ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has ceased the guarantee business of Crescent Star Insurance Limited. The action, taken under Section 60 of the Insurance Ordinance, 2000, follows violations involving guarantees worth Rs. 229 billion issued without requisite collateral or valid reinsurance arrangements.
Crescent Star failed to meet the regulatory requirements necessary for conducting guarantees business. Despite issuing guarantees worth billions, the company did not secure proper collateral or arrange valid reinsurance cover. SECP’s inquiries confirmed that the claimed reinsurance arrangements were false.
Legal and Administrative Proceedings
SECP issued a notice to Crescent Star on January 31, 2024, providing the company an opportunity to clarify its position. Crescent Star challenged the notice in the Islamabad High Court, which directed the company to cooperate with SECP’s proceedings.
During the hearings, Crescent Star submitted four written responses but failed to provide evidence of compliance with regulatory standards. SECP’s findings revealed misstatements and confirmed non-compliance with the framework governing guarantees business.
SECP’s Decision and Directives
To protect the insurance sector’s integrity, SECP ceased Crescent Star’s guarantees business. The company was directed not to roll over existing guarantees and to fulfill outstanding obligations as they become due. Crescent Star is now required to submit monthly comparative statements of its outstanding guarantees.
Pakistan’s Foreign Reserves Fall to $16.37 Billion
SECP has allowed Crescent Star to apply for modification or cancellation of the decision. However, the company must first comply with the regulatory framework by securing valid collateral and reinsurance arrangements to SECP’s satisfaction.
Broader Enforcement Actions
SECP has also initiated proceedings against United Insurance Company of Pakistan Limited for similar violations. The case is pending, as United Insurance has obtained a stay order from the Lahore High Court.
In the first half of FY2024-2025, SECP resolved over 2,300 complaints, recovering Rs. 268 million in claims for individuals. These efforts aim to enhance compliance in the insurance sector and rebuild public trust.
SECP’s proactive measures are expected to strengthen the regulatory framework and ensure greater transparency in Pakistan’s insurance industry.
Follow Day News on Google News, Instagram, YouTube, Facebook, Whats App, and TikTok for latest updates
