The High Court has issued an order preventing the Insurance Regulatory Authority (IRA) from cancelling insurance policies solely on the basis that the issuing insurers have been placed under statutory management.

The judgment concerns Trident Insurance Company Limited and Corporate Insurance Company Limited, where the court found the Commissioner of Insurance exceeded powers under the Insurance Act by attempting to invalidate policies already held by customers.

The court clarified that Section 67C of the Insurance Act does not make statutory management an automatic termination of existing contracts; instead, it gives a statutory manager control while assessing the insurer’s financial recovery or liquidation.

Accordingly, the regulator’s notice that sought to extinguish policies in force at the time of statutory management was quashed, leaving those contracts valid under the motor vehicle third‑party insurance framework.

Legal basis and procedural flaws

The court held that the Commissioner could not rely on Section 67C at the initial stage of statutory management to extinguish lawfully entered contracts, emphasizing the need for procedural fairness.

It also faulted the IRA for not allowing affected policyholders to present their views and for failing to provide reasons for the cancellation directive, breaches of Article 47 of the Constitution which guarantees lawful, reasonable and procedurally fair administrative action.

The judgment invoked Article 46’s consumer protection provisions, underscoring the importance of safeguarding policyholders when an insurer’s failure threatens their paid‑for coverage.

Implications and further steps

The court declined to dismiss the case on the ground that the parties should first have appealed to the Insurance Appeals Tribunal, noting that constitutional and public‑interest issues can outweigh a strict exhaustion doctrine.

Policyholders of Trident and Corporate Insurance with policies issued before 10 March retain coverage, subject to the process outlined in Section 67C(7) of the Insurance Act, while the statutory management and any eventual liquidation will proceed as separate legal processes.