Sunday, January 17, 2021

Five banks instructed to freeze Bona Life accounts

As events continue to unfold at the troubled local life insurance company ÔÇô Bona Life, the latest development is that the Non Banking Financial Institutions Regulatory Authority (NBFIRA) has frozen its bank accounts.

As part of its suspicions that the insurance company is not complying with some financial services laws, the regulator has requested atleast five commercial banks to freeze accounts belonging to the company.

Sunday Standard has been informed that the banks that have already received the communication include First National Bank Botswana (FNBB), BancABC, Bank Gaborone, Botswana Savings Bank (BSB) and Stanbic Bank.

Court documents passed to the Sunday Standard indicates that the purpose of the court application is to seek an order confirming the temporary closure of the business and freezing of the bank accounts of Bona Life in terms of Section 57 (3) of the NBFIRA Act.

In a letter dated 10th July 2018, NBFIRA CEO Ramasedi, wrote to Bona Life CEO Regina Sikalesele-Vaka that the effect of the closure includes that Bona Life should also cease with immediate effect from; taking new clients and issuing new insurance to both existing and new clients and also cease from advertising the products to potential and existing clients.

“The closure is until there is compliance with Insurance Industry Act and a quorate board is appointed to run the affairs of the company,” Ramasedi stated in the letter.

He further stated that NBFIRA reserves the right to impose any other penalty and or take any other action as may be deemed necessary to conclude the matter in a fair and equitable manner.

According documents before High Court dated 10th July 2018, NBFIRA CEO Ramasedi stated in the affidavit that after a careful consideration of facts found, and exposure of the annuitants, NBFIRA formed the opinion that Bona Life is not complying or likely not to comply with financial services laws. He also stated that due to the ceasing of trade by Bona Life, the company is likely not to pay its annuitants as per Bona Life CEO’s letter dated 8th June 2018 and 4th July 2018, which would be in contravention of the Insurers Code of Conduct under the second schedule of the Insurance Industry Regulations which requires insurers to satisfy as quickly as possible the legitimate needs of claimants.

“The liabilities of Bona Life exceeded the assets by negative P83 887 000 and is reflected in the company’s quarterly return,” reads the documents.

Amongst other things, Bona Life conducts a long-term insurance business which involves hundreds of millions of Pulas and its apparent insolvency, it is prudent for NBFIRA to procure services of experts in the financial services sector, to assist it managing the affairs of Bona Life for purposes of authorizing urgent transactions which are necessary to maintain its financial obligation, as well as its capitalisation obligations.

Furthermore it is indicated that the NBFIRA has moved swiftly as soon as Bona Life indicated that it has ceased trading on the 4th July 2018 and that it will not pay its annuitants on the 25th July 2018.

“There was need for prompting urgent intervention NBFIRA to protect the interests of the clients of Bona Life,” read the court papers.

Bona Life recently shut its doors owing to an impasse between its shareholders that led to the company operating without a board.

“We will reopen as soon there is a board in place. We need a competent board in place in order to operate efficiently”, said Vaka at the time of the company closure.

RELATED STORIES

Read this week's paper