Strategic Insurance Brokers awarded major National reinsurance with PAB thumbs up

The Presidential Appeals Board (PAB) on procurements made recommendations to award the retrocession program to cover 30% compulsory reinsurance cession for the period from 1 January to 31 December to strategic insurance brokers, overturning the earlier decision by the Cabinet Approved Procurement Committee (CAPC). 

This award was conveyed to the Cabinet, which has approved the recommendation by the PAB and sent word on the award of the tender to Strategic Insurance Brokers (SIB), to the National Insurance Trust Fund (NITF), the procurement entity.

This decision of the PAB comes close on the heels of the District Court of Colombo making interim injunction that the overseas illegitimate company which was presented with an intent to award on the above program by the NITF is not entitled to and cannot hold themselves out as an insurance broker or function as a reinsurance broker in Sri Lanka. This order was made subsequent to an initial enjoining order issued earlier this year.

The PAB decision establishes incontrovertibly that Strategic Insurance Brokers’ bid for the above retrocession program was the best, the most competitive and the most responsive bid. The PAB overturned the decision of the CAPC affirming SIB’s position that the recent decision not to make the award in the program to SIB was arbitrary, capricious, and tantamount to constructive fraud and corruption.

Strategic Insurance Brokers has offered the best premiums and the most responsive bids for national programs over several years and on the last two occasions with regard to this retrocession program that covers all catastrophic and all risks of all insurance companies in Sri Lanka, and is the incumbent broker.

Among other things SIB offered the best terms given by the best panel of reinsurance companies in the international market. The cover among other things indemnifies against natural calamities which is a very important national issue since the 2004 tsunami and 2016 flood calamities, etc.

The successful company SIB’s Reinsurance Business is ably supported by a majority of the world’s leading underwriters and International brokers including Brokers at Lloyds, thus demonstrating a greater success in all the business placed by them in Sri Lanka. More importantly and significantly, in all the tenders of the NITF, for instance, their bids contained the best terms and were the most competitive. This is mainly due to the skills and due diligence practiced by them, along with carefully selected international partners and leading brokers in their respective regions.

The CAPC was wrongly misinformed and disregarded the fact that Strategic Insurance Brokers offered the most responsive bid and that the intent to offer was to an overseas company, not even a registered broker accredited with the Insurance Regulatory Commission of Sri Lanka. Colombo District Court Judge Sujeewa Nishanka issued an interim injunction essentially forbidding any foreign company that is not registered as a company, or as insurance broker, from offering any insurance related services in the country. The complainant in this case, Strategic Insurance Brokers (SIB) sought the order against an overseas company J B Boda and Co from holding itself out as an insurance broker. 

Romesh de Silva, PC and Chanaka de Silva appearing for the complainant SIB, in submissions before court stated that the defendant Company had been making bids for major tenders on insurance related matters. The plaint filed states that the defendant is being awarded tenders illegitimately by State statutory bodies such as the National Insurance Trust Fund. Meanwhile SIB Director Indrajith Fernando revealed that the national insurance procurement program had to be renewed as at 1 January and had not been extended after expiry, due to what can only be called irresponsible behaviour, and the male fide attempt by officials to award tenders to illegitimate overseas companies.  Though SIB as the incumbent leader had offered lower premiums with almost the same panel of underwriters, the intent for new awards were to be made at excessive exorbitant premiums to the overseas companies, he stated.

The line ministry, namely the Ministry of National Policies and Economic Affairs, vigilant to these unauthorised activities, had requested the local brokering company SIB Insurance Brokers to avail themselves of their right to appeal.

The National Procurement Guidelines exist for just such purposes to prevent companies being given awards pending appeal, with alleged fraud and corruption when tenders are granted at excessive premiums compared to the bids offered by the competition, Fernando added.

Industry sources added that if foreign companies are appointed to take up national reinsurance brokering assignments, it leads to corruption as amply demonstrated in this instant, as there is zero accountability regarding these companies’ operations, as the legislation with regard to insurance regulation suggests.

Section 79 of the Regulation of the Insurance Industry Act, No. 43 of 2000 (as amended) provides that;

“No person shall act or hold itself out as an insurance broker unless such person is a holder of a certificate of registration as a broker granted by the Board and is a member of an Association of Insurance Brokers approved by the Board.”

In Section114“broker” means the placing of insurance business for or on behalf of an insurer, for insurance or reinsurance, with an insurer or reinsurer.