Ceylinco says Insurance Board approval received for segregation model
Monday, 12 January 2015 01:16
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Ceylinco Insurance Plc (CINS) on Friday said that the model selected for segregation of general and life business has been approved by the regulator IBSL after review by an independent actuary appointed for same.
The CINS made this disclosure via a filing to the Colombo Stock Exchange to give its version after the company alleged that a notice placed by a shareholder has misled other shareholders, customers and general public.
In its fling to the CSE, the CINS also stated the following. Section 53 of the Regulation of Insurance Industry (amended) Act NO 3 of 2011 requires composite insurance companies who are engaged in carrying on both long-term insurance and general insurance business to segregate into two separate companies on or before 11 February 2015.
The Insurance Board of Sri Lanka after having a dialogue with the members of the Insurance Association of Sri Lanka have issued guidelines to the members on the said segregation on 30 August 2013.
The said guidelines required every composite insurance company like the CINS to identify an appropriate model to segregate the two classes of business and submit a proposal to the IBSL.
We have selected the most suitable model after considering various factors including the present solvency regulations and the proposed risk-based capital requirement for both businesses, operational cost structures, etc.
Under the present solvency rules the investment by one company in a subsidiary (insurance or otherwise) is not admissible, and the proposed risk based capital rules will carry a risk charge of 45% for such investments.
The ultimate objective of the proposed model is to create value to the shareholders by segregating the respective businesses to independent fully-owned subsidiaries.
We have given due consideration for the changing regulatory framework such as risk-based capital model, gross premium valuation for life businesses, etc. in selecting the proposed model.
The model so selected was communicated to the IBSL and ISBL approved the same after review by the independent actuary appointed by the regulator for the purpose.
Accordingly the following two 100% owned subsidiaries were incorporated to carry out the Long-Term and General insurance operations after the segregation. 1 Ceylinco Life Insurance Ltd., of No 106, Havelock Road, Colombo 05, and 2 Ceylinco General Insurance Ltd., of ‘Ceylinco House’ 3rd Floor, No. 69, Janadhipathi Mawatha, Colombo 1.
Further the Regulation of Insurance Industry Act requires all insurance companies to be listed in the Colombo Stock Exchange by February 2016 and at the time of such listing we will ensure the maintenance of the minimum public float.
When appointing directors to the new company, we have obtained the approval from IBSL for all the nominees and also we have complied with the requirement of the Regulation of the Insurance Industry Act (as amended by the Act NO 3 of 2011) with regard to the employee directors.
Section 102 of the Regulation of the Insurance Industry Act (as amended by the Act No. 3 of 2011) requires the approval of the District Court for such transfer of businesses which has been contemplated under and in terms of section 53 of Act No. 2011.
In terms of Section 102 of the Regulation Insurance Industry Act (as amended by the Act No. 3 of 2011) the company is required to submit to the District Court a copy of such approval of the IBSL’s observations in relation to such a transfer of insurance business.
The company informed the IBSL on 26 August 2014 and requested the IBSL’s observations in terms of the said Section 102 and the IBSL has furnished those observations.
Accordingly the IBSL has stated in their letter that “IBSL has no objection for the transfer of Long-Term and General Insurance Businesses from the Ceylinco Insurance Plc to the Ceylinco Life Insurance Ltd. and Ceylinco General Insurance Ltd. respectively” subject to the conditions set out in its observations.
The Company Ceylinco Life Insurance Ltd., and Ceylinco General Insurance Ltd., will comply with the said conditions set out in the said observations made by the said IBSL.
The investments made by the company in other sectors such as Education, Power Generation, etc. and the investments in overseas insurance subsidiary and associates will remain in the holding company. Accordingly, the present insurance company will thus be operated as an investment holding company.
The company made an application to the District Court of Colombo in terms of Section 102 of the Regulation of Insurance Industry Act in case no DSP/223/2014 and the District Court of Colombo has given its approval to such transfer in terms of Section 012 of the said regulation and subsequently a shareholder namely Brindley Vishantha Hettithanthrige has intervened and filed an objection to the said approval and the matter is now before courts.
