The Securities and Exchange Commission of Pakistan (SECP) has officially ceased the guarantees business of Crescent Star Insurance Limited under section 60 of the Insurance Ordinance, 2000. The regulatory action was taken after significant violations were identified, including the issuance of Rs. 229 billion in guarantees without requisite collateral or valid reinsurance arrangements.
The SECP initiated its inquiry into Crescent Star earlier this year, issuing a notice on January 31, 2024, to address these regulatory breaches. However, instead of complying, Crescent Star challenged the notice in the Islamabad High Court. The court directed the company to participate in SECP’s proceedings, denying any immediate relief.
Despite being given six opportunities for hearings and submitting four written responses, Crescent Star failed to demonstrate compliance with the regulatory requirements necessary for conducting a guarantees business. During the investigation, Crescent Star claimed to have secured reinsurance arrangements, but the SECP’s verification with the purported insurance provider revealed no such agreements existed. This further substantiated SECP’s findings of non-compliance and raised concerns about misstatements made by Crescent Star.
As a result, the SECP concluded that Crescent Star’s guarantees business lacked essential safeguards, including proper collateral and reinsurance cover. To protect the integrity of Pakistan’s insurance sector, the SECP ordered the cessation of Crescent Star’s guarantees business. The company has been prohibited from rolling over existing guarantees and directed to honor its obligations as they come due. Additionally, Crescent Star must now submit a monthly comparative statement of outstanding guarantees to the SECP for monitoring purposes.
The SECP also provided Crescent Star with the option to seek modification or cancellation of this directive, contingent upon meeting the regulatory framework’s requirements, including securing proper collateral and valid reinsurance arrangements.
Crescent Star’s case is not isolated; the SECP is also investigating United Insurance Company of Pakistan Limited for similar violations in its guarantees business. United Insurance has obtained a stay order from the Lahore High Court, and the proceedings against it remain ongoing.
In its broader efforts to uphold regulatory compliance and enhance consumer confidence, the SECP has been proactive in addressing complaints within the insurance sector. During the first half of FY2024-2025, the SECP successfully resolved over 2,300 complaints, resulting in the recovery of Rs. 268 million for affected individuals.
This decisive action against Crescent Star and ongoing scrutiny of other players in the insurance industry reflect SECP’s commitment to ensuring transparency and accountability. By strengthening enforcement measures and addressing misconduct, the SECP aims to build public trust and drive sustainable growth in Pakistan’s insurance sector.