Insurance Regulatory Authority (IRA) has issued an ultimatum to insurance companies and brokers that ceased operations to apply for withdrawal of their security deposits or risk losing their money. 36 firms will benefit from this gesture.
“We gave them a deadline that if they do not pick that money, they cannot come out and claim for that money,” communications officer IRA Ms Mariam Nalunkuuma said in an interview on Tuesday.
This follows a statement issued by chief executive officer, Mr Ibrahim Kaddunabbi that read, in part, “The authority informs the unlicensed insurance players who have ceased operations and have not yet applied for the withdrawal of their security deposits to submit the information here below.”
Section 7(1) of the Insurance Act 2011 states that every insurer (insurance company), shall hold an account maintained by the insurer for the purpose, a security deposit of at least 10 per cent of the capital of the insurer.
Ms Nalunkuuma noted that the 12 non-operational insurance companies and 24 insurance brokers have to receive this money because the funds are no longer invested. She added that such a fund does not benefit these companies since it is not making any profits.
General insurance companies are required to have a paid-up capital of Shs4b while life insurance companies should have Shs3b.
Ms Nalunkuuma explained that insurance companies have to deposit 10 per cent of this paid-up capital or invest it in government securities or any other investments as approved by IRA.
When an insurance company stops operating, the security deposit is either in government securities or in Bank of Uganda. IRA has authority over this money but cannot use it because it belongs to the insurance company.
IRA is obliged to use the money once an insurance company fails to settle a client’s claim or return it to the insurer once the company winds up.
Miss Nalunkuuma partly attributed closure of these companies to financial constraints.
“When the new Insurance Act was amended, the capital was increased from Shs1b to Shs4b. Definitely there are companies that had to drop out,” she noted.
For an insurance company or broker to receive this money, it has to present a board resolution from Uganda Registration Services Bureau allowing the company to stop insurance business.
Insurance companies have to show evidence that they have settled all financial transactions with all reinsurance companies that they dealt with before withdrawal of their license.
Besides availing documents of the company’s outstanding claims, details of claimants and reasons for non-settlement, insurers have to provide an account where the funds should be remitted.
However, insurance brokers have to provide evidence that the company settled all financial transactions with all insurance companies it dealt with before it lost its license.