SECP-PII Microinsurance Symposium Role of regulation and supervision Jules Gribble 29 November 2011.
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Transcript of SECP-PII Microinsurance Symposium Role of regulation and supervision Jules Gribble 29 November 2011.
2 Enterprise Metrics
Agenda
My task IAIS Insurance Core Principles Role of supervisor Microinsurance (MI) focus
Disclaimer: My views, not WB or SECP
3 Enterprise Metrics
World Bank mission
Assess demand and supply for MI Assess current regulatory and
supervisory status With SECP develop MI regulatory
and supervisory framework:▪ Rules and regulations
▪ Accounting
▪ Policyholder protection
4 Enterprise Metrics
My task
Part of assessment of regulatory and supervisory status:▪ Review current position against IAIS
ICPs
▪ Provide input for overall review
IAIS = International Association of Insurance Supervisors
ICP = Insurance Core Principle
5 Enterprise Metrics
ICPs 26 ICPs (replacing prior set of 28)
▪ Approved 1 October 2011▪ See www.iaisweb.org
Globally accepted framework for supervision of insurance sector
Apply in all jurisdictions regardless of▪ Level of development
▪ Type of product
▪ Services being supervised
6 Enterprise Metrics
Proportionality
Assessment should be appropriate to supervisory objectives
Principle of ‘Proportionality’:▪ Supervisors may adjust some requirements
and actions to reflect the nature, scale and complexity of individual insurers
Additional IAIS guidance for MI in progress
Achieving simplicity may require effort ▪ More than ‘simple’ product structures▪ Need robust but simple processes
7 Enterprise Metrics
Coverage of ICPs
Presume appropriate preconditions 7 groups:
▪ Supervisor (1 - 3)
▪ Supervised entities (4 - 8)
▪ Supervisory processes (9 - 12)
▪ Prudential matters (13 - 17)
▪ Distribution and disclosure (18 - 20)
▪ Fraud and AML (21 - 22)
▪ Groups and macroprudential (23 - 26)
8 Enterprise Metrics
Review process
ICPs (26)▪ Standards (233, average 9 per ICP)
▫ Guidelines (1,600, average 7 per Standard)
Assess standards, then ICPs:▪ Observed▪ Largely observed▪ Partly observed▪ Not observed▪ Unable to assess▪ Not applicable
9 Enterprise Metrics
Aspects to consider
Life / Nonlife Regulatory / Supervisory
▪ Regulatory: Have powers and establish framework (laws, Rules etc). Intent
▪ Supervisory: Processes to administer framework effectively. Implementation
Standard / Micro insurance Multiple issues in standards
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Enterprise Metrics
Role of supervisor Analogy: A game
▪ Supervisor: Referee▪ Regulation: Formal game rules ▪ Supervision: Referee game in practice▪ Industry: Playing teams▪ Policyholders: Spectators
Supervisory regime▪ Enabler - provides industry with
opportunity▪ Balance - care not to inhibit while retain
control and protect policyholder interests
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Enterprise Metrics
Standard / Micro insurance
Continuum, not disjoint Ref: IAIS_2007
Standard ins - used
Under/Uninsured
Micro ins
Uninsurable through market
Wealth
12
Enterprise Metrics
Comparison
Insurance risk the same▪ Require grouping▪ Avoid anti-selection▪ Importance of insurance risk mitigation
Challenge: Operational changes▪ All steps in ‘chain’ from policyholder to
insurer and (possibly) back to policyholder
▪ Simplicity▪ Robustness▪ Group focus
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Enterprise Metrics
MI – key ICPs
4 – Licensing 8 – Risk management and internal
controls 17 – Capital 18 – Intermediaries 19 – Distributors 20 – Consumer protection
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Enterprise Metrics
Supervisory interactions (Sup Int) Need understand the value chain to have
appropriate ‘refereeing’ that links are not broken or abused▪ System fails at the weakest link
Starts and finishes with the policyholders▪ Service providers positions need to be
viable
MI based, long term, on simplicity, volume, group context, and consumer value
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Enterprise Metrics
Sup Int: Supervisor
Public opinion SBP SECP
User Distributor Manufacturer
Policyholder MFI Insurer
??
18
Enterprise Metrics
Sup Int: Purchase & premiums
Public opinion SBP SECP
User Distributor Manufacturer
Policyholder MFI Insurer
??
19
Enterprise Metrics
Sup Int: Claims management
Public opinion SBP SECP
User Distributor Manufacturer
Policyholder MFI Insurer
??
Rs
20
Enterprise Metrics
Sup Int: Policy servicing
Public opinion SBP SECP
User Distributor Manufacturer
Policyholder MFI Insurer
??
Rs
21
Enterprise Metrics
Sup Int: Business partnership
Public opinion SBP SECP
User Distributor Manufacturer
Policyholder MFI Insurer
??
Rs
22
Enterprise Metrics
Sup Int: Perceptions & reputations
Public opinion SBP SECP
Reputational Risk
User Distributor Manufacturer
Policyholder MFI Insurer
??
Rs
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Enterprise Metrics
SECP interest in entire ‘chain’ Insurance ordinance, 2000 (preamble) Ordinance to regulate the business of
the insurance industry▪ To ensure the protection of the interests
of the insurance policy holders and▪ To promote sound development of the
insurance industry ...
Holistic▪ Both insurance risks and all associated
operational and business risks
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Enterprise Metrics
Summary
Objectives of this WB project▪ In independent assessment of the
insurance supervisory regime▪ Provide basis to enhance and address any
issues identified MI
▪ No specific recognition in law or insurance regulatory and supervisory regime
▪ Key distinctive aspects that need explicit recognition in supervisory regime. In progress
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Enterprise Metrics
Contact details
Jules Gribble, Director, Enterprise Metrics
Phone: +61 408 127 624
Email: