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Administration of the Regulation of Insurance Industry Act
Legislation
Regulation of the insurance industry is governed by the Regulation of Insurance Industry Act, No. 43 of 2000. Prior to the enforcement of this Act, the insurance industry was regulated by the Controller of Insurance acting under the powers vested by the Controller of Insurance Act, No. 25 of 1962. Subsequently, this Act was repealed with the introduction of the Regulation of Insurance Industry Act, No. 43 of 2000.
The Insurance Board of Sri Lanka (hereinafter referred to as the Board) has been established for the purpose of development, supervision and regulation of the insurance industry and to ensure that insurance business in Sri Lanka is carried out with integrity and in a professional and prudent manner, with a view to safeguarding the interests of the policy-holders and potential policy holders.The insurance Industry is regulated and supervised in terms of the provisions of the Regulation of Insurance Industry Act, No. 43 of 2000 (hereinafter referred to as the ‘Act’). The Board is established under this Act.From time to time several amendments have been incorporated into the principal enactment and subordinate legislation made to strengthen the insurance industry, which is dealt in detail in the Regulatory Review of this report.
Market Structure
Company Status and Changes in Capital
Insurance Companies
The minimum capital requirement for a company to seek registration was increased during the year from Rs 100 mn per class of insurance business to Rs 500 mn per class of insurance business.Risk Based Capital (RBC)
The Baord is also in the process of introducing Risk Based Capital Model for insurance companies under the Act.
The successful implementation of RBC Model is expected to provide the following benefits to the insurance industry:
The Board has also requested all insurance companies to obtain, a rating of Insurer’s Financial Strength (IFS) and the claims paying ability. Accordingly, the following insurers have obtained ratings:
Figure 1.4 – Status on ‘listed/ non listed’ insurance companies
The Regulation of Insurance Industry (Amendment) Act, No.03 of 2011 requires an existing insurer to have itself listed on the stock exchange within a period of five years from the date of the coming into operation of the Amendment Act. Composite insurance companies would therefore, have to segregate its business into two separate companies within a period of four years prior to obtaining a listing.
The Board is working with insurance companies (IASL - Insurance Association of Sri Lanka) to identify possible challenges in relation to segregation and finding solutions to same.
A new insurance company registered after the amendment Act came into effect is required to list itself on the stock exchange within a period of three years of being issued with a licence by the Board.
Foreign equity participation in insurance companies has been permitted up to 100% in terms of the Gazette Notification No. 1232/14 published by the Controller of Exchange on 19 April 2002. Allianz Insurance Lanka Ltd. and Allianz Life Insurance Lanka Ltd. have 100% foreign equity participation. They are the subsidiaries of Allianz SE
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