Insurance red alert: Overseas fly-by-nights holding out as brokers illegitimately
Overseas companies are acting and holding themselves out as insurance brokers, when they are clearly not authorized to do so. These companies are not registered insurance and reinsurance brokers in Sri Lanka, as required by the Regulation of Insurance Industry Act No. 43 of 2000, industry sources said.
The said companies are not located in Sri Lanka or have the required licence from the Insurance Regulatory Commission of Sri Lanka (IRCSL). All institutions seeking insurance broking services and covers should check their registration with the IRCSL and other regulatory bodies as required by law.
“It is illegal and contrary to the express provisions of the Regulation of Insurance Industry Act No. 43 of 2000 to hold out and/or retain and/or entertain such companies as brokers especially in matters of requiring insurance services and procurement,” a veteran in the industry inducted to the Sri Lanka Insurance Institute (SLII) ‘Hall of Fame’, a Sri Lanka Insurance Brokers’ Association (SLIBA) founder/secretary Upali Wickremaretne said.
He was a pioneer insurance broker in Sri Lanka and also an author of insurance regulations.
He also pointed out that any broker appointment made to such overseas companies is made illegally and contrary to the express provisions of the regulation and best practices of the insurance industry around the world.
Wickremaretne further stated that if an overseas broker is interested in operating in any country in areas such as reinsurance, they should establish a registered broking company adhering to the regulations and laws or work with a registered local broker that would offer the local expertise and collaborate in their activity.
The industry association sources also showed extreme concern on why when there is such a strict regime for registered brokers, such overseas companies, including fly-by-nights, operate here unchecked.
Sources said, “They could run away and there is no accountability for persons who are not registered in the country, as required by law.”
These sources added, “We will do our utmost to protect the industry and the interests of the large number of insurance brokers mainly with a view to safeguard the insured and public interest at large.”
Sri Lanka has a very large number of insurance brokers and some specialists offering world-class services and there is no requirement for the presence or engagement of overseas companies not registered with the IRCSL.
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 leading to fraudulent practice, corruption and chaos.
The IRCSL meanwhile states that the names of all registered insurance brokers are published in the newspapers periodically as well as on their website. Since overseas companies including fly-by-night entities are not registered brokers in the country, their names are not being published in the requisite the Insurance Board of Sri Lanka (IBSL) list.
Section 79 of the Regulation of the Insurance Industry Act, No. 43 of 2000 (as amended) provides, “No person shall act or hold itself out as an insurance broker unless such person is a holder of a certificate of registration as a broker granted by the Board and is a member of an Association of Insurance Brokers approved by the Board.”
Meanwhile, the IRCSL makes clear that there are mandatory requirements including adequate capital to register as an insurance broker and failure to furnish the required information and documents for registration as a broker results in refusal of registration.
They also note that companies, which fail to register, are prohibited from acting or holding themselves out as insurance brokers and the names of such companies will not be in the list of approved brokers.