HomeNewsInsurance firm, regulator square off

Insurance firm, regulator square off

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Gallant Insurance Company has threatened to sue the Commission for Insurance, Pension and Provident Funds after the regulatory body allegedly refused to honour a High Court order issued last Friday to reinstate the insurer’s registration on grounds of poor capital adequacy.
A source says Jupiter Insurance Company, Regal insurance Company and two other insurers are also preparing to challenge their closure in court, accelerating the drama which started with the closure of 18 companies two weeks ago, to a climax.
Confirming the litigation yesterday, insurance commissioner, Mannet Mpofu, said the regulatory body would not budge on minimum capital requirements technically seen as the last line of defense for the insuring public.
“It is correct that Gallant Insurance have, through their lawyers, submitted papers to the High Court seeking to be allowed to continue operating,” Mpofu said. “As the issue is before the courts, we cannot comment any further.”
Mpofu added that none of the 18 companies closed in the crackdown had been re-registered.
“Two of them are however engaging the Commission and time will tell whether they will be able to meet the requirements and hence be admitted back into the market.”
“Capital adequacy is very critical in ensuring that the insuring public is protected. As long as companies are unable to raise the requisite capital, they will not be allowed to operate as this will jeopardise policy-holder interest.”
“Even the Minister of finance endorsed the stance of the Commission that insurance companies which fail to meet capital adequacy requirements should be de-registered as per the provisions of the Insurance Act. The minister’s sentiments were expressed in his 2010 Mid-Term Fiscal Policy Review Statement.”
Gallant took its regulator to court last week seeking a reversal of the Commission’s decision, citing errors and irregularities in assessing its technical ratios.
But the insurance commission says Gallant and other closed companies, “had failed to raise the necessary capital to continue operating”, which undermined their ability to pay claims.
The technical liabilities, including debts and claims, for some of the affected companies were also found to be larger than shareholder funds, compromising underwriting capacity. The minimum capital is $300 000 for insurance companies, $400 000 for reinsurers and funeral assurers and $500 000 for life assures.
The insurance commission said it would institute more measures to “reduce the number of players in line with the size of the economy in which they operate”.
Last year, the short-term insurance industry, then comprising 31 active firms, wrote gross premiums worth $68,6 million, 88% of which came from the industry’s top ten in terms of assets.
Cell Insurance and Nicoz Diamond accounted for 30% of the income with Gallant contributing about 0,39% with a GPW $265 847.
Its after-tax profit for the year was $22 822.
Shareholder funds amounted to $71 821, while its solvency ratio was 31% against a minimum standard of 40%.
The insurer’s debtors to net premium ratio – which expresses the size of technical reserves – was estimated at 8,15%.

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