Islamabad, Dec 26: The Securities and Exchange Commission of Pakistan (SECP) has halted the guarantee business of Crescent Star Insurance Limited (Crescent Star) through a Direction issued under section 60 of the Insurance Ordinance, 2000. This decision follows the company’s issuance of guarantees worth Rs. 229 billion without securing the necessary collateral or valid reinsurance arrangements.
Despite being issued a notice on January 31, 2024, to explain its violations, Crescent Star contested the notice in the Islamabad High Court, but the court ruled against the company, directing it to participate in SECP’s proceedings. SECP provided Crescent Star with six hearing opportunities and received four written responses. However, the company failed to meet the regulatory requirements, including obtaining proper collateral and reinsurance arrangements.
Further investigation by SECP into Crescent Star’s claim of having a reinsurance arrangement revealed that the concerned insurance company denied any such agreement, confirming SECP’s findings of non-compliance and exposing the company’s misstatements.
As a result, SECP has directed Crescent Star to cease its guarantee business, prohibiting the rollover of existing guarantees and requiring the company to fulfill its obligations as they become due. The company must also submit monthly reports detailing the outstanding guarantees. Crescent Star may seek the cancellation or modification of the Direction if it meets the regulatory requirements, including obtaining proper collateral and reinsurance arrangements.
In a similar move, SECP has initiated proceedings against United Insurance Company of Pakistan Limited for non-compliance with regulatory requirements in its guarantees business. However, United Insurance has obtained a stay order from the Lahore High Court, delaying further action.
In the first half of FY2024-2025, SECP successfully resolved over 2,300 complaints, resulting in an additional Rs. 268 million in claims recovery for individuals. SECP’s proactive efforts aim to improve compliance within the insurance sector and bolster public confidence.
