Barely a day after the Reserve Bank of Malawi (RBM) took over management of a local insurance company, Prime Insurance Limited, the High Court in Blantyre has blocked the process.
The central bank, through the registrar of financial institutions, announced on Friday in Lilongwe it was putting the insurance company under its administration to recapitalise it or risk being declared insolvent.
But on Saturday, Prime Insurance rushed to the court for relief, arguing the bank or its governor Charles Chuka, who is also registrar of financial institutions, do not have jurisdiction to conduct statutory management in the manner they did.
The bank argued that from the circumstances leading to putting the company under statutory management, there was nothing to trigger the power for the registrar to come up with the decision.
The injunction was granted yesterday before Judge Kenyatta Nyirenda.
According to an order for leave to move for judicial review, the High Court has restrained the registrar of financial institutions or its agents/servants from proceeding with the purported statutory management.
Further, the court has given Prime Insurance 14 days to file an inter partes summons for continuation of the injunction.
Reads part of the order: “It is hereby ordered and directed… that an order be and is hereby made staying the decision of the respondent [RBM] comprised in the letter dated 3rd June 2016 being the decision to purportedly place 1st applicant [Prime Insurance] under statutory management on alleged grounds that 1st applicant is or is likely to be in an unsound financial position contrary to Section 68[a][i] of the Financial Services Act.”
Prime Insurance lawyer Patrick Mpaka confirmed obtaining an injunction yesterday saying the company felt the registrar of financial institutions acted contrary to other prescriptions of the law like fairness.
He said the order meant that the process of statutory management had been suspended.
Said Mpaka: “Prime Insurance goes back to business as normal until the court examines, after hearing our arguments and those of RBM, whether RBM was right or wrong to act in the manner they did.”
RBM spokesperson Mbane Ngwira said yesterday the injunction had not been served officially but once received the legal team will advise on the way forward.
“Normally, issues of this nature you expect the aggrieved party take an injunction so our legal team will be studying the issue and then whatever they will come up with, we will take that route.”
On Friday, Chuka told the media the bank’s decision follows months of monitoring of the insurance firm’s financial records and negotiations amid reports of failure by the company to honour claims by clients.
Prime Insurance Company was licensed in 1991 to conduct general insurance business but over the years, grew more into the motor vehicle insurance portfolio, particularly minibuses.
If declared insolvent, it will become the second wholly Malawian-owned insurance company after Citizen Insurance.