Ceylinco institutes legal action against AAIB

• Says Agriculture and Agrarian Insurance Board failed to heed directive given to halt issuing insurance policies outside its mandate

As the directive given by the Insurance Regulatory Commission has not been heeded by the Agriculture and Agrarian Insurance Board, Ceylinco General Insurance Ltd., has taken the lead to challenge AAIB for issuance of insurance covers to the public for motor vehicles and other insurance covers not related to agricultural activities.

The company said in a statement yesterday that earlier, the Insurance Association of Sri Lanka made representations to the Insurance Regulatory Commission of Sri Lanka (IRCSL) on this matter, resulting in the latter advising AAIB against its practice but the inaction of AAIB has resulted in a legal battle.    

Ceylinco General Insurance Ltd., in the petition filed in the Court of Appeal, alleged that AAIB is issuing insurance covers to the general public, violating the provisions of the Agricultural and Agrarian Services Act.  AAIB is empowered to issue insurance covers only to the agriculturists as defined in section 7 of the Act.   

Ceylinco General Insurance has also alleged that AAIB is not a regulated body that comes under the purview of the Insurance Regulatory Commission and as such the public is exposed to risks of having their claims denied by AAIB. Further, AAIB does not have any reinsurance on the policies issued by them. 

Therefore, Ceylinco General Insurance has sought interim orders preventing AAIB issuing motor and health insurance covers which exposes the general public to undue risks, as AAIB is engaged in unfair trade practice. As final relief, Ceylinco General Insurance Ltd. has prayed for writ of prohibition and writ of mandamus, preventing AAIB engaging in illegal issuance of policies and limiting the issuance of policies in terms of the said act.   

After hearing the application, the Court of Appeal has issued notice to AAIB and its Board members to appear in Court on 2 September.