Sri Lankan insurance broker accuses state body of engaging foreign firm with bribery record

A significant controversy is brewing in Sri Lanka’s insurance sector as Strategic Insurance Brokers (SIB), a local firm, has accused the National Insurance Trust Fund (NITF), a state body, of awarding a reinsurance contract to a foreign broker with a documented history of high-profile bribery. 

In a strongly-worded press release, SIB has alleged that such foreign entities are being welcomed into the Sri Lankan market without being required to adhere to the domestic laws and regulations, creating an uneven playing field for the local companies.

The allegations centre around the recent awarding of a contract by the NITF to Tysers, a UK-based insurance broker. According to SIB, this decision is shocking, particularly in light of a recent case involving Tysers and the United States Department of Justice (DOJ). 

In February, the DOJ announced that Tysers had agreed to a settlement after being charged with paying millions of dollars in bribes to government officials in Ecuador to secure and retain the insurance business. The company agreed to pay a substantial fine and forfeit assets to resolve the bribery charges.

SIB’s press release highlights what it terms a “zero tolerance” policy towards bribery and corruption by the current government, questioning the wisdom of engaging a firm with a tainted record. 

“In bribery and corruption, it is well spelled out that there is always a perpetrator and a receiver or beneficiary,” the statement reads, quoting a prominent promoter of transparency and good governance. 

“In a regime that has a zero-tolerance policy toward bribery with commitment to bring to book and penalise the receivers of bribes, they should take constructive action to prevent and prohibit the bribers.”

The local brokerage firm claims to have filed a formal complaint with the Commission to Investigate Allegations of Bribery or Corruption in Sri Lanka regarding this matter. Furthermore, SIB states that appeals have been made to the president and prime minister, who have reportedly assured that an investigation is underway.

A key contention in SIB’s argument is the assertion that foreign brokers are not being held to the same regulatory standards as their Sri Lankan counterparts, including registration with the Insurance Regulatory Commission of Sri Lanka (IRCSL). They argue that this exemption from local laws, taxation and regulatory costs puts domestic firms at a significant disadvantage.

However, the issue of registration for foreign reinsurance brokers appears to be a point of legal contention. A recent ruling by the High Court of Civil Appeal reported just last week stated that foreign reinsurance brokers, who conduct their business from outside the territorial waters of Sri Lanka, do not fall under the purview of the Regulation of Insurance Industry Act and are therefore not required to register locally. This judgment was delivered in a case that also involved Tysers and SIB, with the court ruling in favour of the foreign broker.

SIB, in its press release, alludes to previous court rulings that have affirmed the necessity of registration for foreign brokers operating in Sri Lanka. The firm also mentions a clear opinion from the Attorney General and guidelines from the IRCSL that support their stance.

The controversy also raises questions about the validity of reinsurance contracts arranged by unregistered foreign entities. SIB has warned that such agreements could be deemed void, potentially leaving the NITF and by extension the Sri Lankan public, exposed to significant financial risk in the event of a large-scale claim, particularly for crucial areas like civil riots and terrorism coverage.

As of now, there has been no official public statement from the NITF or Tysers addressing the specific allegations raised in SIB’s latest press release. 

(NF)