UNP raises audit query over SLIC reinsurance deal in Parliament

Thursday, 25 October 2012 00:36 -     - {{hitsCtrl.values.hits}}

By Ashwin Hemmathagama Our Lobby Correspondent

A reinsurer with limited recognition has foxed Sri Lanka Insurance Corporation Ltd. for Rs. 92 million in FY2009/10 and Rs. 116.85 million in FY 2010/11, revealed UNP MP Lakshman Kiriella in Parliament yesterday.

Highlighting this controversial reinsurance agreement between SLIC and Trans Asia Management Advisors FZC, Kiriella said: “SLIC is one of the few State institutions running at a profit in this country. The transaction had taken place in a situation where the name of this suspicious company had been made public in the website in 2006, which shows the poor management performance. In the absence of legal provisioning, the Auditor General is unable to take matters forward, although this has been emphasised in the interim COPE report published this week."

"The Insurance Board of Sri Lanka (IBSL) is also unable to investigate this controversial activity," MP Kiriella said during the debate on regulations introduced in Gazette Extraordinary No.1746/4 to streamline the insurance industry.

Joining the debate, UNP MP Dr. Harsha de Silva challenged the Government to identify Suresh Balakrishnan as a Director of this bogus company, Trans Asia Management Advisors FZC, and take legal action to recover the monies paid. He also spoke about discreet plans made by the Government to privatise SLIC with an IPO in three years.

RAM Ratings Lanka this week in reaffirming SLIC’s ratings at AAA/P1 said state giant’s capitalisation is strong, with its ratio on shareholders’ funds to total assets and the ratio on shareholders’ funds to total insurance funds comparing favourably to most peers’. The company’s solvency margins also remained well above those of its peers in both its general and life divisions.

In Parliament Minister of International Monetary Co-operation Dr. Sarath Amunugama, moving the new regulations made by President under paragraph (d) of subsection 91) of section 13, section 614, and section 112 of the Regulation of Insurance Industry Act No. 43 of 2000, read with paragraph (2) of Article 44 of the Constitution, said: “When IBSL was established in 2001 each insurance company had to pay Rs. 250,000, which was collected to cover the administration costs. The new regulations will increase this fee to Rs. 500,000. Apart from that, an insurer will have to pay an annual fee of Rs. 100,000 for each class of insurance business for the first year in operation. After the commencement of the second calendar year in operation, an insurer has to pay a sum of Rs. 200,000 in respect of each class of insurance business or 0.075% of the gross written premium of each class of insurance business of the preceding financial year, whichever amount is higher.”

According to Minister Amunugama, increased fees will not have a serious impact on the insurers, who benefit from the current economic development in the country.

“IBSL Chairperson Indrani Sugathadasa has stated in a report that Sri Lanka experienced positive economic growth, which was 8.3%, following the eight% growth in 2010. Coinciding with this growth of the economy, the insurance industry witnessed a significant improvement in 2011. Overall Gross Written Premium income for long-term insurance business and General insurance business was Rs. 78,512 million, reflecting a growth of 18.5% compared to the same period last year. There are 22 registered insurance companies. However, only 21 companies are in operation, out of which three companies engage in long-term insurance, six in General insurance and 12 companies in composite insurance in 2011. In the same year taking the total number of companies to 23 two new companies – Orient Insurance Ltd. and Arpico Insurance Ltd. – were granted licenses,” said Minister Dr. Amunugama, justifying the insurance industry growth.