OVERVIEW OF THE GENERAL LEGISLATIVE ENVIRONMENT · framework for insurers pending the enactment &...
Transcript of OVERVIEW OF THE GENERAL LEGISLATIVE ENVIRONMENT · framework for insurers pending the enactment &...
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OVERVIEW OF THE GENERAL LEGISLATIVE ENVIRONMENT
3RD PARTY CLIENT WORKSHOP
DATE: 28 NOVEMBER 2018
PRESENTER: MAXWELL SIBANDA (CRO)
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INDEX
INTRODUCTION AND BACKGROUND
TRANSITIONAL ARRANGEMENTS ( ST & LT ACTS)
OVERVIEW: FINANCIAL SECTOR REGULATION ACT
OVERVIEW: INSURANCE REGULATIONS
OVERVIEW: REGULATORY INSTRUMENTS
OTHER NOTABLE CONSIDERATIONS & CONCLUSION
SLIDE NO: 2
OVERVIEW: INSURANCE ACT
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INTRODUCTION & BACKGROUND
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TRANSITION: OLD TO NEW REGULATORY REGIME
SLIDE NO: 4
PRU
DEN
TIAL
REG
ULA
TIO
N (P
. AU
THO
RIT
Y)
COFI BILL
PPR FAIS REGULATIONS
MAR
KET
CO
ND
UC
T R
EGU
LATI
ON
(FSC
A)
TCF
RDR
FINANCIAL SECTOR REGULATION (FSR) ACT
INSURANCE ACT
SHORT-TERM INSURANCE ACT LONG -TERM INSURANCE ACT
REGULATIONS (SHORT-TERM INSURANCE ACT) REGULATIONS (LONG-TERM INSURANCE ACT)
INSURANCE INDUSTRY REGULATION (F INANCI AL SERVICES BO ARD)
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END STATE: NEW REGULATORY REGIME
SLIDE NO: 5
FINANCIAL SECTOR REGULATION ACT
INSURANCE ACT
PR
UD
EN
TIA
L R
EG
UL
AT
ION
COFI ACT
REGULATORY INSTRUMENTS
(INCLUDING: PRUDENTIAL STANDARDS,
CONDUCT STANDARDS & JOINT STANDARDS)
GUIDANCE NOTES
INTERPRETATION RULINGS
MA
RK
ET C
ON
DU
CT
REG
ULA
TIO
N
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TRANSITIONAL ARRANGEMENTS (ST & LT ACTS)
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PA & FSCA: JOINT COMMUNICATION 1 OF 2018
SLIDE NO: 7
Remaining sections of LTI Act & STI Act provide conduct of business legal framework for insurers pending the enactment & implementation of COFI Act.
In terms of above, post 1 July 2018, certain ST & LT insurance instruments: - remain in force; - withdrawn / lapse on the effective date of the Insurance Act; and - are no longer relevant.
Status of instruments issued under (LT or ST Ins Acts), post 1 Jul 2018
Insurance Act repealed all prudential requirements under LTI Act and STI Act.
Directives, Board Notices, Insurance Notices, Info Letters & Guidance Notes
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OVERVIEW: FINANCIAL SECTOR REGULATION ACT
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OVERVIEW FINANCIAL SECTOR REGULATION ACT
SLIDE NO: 9
Establish the Prudential Authority & the Financial Sector Conduct Authority.
Provide for co-ordination, co-operation, collaboration & consultation among Reserve Bank (SARB), Prudential Authority (PA), Financial Sector Conduct Authority (FSCA), National Credit Regulator (NCR), Financial Intelligence Centre (FIC) and other organs of state in relation to financial stability.
Provide for making regulatory instruments (including prudential standards, conduct standards and joint standards).
Make provision for licensing of financial institutions; to make comprehensive provision for powers to gather information and to conduct supervisory on-site inspections and investigations.
Provide for transformation of the financial sector.
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OVERVIEW: INSURANCE ACT
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OVERVIEW OF THE INSURANCE ACT
SLIDE NO: 11
Legal framework for prudential regulation & supervision of insurance business.
To promote the maintenance of a fair, safe and stable insurance market.
Introduce a legal framework for microinsurance to promote financial inclusion.
To replace certain parts of the LT or ST Ins Acts (w.r.t prudential matters).
Make provision for the broad-based transformation of the insurance sector.
Enhance the protection of policyholders as well as potential policyholders.
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OVERVIEW: INSURANCE REGULATIONS
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INSURANCE REGS. (TRANCHE 1): BINDER FEES
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NMI Binder fee caps (w.r.t advice), effective 1 January 2018 (see table below):
BINDER FUNCTIONS % FEE (MAXIMUM)
(a) Enter into, vary or renew Function (a) only 3.5%
(b) Determine policy wording Function (a) and one or more of functions (b) – (d) 5%
(c) Determine policy premiums
(d) Determine value of policy benefits One or more of functions (b) – (d) only 0%
(e) Claims settlement 4%
MAXIMUM PAYABLE (ONLY IF PERFORMING ALL 5 BINDER FUNCTIONS ABOVE) 9%
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INSURANCE REGS. (TRANCHE 1): BINDER FEES
SLIDE NO: 14
Transitional provisions for complying with caps to NMI Binder Fees
TYPE OF AGREEMENT EFFECTIVE DATE
All new binders from 1 Jan 2018 Immediately
Existing agreements where binder fees were amended after 1 Jan 2017 1 July 2018
Agreements entered into between 1 Jan 2017 and 31 Dec 2017 1 July 2018
Agreements entered into before 1 Jan 2017 1 January 2019
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SLIDE NO: 15
Amendments to Regulations i.t.o Tranche 2, came into effect 01 Oct 2018.
To align the Regulations (specifically terminology) with the Insurance Act.
The amendments in respect of premium collection (effective 01 July 2019).
Further strengthen policyholder protection by providing for more robust legislative requirements pertaining to collection of premiums by intermediaries, (e.g. the repeal of IGF cover requirement etc).
Amend Binder Regulations to provide for certain procurement and transformation requirements.
INSURANCE REGULATIONS (TRANCHE 2)
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OVERVIEW: REGULATORY INSTRUMENTS
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PRUDENTIAL STANDARDS (FINANCIAL SOUNDESS) 1 JUL 2018
SLIDE NO: 17
PRUDENTIAL STANDARD (FSI 1)
Framework for Financial Soundness of Insurers
PRUDENTIAL STANDARD (FSI 2)
Valuation of Assets Liabilities and Eligible Own Funds
PRUDENTIAL STANDARD (FSI 2.1)
Valuation of Assets and Liabilities Other than Technical Provisions
PRUDENTIAL STANDARD (FSI 2.2)
Valuation of Technical Provisions
PRUDENTIAL STANDARD (FSI 2.3)
Determination of Eligible Own Funds
PRUDENTIAL STANDARD (FSI 3)
Calculation of the MCR
PRUDENTIAL STANDARD (FSI 4)
Calculation of the SCR Using the Standardised Formula
PRUDENTIAL STANDARD (FSI 4.1)
Market Risk Capital Requirement
PRUDENTIAL STANDARD (FSI 4.2)
Life Underwriting Risk Capital Requirement
PRUDENTIAL STANDARD (FSI 4.3)
Non-life Underwriting Risk Capital Requirement
PRUDENTIAL STANDARD (FSI 4.4)
Operational Risk Capital Requirement
PRUDENTIAL STANDARD (FSI 5)
Calculation of the SCR Using a Full or Partial Internal Model
PRUDENTIAL STANDARD (FSI 6)
Liquidity Risk Assessment
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PRUDENTIAL STANDARDS (GOVERNANCE & OPERATIONAL) 1 JUL 2018
SLIDE NO: 18
PRUDENTIAL STANDARD (GOI 1)
Framework for Governance and Operational Standards for insurers
PRUDENTIAL STANDARD (GOI 2)
Governance of Insurers
PRUDENTIAL STANDARD (GOI 2.1)
Corporate Culture
PRUDENTIAL STANDARD (GOI 3)
Risk Management and Internal Controls
PRUDENTIAL STANDARD (GOI 3.1)
Own Risk and Solvency Assessment (ORSA)
PRUDENTIAL STANDARD (GOI 3.2)
Business Continuity Management (BCM)
PRUDENTIAL STANDARD (GOI 3.3)
Reinsurance and Other Forms of Risk Transfer by Insurers
PRUDENTIAL STANDARD (GOI 4)
Fitness and Propriety
PRUDENTIAL STANDARD (GOI 5)
Outsourcing
PRUDENTIAL STANDARD (GOI 6)
Transfers of Business
PRUDENTIAL STANDARD (GOI 7)
Miscellaneous Regulatory Requirements
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OTHER NOTABLE CONSIDERATIONS & CONCLUSION
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INTERMEDIARIES GUARANTEE FACILITY (IGF)
SLIDE NO: 20
Joint Communication 3 (PA & FSCA): Deals with temporary continuation of insurance business of the Intermediaries Guarantee Facility (IGF).
Purpose – the IGF may continue to issue new policies in the coming months, but on condition that all such policies will terminate on 31 March 2019.
Insurers therefore expected to implement credit risk mitigation measures.
Requirement that an entity collecting premium must hold a guarantee policy (IGF) or bank guarantee – removed in terms of Insurance Act (01 July 2018).
Post 31 March 2019, insurers allowing intermediaries to collect premiums on their behalf, no longer able to rely on intermediaries obtaining IGF policies.
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CONCLUDING REMARKS
SLIDE NO: 21
Significant changes to the insurance environment (in transition from the “old” to the “new” regulatory regime under Twin Peaks.
Separate presentations on: Regulatory framework for 3rd Party Cell Captives, Microinsurance, Policyholder Protection Rules & Prudential Standards (SAM).
Not all the requirements have been finalised by regulatory authorities (there are still debates on key issues i.e. cell captive regulatory framework).
Guardrisk actively participates in engaging regulatory authorities via industry forums as well as directly the PA & FSCA. Key developments will be shared with clients (through Portfolio Managers, Business Partners, Workshops etc).
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Thank you