correspondent

The ground-breaking changes proposed to develop the insurance industry received House approval yesterday. 

Acting Minister of Finance Eran Wickramaratne moved the regulations of the Insurance Industry (Amendment) Bill, introducing three key changes which proposed to change the name of the Insurance Board of Sri Lanka (IBSL) to suit its new profile, refine the listing of the insurance companies and to allow the insurance agents to receive their lost income.

Moving the second reading motion, Minister Wickramaratne explained the three areas of change. “The decision to change the name will enable the IBSL to start the governing process. So, instead of calling it the Insurance Board of Sri Lanka, it will be changed to the Insurance Regulatory Commission of Sri Lanka to show the actual purpose for which it has been set up,” he said.

According to the Minister, amendment No.3 of 2011 has made it mandatory to split the general and life business of companies and also listing it has created certain difficulties in the insurance industry. “Regulations on Insurance Industry Act No.43 of 2000 were amended by No.27 of 2007 and No.3 of 2011. These amendments made the general and life insurance two separate businesses. Adding more to it, the new companies were expected to go for listing. The Securities and Exchange Commission of Sri Lanka (SEC) has issued an order on this. However, practically all insurance companies did not go for a listing. A few companies obtained permission from the Ministry of Finance to refrain from listing. So, this amendment will exempt a few companies from this mandatory listing,” explained Minister.

Providing more flexibility to insurance companies to avoid listing, but to maintain accounting standards and good governance by the new Bill, the Minister said: “Nine insurance companies out of 26 are listed on the Colombo Stock Exchange (CSE). If a local insurance company is owned by a foreign international insurance company with over 85% stake in the local venture, and that the foreign insurance company is already quoted on an international stock exchange, which is acceptable to SEC, then we are able to release that company from the local listing.”

“In addition to that the local insurance company must have consolidated in the overseas company’s accounts. That is to ensure that it complies with all international regulations on accounting and stock exchange requirements are fulfilled. The National Insurance Trust Fund and the Sri Lanka Insurance Corporation have to be quoted according to the present law. But we are releasing it from this amendment as long as those companies are owned by the Government of Sri Lanka. So, the Government could choose to list those companies or not. A local insurance company if it was owned by a local company, which is already quoted on the stock exchange where we don’t want to make it compulsory for the insurance company to be separately listed. We will leave it to the particular group to make that decision. As long as the parent company is listed, we can assure good governance,” he added.

Providing for the income generation of the insurance agents who lost the opportunity to develop business in both areas – life as well as in general business - the Minister said: “Previously, both the life and general insurance were within the same company and the insurance agents were able to service both these types. But with the separation of the life and general, agents lost their income. So, the amendment will enable these agents to work for both life and general insurance companies and make an income,” added Minister Wickramaratne, who confirmed the new income tax act would come into effect from 1 April next year.