26th January 2022
The President of the Republic of Sierra Leone
State House
State Avenue
Freetown
Your Excellency Sir,
OPEN LETTER TO HIS EXCELLENCY RETIRED, BRIGADIER. DR JULIUS MAADA BIO ON FRAUDULENT INSURANCE PRACTICES AND THE FAILURE OF SIERRA LEONE INSURANCE COMMISSION TO PROTECT SIERRA LEONE POLICY HOLDERS FROM FRAUDULENT INSURANCE PRACTICES.
Happy New Year to you Sir.
We, the Consortium of Civil Society Organizations on Social & Economic Justice are a Coalition of Civil Society and Media Organizations promoting and advocating for accountability, social and economic justice in Sierra Leone. We are using this medium to appreciate Your Excellency’s uncompromising position on the fight against corruption and consistent appeal for Foreign Direct Investment into the country to harness the untapped potentials of our beloved country with it multiplier effect on our standard of living
Your Excellency and Fountain of Honour, we want to draw your attention to the continued and sustained fraudulent insurance practices in the country and the willful refusal of Sierra Leone Insurance Commission(SLICOM) to exercise their statutory roles as regulators in addressing these issues which has resulted in fraudulent mismanagement of Life Assurance Funds of over 22,000 Civil Servant in Sierra Leone including the Army, Police, Teachers, Nurses etc. The impact of a failed Insurance Industry is inestimable for any country, because of the pivotal role the industry plays in the financial service sector of a country
Upon receipt of complaints with relevant supporting documents on certain fraudulent insurance practices and willful disregard to various provisions of The Insurance Act of Sierra Leone 2016, we wrote to International Insurance Company SL Limited for clarification and explanations to guide our actions, but we have not received any valid explanation or documents to suggest otherwise.
We further engaged Sierra Leone Insurance Commission (SLICOM) in September 2021 with the quantum of evidences available to us to substantiate our claims and for appropriate action to save our insurance industry and protect innocent Policy holders.
The issues affecting International Insurance Company SL presented to SLICOM are listed below:
- The Managing Director approving a Loan of 200,000 USD to himself without Board Approval despite the clear loan prohibition clause in Section 60 Sub Section 1-3 of Insurance Act of SL 2016.
Insurance Act Section 60 Sub Section 3 states “ Where any event occurs giving rise to circumstances the existence of which at the time of the grant of any subsisting loan would have made such grant a contravention of this section, such loan shall, notwithstanding any contract to the contrary, be repaid
within three months from the occurrence of such event; and in case of a default, the director, managing director, general manager or principal officer by whatever name called shall, without prejudice to any other penalty which he may incur, cease to hold office with the insurer granting the loan on the expiry of the three months (The loan repayments lasted more than three years)
- The Managing Director took part of the loan from Life Assurance Bank Account in violation of Section 36 Sub Section 4C which states “The life insurance fund shall– (c) not be applied directly or indirectly for any purpose other than that of life insurance business referred to in subsection”
The said Managing Director’s Loan was not reported or disclosed in the Company Financial statements for two consecutive years.
- The said Company produced two set of Audited Financial Statements in the same year, one to the Regulator and the other to the public.
- The Company failed to make provisions for Life Assurance Actuarial Valuation Report disclosing a deficit valuation of Le 2.4 billion Leones, in the financial statement since 2013. Section 37 Sub Section 1-3. Sub (3)states “ An insurer shall maintain with respect to the life insurance business–
(a) a general reserves fund which shall be credited with an amount equal to the net liabilities on policies in force at the time of the actuarial valuation; and” - Failure to give details of management expenses as required by IAS 1 to conceal the monumental expenses of the Managing Director
- Treating Life Assurance Premium as income from where they are charging Management and Operating Expenses thus entrenching gross understatement of Life Assurance Fund and defrauding over 22,000 Sierra Leoneans who are Policy Holders to the Company.
- The Company failed to submit Financial statement to SLICOM as required by Insurance Act in Section 41 sub section 1-2 of the Insurance Act. Unfortunately, SLICOM did not sanction the company but proudly stated same in SLICOM Annual Report.
- The External Auditor who audited this Company Account and issued an unqualified Audit Report was engaged to review their books of account. And they confirmed from their financial review that the appropriate Books of account were not kept for Policy Loans by the Company.
- Non – procurement of work permit for some expatriate staff.
- Selective remittance of NASSIT for Staff against the express provisions of NASSIT Act of 2001.
Section 25 (1) “Every employer of an establishment shall deduct from the earnings of every worker in the establishment immediately at the end of each month, a worker’s contribution of an amount equal to 5% of the worker’s earnings for that month irrespective of whether or not such earnings are actually paid to the worker.”
(2) “Every employer of an establishment shall pay for each month in respect of each worker, an employer’s contribution of an amount equal to 10% of such worker’s earnings for that month.”
The General Issues affecting the Insurance Industry are:
- Failure to account for Life Assurance Funds appropriately. Insurance Companies do not provide Balance Sheet for Life Business Separately to show Assets and Liabilities, including Investments supporting Life Funds. Section 36 Sub 1-3 , Sub 3 states – The investments of the life insurance fund shall be kept separate from the investment of any other fund of the insurer.
Section 37 Sub 1-3 (3) An insurer shall maintain with respect to the life insurance business–
(a) a general reserves fund which shall be credited with an amount equal to the net liabilities on policies in force at the time of the actuarial valuation; and
(b) contingency reserves which shall be credited with an amount equal to one percent of the premiums.
Sec 40 Sub sec 2 Where the insurer carries on the business of life
insurance, all receipts of such business shall be carried to and shall
form a separate fund to be called life insurance fund; and the assets
of this fund shall be kept free from all incumbrances and shall be
separate from all other assets of the insurer.
- The treatment of Life Assurance Premium as Income from where management expenses are taken with little regards to liabilities arising from Life Assurance.
Life Assurance Premium comprises of Policy Holders savings and Premium for death benefit. For clarity Sir, Life Assurance Premium are accounted for in the same way Banks account for Customers Deposit. Bank invest Customer Deposit and pay their expenses and any Customer deposit interest from the Investment Income and not directly from Customer deposit. Banks are under obligation to clearly account for all customer deposit and interest accrued on such deposit. The reverse is the case in practise in the Insurance industry.
- Gross violations and Non – Compliance with various sections of Insurance Acts of Sierra Leone 2016 that will make for a progressive and vibrant insurance sector due to poor regulatory supervision by SLICOM.
We had engaged SLICOM with appropriate evidences to substantiate our claims including a sample of Financial Statement of Insurance Company from Nigeria for their reference. But SLICOM has refused to act appropriately to protect the Insurance Sector thus failing to provide effective supervision to the Insurance Industry.
We are humbly appealing to Your Excellency for intervention to clear the Industry of these corrupt practises and the enforcement of good corporate governance. Your intervention will result in a vibrant and growing industry that will meet the basic requirement in supporting local and foreign direct investments in the country.
We believe that holding all Insurance Companies accountable in totality for all Life Assurance Premium will encourage profitable insurance investments for adequate returns to cover their operating expenses and accrued interest just like the Banks. This will in turn stimulate economic growth, while preserving Life Funds for the benefit of the Insurance Policy Holders and their named beneficiaries when they fall due.
Your Excellency Sir, we will be available to present all our evidences before you to substantiate our position and in support of our commitment to entrench accountability and good governance in the Insurance Sector of Sierra Leone.
Faithfully submitted for your attention.
Mohamed Kamara
Chairman
CC – Speaker of Parliament
- Leader of Government Business SLPP
- Leader of APC MPs in Parliament
- Leaders of NGC MPs in Parliament
- Leader of C4C MPs in Parliament
- Chief Justice of the Republic of Sierra Leone
- President of SLAJ
- President of Bar Association
- Minister of Finance
- Minister of Justice
- Minister of Defence
- Inspector General of Police
- Secretary to the President
- Presidential Spokesman
- Head of Civil Service
- Commissioner – Anti Corruption Commission
- Clerk of Parliament