Crescent Star Insurance fights SECP directive in court

Crescent Star Insurance Limited (PSX: CSIL) has filed a legal challenge against the Securities and Exchange Commission of Pakistan’s (SECP) directive to halt the issuance of fresh guarantees under its Credit and Surety business, asserting that the regulator’s order is based on an alleged misinterpretation of the Credit Surety Rules.

The matter is currently sub judice before the Islamabad High Court, which has issued notices to the SECP. In a notification to the Pakistan Stock Exchange (PSX), CSIL expressed optimism about securing a stay order, referencing a precedent where another insurer obtained relief from the Lahore High Court in a similar case.

CSIL has staunchly defended its Guarantee business, highlighting its prudent underwriting practices and the backing of facultative reinsurance arrangements. The company refuted SECP’s interpretation of reinsurer communications and denied any misrepresentation of facts.

With a low claim ratio of just 2.5% over the past three years, the insurer described its Guarantee business as one of the safest segments in its portfolio. It further criticized the SECP’s directive as disproportionately targeting a single class of business that does not significantly affect its overall operations.

The insurer expressed confidence in a favourable court ruling, citing past instances where SECP directives were overturned by superior courts. “We remain committed to our business practices and trust that justice will prevail,” the company stated.

This legal confrontation highlights ongoing friction between insurers and regulators over the interpretation and application of rules governing specialized insurance segments.