This has paved way for the Insurance Board, the insurance sector regulator, to consider allowing the company to resume normal business.
The Board, a week ago, had halted business transactions of Asian Life after the company distributed dividends among shareholders despite the regulator´s clear instruction not to do so. [break]
Since then, the company has not been able to sell new insurance policies and has to take the regulator´s permission before settling claims - although it was allowed to collect premiums on policies sold in the past.
After placing a ban, the Insurance Board said the company can resume normal business only after putting all the money it had distributed back in its coffer by Sunday.
As demanded, the company on Sunday reported its promoters and shareholders have returned Rs 45.9 million of Rs 48.5 million that was distributed. Since the amount that needs to be recouped - Rs 2.6 million - is “nominal”, the Insurance Board is now considering to allow the company to do business as usual after slapping a fine of Rs 25,000 as per the Insurance Regulation 1993.
“A board meeting is likely to be called soon to decide on the matter,” Binod Aryal, a board member of the Insurance Board told Republica, asking clients of the company not to be worried as “their money is safe with the company”.
Experts of the insurance sector, however, said the regulator should not let the company go scot free as it has committed a “grave mistake”. On condition of anonymity, they recommended that company´s board be dissolved soon and replaced with a new one. They also said people who were involved in the scandal be banned from doing insurance business for at least five years.
“These steps would discourage others from making similar mistakes and going against regulator´s instructions,” they said.
Asian Life, which has a capital of Rs 360 million, was banned from doing business after it started distributing dividends without raising its paid-up capital to Rs 500 million as said in the directive issued by the Board in September.
After committing the mistake, the company had defended its move citing it had not violated any rules of the Board.
“We had distributed the money from premium collected through sales of foreign employment policies, which had expired, and not from annual profits,” Bijaya Kumar Sarawagi, the company´s chairman, had told Republica on Wednesday.
Asian Life is one of the companies that sells foreign employment policies to people who go abroad for employment purpose. These policies, which cost as less as Rs 1,025, provide coverage of up to Rs 600,000 in case of policyholders´ death and up to Rs 550,000 in case of partial or full disability.
These policies mature after a maximum of three years, meaning policyholders or their kins who do not demand for compensation within this period are legally not entitled to ask for payments in later days. “Since the money we distributed as dividend had come from this source, on which we have no liabilities, we still think we are not at fault in giving away the money to our promoters and shareholders,” Sarawagi had argued.
But the Insurance Board said premiums on which the company has no liability has to be entered into balance sheets as profit and not given away to shareholders.
The IB had stopped all life insurers from distributing dividends and asked them to raise their capital base, as companies with a capital of as little as Rs 250 million were conducting business transactions of tens of billions of rupees, putting public money at risk.
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