by Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjung, Lim Kit Siang, in Petaling Jaya on Tuesday, May 24, 1994:
DAP calls on Anwar Ibrahim to issue a White Paper on the RM383 million Mercantile Insurance crisis and its handling by Bank Negara in the last three years
The 263,000 innocent policyholders and 40,000 claimants on Mercantile insurance Sdn. Bhd. (MISB) have become the biggest victims of Bank Negara’s sudden directive on May 17 to MISB to cease all business and suspend all payments – and not the MISB shareholders or executives who by their fraud, malpractice or mismanagement had created the RM383.4 MISB solvency deficiency crisis.
This Bank Negara action in making the 263,000 MISB policyholders and 40,000 claimants to bear the brunt of the RM383.4 insurance crisis is most unfair and utterly indefensible.
It in fact raised the questions of the competence and professionalism of Bank Negara in exercising its supervisory role over the insurance industry.
In its statement of May 17 announcing its decision to recommend to the Minister of Finance to order the winding up of MISB if the MISB shareholders do not inject RM383.4 million new capital with in two weeks (and there is no doubt that the MISB shareholders will not inject a single sen into the company), Bank Negara made it clear that there was inadequate money at present for the payment of 70 sen on each RM1 from the Insurance Guarantee Scheme Fund (IGSF).
Over RM200 million would be required by Bank Negara to make the payment of 70 sen on each RM1, but according to the 1993 Insurance report of the Director-General of Insurance made public in March, the insurance Guarantee Scheme Fund (IGSF) had a bal¬ance of only RM40.5 million as at the end of 1993.
To boost the fund of IGSF, Bank Negara, has suggested that the Insurance Act be amended to increase the levy imposed on all general insurers, based on their annual written premiums for the preceding financial year, from 0.45% to one per cent.
It is clear that policyholders, claimants and creditors of MISB who had lodged their claims prior to the stoppage of payments on May 17 are going to take a very long time before they can expect any payments – although they are still more fortunate than claimants lodged after the stoppage.
Bank Negara should explain why it has taken more than three years after its takeover of Mercantile Insurance to realise that it urgently needs more powers under the Insurance Act?
¬Bank Negara should explain why it has taken such a long time to introduce comprehensive amendments to the Insurance Act 1963 to give better protection to the policyholders and the public, as well as to improve the operating efficiency of insurers with better accountability and to curb fraud and malpractices in the insurance industry.
Immediately after the Bank Negara take over of MISB in March 1991, the public were made to believe that comprehensive amendments to the Insurance Act would be tabled in Parliament at the end of the year.
It is quite ridiculous that Bank Negara should be rushing to Parliament for new powers to deal with MISB problem, hoping that these new powers would come into effect by August when Bank Negara had assumed control over MISB for over three years.
Why has Bank Negara taken more than three years after its takeover of Mercantile Insurance to realise that it urgently requires more powers under the Insurance Act? This does not reflect well on the efficiency, competence and professionalism of the Bank Negara at all.
Public confidence in the Bank Negara has again been shaken by its handling of the RM383.4 million Mercantile Insurance crisis and DAP calls on the Finance Minister, Datuk Seri Anwar Ibrahim, to issue a White Paper on the Mercantile Insurance crisis as well as its handling by Bank Negara in the last three years.
This White Paper should be the subject of a special debate in Parliament when it reconvenes in July.