ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has ceased the guarantees business of Crescent Star Insurance Limited (Crescent Star) under Section 60 of the Insurance Ordinance, 2000. Crescent Star had issued guarantees worth Rs. 229 billion without securing the requisite collateral or valid reinsurance arrangements.
To ensure due process and provide Crescent Star an opportunity to respond to the regulatory violations, SECP issued a notice on January 31, 2024. However, the company challenged the notice in the Islamabad High Court. The court directed Crescent Star to participate in SECP’s proceedings but did not grant any relief.
During the proceedings, SECP offered Crescent Star six hearings and reviewed four written responses. Despite these opportunities, Crescent Star failed to demonstrate compliance with regulatory requirements, including securing proper collateral and reinsurance arrangements. SECP also contacted the insurance company Crescent Star claimed to have a reinsurance agreement with, which categorically denied any such arrangement. This confirmed Crescent Star’s non-compliance and misrepresentation of facts.
Based on its findings, SECP concluded that Crescent Star was conducting guarantees business without the necessary safeguards. To protect the integrity of the insurance sector, SECP directed the company to cease its guarantees business, forbidding the rollover of existing guarantees in any form. Crescent Star must now fulfill its obligations as they become due and submit a comparative statement of outstanding guarantees to SECP on a monthly basis.
Crescent Star may request a cancellation or modification of SECP’s directive, provided it meets the regulatory framework’s requirements by securing proper collateral and valid reinsurance arrangements, subject to SECP’s satisfaction.
SECP has also initiated similar proceedings against United Insurance Company of Pakistan Limited for apparent non-compliance in its guarantees business. However, these proceedings are pending due to a stay order from the Lahore High Court.
In a broader effort to enhance customer confidence, SECP successfully resolved over 2,300 complaints in the first half of FY2024-2025, facilitating an additional Rs. 268 million in claims recovery for individuals. SECP’s proactive measures aim to improve compliance within the insurance sector and strengthen public trust.
