Major national reinsurance covers not renewed

Major national insurance procurement programs have lapsed as at 31 December 2017 and have not been extended after their expiry due to irresponsible behaviour and an attempt to award tenders to illegitimate overseas companies, insurance industry sources claim. 

They say that these illegal awards are at unbelievably excessive premiums compared to the renewal terms offered by the incumbent leader and panel of underwriters. 

These awards, at the written request to the incumbent Strategic Insurance Broker by the vigilant line ministry, also appreciate the representations made with regard to the alleged fraud and corruption, are under appeal at the Presidential Appeals Board (PAB), Cabinet Approval Procurement Committee (CAPC) and the Ministerial Procurement Committees (MPC) against the intent to award to the overseas companies operating illegitimately.

The National Procurement guidelines rightfully provide that awards cannot be made pending the appeal and it is very appropriate in instances  like this where it is alleged that procurement guidelines are blatantly violated with the intent to award at exorbitantly higher premiums, compared to the best bids.     

However, it is learnt that the State-controlled entity National Insurance Trust Fund (NITF) has, with the approval of CAPC/MPC and cabinet approval for the 2017 reinsurance programs, an automatic one-month plus extension from 31 December 2017 on a prorated basis with the incumbent panel of reinsurers who in turn have already agreed to renew. 

They say that surprisingly for mala fide reasons, that option, which is with a much cheaper premium, has not been exercised for the lapsed policies under consideration, exposing the avoidable massive risk for the industry, people and the country at large for the uninsured period. 

It is important to note that in April 2017 too such a non-extension due to what can only be seen as sheer irresponsibility and male fide intent of the officials at the fund, affected the much applauded worldwide National Natural Disaster Insurance Scheme (NNDIS), which lapsed and was not extended in similar circumstances. 

The industry sources alleged that NITF was entertaining options from overseas illegitimate brokers as they are doing now. This led to a situation of no reinsurance cover for the uninsured and the thousands of marginalised poor when the unfortunate floods devastated the country for a second year in a row during 22 May 2017. Eventually the taxpayer had to foot the hefty bill in billions of flood damage, depriving the poor and marginalised, who would have been entitled to and were deprived of much more deserving higher claims and benefits. 

“The much-deserved credit for the Yahapalanaya Government that introduced this novel insurance scheme too was tarnished,” the sources said.

They went on to state that overseas companies were acting and holding themselves out as insurance brokers, when they are clearly not authorised to do so. These companies are not registered insurance and reinsurance brokers in Sri Lanka, as required by the Regulation of the Insurance Industry Act No. 43 of 2000, industry sources said.

The said companies are not located in Sri Lanka nor have they the required licence from the Insurance Regulatory Commission of Sri Lanka. All institutions seeking insurance broking services and covers should check their registration with the IRCSL and other regulatory bodies as required by law. 

Industry sources say that what is quite clearly against the law is untenable, and that any lax enforcement in this regard would be detrimental to the industry and have serious repercussions. They say this would open the floodgates for many industry standards to be flouted, leading to an unregulated industry, which will in turn lead to fraudulent practice, corruption and chaos as is demonstrated and becoming evident in this instance. 

Meanwhile the IRCSL makes clear that there are mandatory requirements including adequate capital, ethical and competence officers to register as an insurance broker and failure to comply and furnish the required information and documents for registration as a broker results in refusal of registration.

 They also note that companies that fail to register are prohibited from acting or holding themselves out as insurance brokers and the names of such companies will not be on the list of approved brokers.