Legislation to split insurance companies (into separate entities handling general and life insurance) and to make mandatory the listing of insurance companies is to be passed in Parliament soon. This will further protect insurance policy holders and promote public confidence in insurance, Director General, Insurance Board of Sri Lanka (IBSL), Ms. Lasinee Seresinhe told the Island Financial Review. The amendments to the Regulation of Insurance Industry Act No.43 of 2000 (the Act) is expected to be ratified by Parliament this year and insurance companies will then have one year to get listed on the Colombo Stock Exchange. Six out of 15 insurance companies are already listed in the Colombo Stock Exchange. The insurance companies will get three years in which to separate the general and life insurance businesses into separate legal entities. "The insurance premiums collected for life and general insurance should be invested in assets as laid out by the Board and it is important for us to know the composition of these assets," Seresinhe said. "Life insurance is long term and therefore the assets are long term in nature while premiums collected from general insurance are invested in short term investments. "Most importantly, if a life insurer is experiencing difficulties to settle its claims, the IBSL, as the regulator, will have to know the exact composition of the investments that will match the long term liabilities so that life policy holders can be protected when it comes to settlements." IBSL also proposed the following regulations, which are imbedded in the amendment. Insurance companies will have to be rated by a recognised rating agency and published within a month. The ratings will indicate the financial strength and claim paying abilities of insurance companies. The Board will also expect insurance companies to increase their paid up share capital, which at present is Rs.100m for each class of insurance business, to Rs.250m by December 2008 and to Rs.500m by December 2010. In a step to further promote and consolidate the insurance industry in the country, IBSL is trying to move away from rules based supervision and is using a risk based supervisory system to regulate the industry. "We are focused on assessing the risks that the insurance companies face and how well management deals with them. To this end, IBSL will closely monitor the manner in which the board of directors and senior management are managing the risks their organisations may face," Seresinhe said. |
