Presenter: Adv Suzette Olivier Date: 26 March 2018 Johannesburg 28 March 2018 Cape Town

Transcription

1 GENERAL LEGISLATIVE UPDATE Presenter: Adv Suzette Olivier Date: 26 March 2018 Johannesburg 28 March 2018 Cape Town

2 Background Prudential legislation Financial Sector Regulation Act Insurance Act Financial Sector Levies Bill Financial Sector Code Other prudential legislation Market Conduct legislation Conduct of Financial Institutions Bill Financial Advisory and Intermediary Services Act Short-and Long-term Insurance Acts Other non-financial sector specific legislation Protection of Personal Information Act Competition Amendment Bill National Credit Amendment Bill Guardrisk new membership

3 END STATE OF THE REGULATORY LANDSCAPE PRUDENTIAL REGULATION INSURANCE ACT REGULATORY INSTRUMENTS (STANDARDS) FINANCIAL SECTOR REGULATION ACT GUIDANCE NOTES COFI ACT INTERPRETATION RULINGS MARKET CONDUCT REGULATION Slide 3

4 Background Prudential legislation Financial Sector Regulation Act Insurance Act Financial Sector Levies Bill Financial Sector Code Other prudential legislation Market Conduct legislation Conduct of Financial Institutions Bill Financial Advisory and Intermediary Services Act Short-and Long-term Insurance Acts Other non-financial sector specific legislation Protection of Personal Information Act Competition Amendment Bill National Credit Amendment Bill Guardrisk new membership

5 FINANCIAL SECTOR REGULATION ACT (FSRA) Signed into law August 2017 Financial system that works in interest of financial customers Achieving balanced and sustainable economic growth

6 FINANCIAL SECTOR REGULATION ACT (FSRA) Objectives include Safety and soundness of financial institutions Financial inclusion Consumer protection Efficiency and integrity of the financial system Transformation Prevention of financial crime Confidence in the financial system

7 FINANCIAL SECTOR REGULATION ACT (FSRA) Framework for licensing, regulatory instruments, conglomerate supervision, inspections and investigations & significant owners, investigations In addition: Schedule 2 mandate for PA/FSCA to supervise FICA/AML/CTF How will supervision be conducted? - On-site supervision (domestic/foreign) - Off-site supervision (workshops/ thematic reviews/returns/progress reporting)

8 FINANCIAL SECTOR REGULATION ACT (FSRA) Other important functions to be considered cont - Conglomerate Supervision introduced (additional requirements and includes licensing the holding company) - will be designated as such Targeted date 1 March 2019 Draft prudential standards Framework to provide for: capital requirements, risk concentration, intra-group exposures, corporate governance & risk management, and reporting - Systemically Important Financial Institutions (SIFI s)

9 INSURANCE ACT 2016 Bill tabled 18 January 2018 Bill enacted July 2018 Expected commencement date 2009 to 2015 Development of the Bill and sub-ordinate legislation (standards) 2015 Parliamentary process commenced Next steps Formal consultation on insurance standards Conversion of insurance licenses Slide 9

10 INSURANCE ACT Some key facts - Act has a prudential focus - Consolidates the long-term (life) and short-term (non-life) prudential regulatory framework in one Act - Framework legislation this means all the technical requirements are provided for in standards - Provides for conglomerate supervision - Introduce microinsurance framework - Provides for dedicated cell captive license - Strengthens governance framework Continued Comprehensive Parallel Run ( CPR ) intended to achieve a smooth transition to the effective implementation of SAM

11 INSURANCE ACT Conversion process 3 Tranches Tranche Period from commencement date of Insurance Act months July December 2018 Type of insurer Dormant insurers Conversions - Local reinsurers to foreign branches - Insurers to micro insurers - Cell captive insurers Guardrisk months January June 2019 Captive insurers Linked insurers Reinsurers months January June 2020 All other insurers

12 INSURANCE ACT Conversion process what does it entail and how does it impact our partners Pre conversion process Pre conversion engagement Independent expert review Submission for conversion Consideration of conversion Issue of notification of scope Issuing of insurance license

13 INSURANCE ACT How will it impact our partners? Certain implications by virtue of being a cell owner Certain general requirements to be considered - Segmentation or authorisation classes - Insurers will only be allowed to take certain reinsurance arrangements into consideration for financial soundness requirements - Therefore if reinsurance is placed in foreign jurisdictions, it will have an impact on financial soundness

14 INSURANCE ACT Certain implications for cell owners Background - 11 June rd party call captive paper was published with certain recommendations - Many of the recommendations have been legislated whilst there are still some policy positions that remain outstanding

15 INSURANCE ACT 3 rd Party cell captive discussion document recommendations Provisions relating to licencing and business to be conducted - To be conducted under a dedicated insurance licence - Similar arrangements will no longer be permitted - Third party and first party business may not be conducted in the same cell Who may be a cell owner - Cell owner to be restricted to binder holder (UM/NMI affinity) - Approval required for NMI affinity cell owners - Criteria set for affinity scheme Status Legislative instrument Insurance Act effective 1 July S25 (6) (a) Only a cell captive insurer may conduct insurance business through cell structures - Definition of cell structure - S25 prescribes a cell captive insurer may not insure first party risks and third party risks in the same cell structure Research - Role of cell captives to develop the insurance market to improve transformation, inclusion and MSME development. Include the benefits and risks and how to mitigate it accordingly

16 INSURANCE ACT 3 rd Party cell captive discussion document recommendations Governance and risk management - Prescribing provisions in shareholder / cell agreements - Existing licensing conditions will be amended - same standard registration conditions apply in respect of third-party cell captive insurers (with similar models) - Insurers may only be cell owners to the extent that they are insuring their own (operational) risks Market conduct recommendations - Enhanced disclosure and restrictions on white-labelling Status Legislative instrument - Developing governance and operational requirements for cell captive insurers - Insurance Act effective 1 July 2018 (S25) Conversion process - S25 (6)(b)(ii) may not insure the risks associated with the insurance obligations of another insurer without the approval of the Prudential Authority - General requirements on white labelling clearly and prominently identify the insurer including same font size as the white label and due diligence

17 3 rd Party cell captive discussion document recommendations Reporting and monitoring - Reporting on each cell arrangement - On-going monitoring Prudential - Insurers are accountable for the financial soundness of each third-party cell arrangement that they put in place and the market conduct of cell owners - Financial soundness of individual cells (including a minimal capital requirement of R1 million) as well as the cell captive insurer - Investment strategy to be approved by insurer INSURANCE ACT Status Legislative instrument - Information Request 5/2016 notification of all third party cells both market conduct and prudential - Above also included information request of all cell arrangements - Insurance Act and Prudential Standards - FSI standard 4.2 Effective 1 July 2018 Minimum capital requirement of R1 million has been introduced for each cell when aggregating the SCR for all cells (R microinsurance) - Governance and operational standards to be developed

18 - Authorisation classes INSURANCE ACT Risk Fund risk Individual investment Credit Life Fund investment Funeral Income drawdown Life Annuities Reinsurance

19 - Authorisation classes INSURANCE ACT Class Individual Group

20 - Authorisation classes INSURANCE ACT Credit Life Funeral Lump sum Specified amount Payable at specific intervals To satisfy financial obligations Happening of health, death, disability In the event of unemployment or other insurable risk likely to impair person s ability to earn an income or meet credit obligations Individual cap for a specified amount, cover cost associated with funeral or rendering a service on the happening of a death event Group as above but payable to a beneficiary

21 - Authorisation classes INSURANCE ACT Motor Transport Property Rail Guarantee Agriculture Legal expense Accident and Health Engineering Liability Travel Marine Consumer credit Miscellaneous Aviation Trade credit Reinsurance

22 - Authorisation classes INSURANCE ACT Personal lines Class Individual/Group Commercial lines

23 - Authorisation classes INSURANCE ACT Consumer credit Personal lines Commercial lines Lump sum payable to satisfy all or part of a financial liability to a credit provider in the event of loss resulting from the possession, use, ownership or benefits of the goods or services supplied in terms of the credit agreement Excludes death and disability

24 - Authorisation classes INSURANCE ACT Consumer credit Non-Life Life or Microinsurance Conversion process

25 INSURANCE ACT Equivalent foreign jurisdictions PA may by notice determine that the requirements imposed by a foreign jurisdiction are equivalent if the PA is satisfied that the laws, and supervisory and information sharing frameworks, established in that foreign jurisdiction meet the objects of the Act What does its equivalence mean? Insurers will be allowed to only take reinsurance arrangements into consideration for financial soundness purposes - impact on the capital required to hold

26 INSURANCE ACT Equivalent foreign jurisdiction list Australia Germany Netherlands Austria Gibraltar Norway Belgium Greece Poland Bermuda Hungary Portugal Brazil Iceland Romania Bulgaria Ireland Slovakia Canada Italy Slovenia Croatia Japan Spain Cyprus Latvia Sweden Czech Republic Liechtenstein Switzerland Denmark Lithuania United Kingdom Estonia Luxembourg USA Finland Malta France Mexico

27 INSURANCE ACT Draft Prudential Standards issued Financial Soundness Standards (FS) FSI: Insurers FSG: Insurance groups FSM: Micro-insurers FSL: Lloyd s FSB: Branches of foreign reinsurers Governance Standards (GR) (same split as above) NB: *Auditing standards and Reporting Standards to be issued later

28 FINANCIAL SECTOR LEVIES BILL Provides for levies for Prudential Authority, Financial Sector Conduct Authority and others (Ombuds Schemes) Institutions will pick up the appropriate portion of additional costs to implement a Twin Peaks model where resourcing is required to enable their supervision e.g. strong research skills, data analytic capability, Fintech capability and the use of Fintech

29 FINANCIAL SECTOR CODE Revised Financial Sector Code (FSC) effective date 1 December 2017 Promoting a transformed financial sector through empowerment financing and access Each financial institution measured on its own (irrespective of forming part of group) but reporting can be done on group basis Targets (reduced from 9-7) include Ownership, Management & Control, Skills Development, Procurement & Enterprise Supplier Development, Socio Econ Dev. & Consumer Ed, Access to Financial Services Priority elements included Registration of BEE transactions and oversight by BEE commission

30 FINANCIAL SECTOR CODE - SCORECARD ELEMENT Former FSC CODES Weighting Points AMENDED FSC CODES Weighting Points ST LIFE OTHER Ownership Management & Control Skills Development Procurement & Enterprise Supplier Development SED and Consumer Education Access to Financial Services Empowerment Financing 25 TOTAL Slide 30

31 OTHER PRUDENTIAL LEGISLATION Taxation Laws Amendment Act - Tax amendments due to the SAM framework for long-term insurers - Amendments to tax valuation method for long term insurers - Tax treatment of deferred acquisition costs by long-term insurers 2018 Draft Rates and Monetary Amounts and Amendment of Revenue Laws - This Bill will give effect to the VAT increase - Guardrisk part of the working group engaging on the practical implications of the amendments on the short-term insurance sector via the industry association - Impact on short-term insurance (long-term VAT Exempt) applied for a special VAT Ruling

32 Background Prudential legislation Financial Sector Regulation Act Insurance Act Financial Sector Levies Bill Financial Sector Code Other prudential legislation Market Conduct legislation Conduct of Financial Institutions Bill Financial Advisory and Intermediary Services Act Short-and Long-term Insurance Acts Other non-financial sector specific legislation Protection of Personal Information Act Competition Amendment Bill National Credit Amendment Bill Guardrisk new membership

33 MARKET CONDUCT LEGISLATION Conduct of Financial Institutions Bill (COFI) - Framework legislation with the technical details in sub-ordinate legislation (currently being formulated) - Pending the development/effective date of this Bill, the current market conduct provisions in the: Short-term Insurance Act (STIA); Long-term Insurance Act (LTIA); and Financial Advisory and Intermediary Services Act (FAIS) will prevail

34 MARKET CONDUCT LEGISLATION Some important amendments and sub-ordinate legislation to take note of: Amendments Financial Services General Laws Amendment Act effective 1 January 2018 Short-term Insurance Act - Section 8(5) of the STIA repealed - What is impact charging these fees Instead provided for in PPR and FAIS General Code of Conduct (agreed, actual service, not already remunerated for and stopped at the discretion of client) Insurer may facilitate payment subject to PPR 12 - Consequential amendments following the effective date of Insurance Regulations

35 MARKET CONDUCT LEGISLATION Some important sub-ordinate legislation to take note of: Insurance Regulations - Effective 1 January 2018 (incl. amendments to the Binder Regulations) issued under STIA/LTIA - Transitional requirements Replacement Policy Holder Protection Rules - Effective 1 January 2018 issued under STIA/LTIA - Transitional requirements FAIS Fit and Proper requirements - Effective 1 April 2018 issued under the FAIS Act - Transitional requirements - Consequential impact on RE, CPD hours, Conduct of Business and Product Specific Training Conduct of business returns Guidance note on the reappointment of debarred representatives

36 MARKET CONDUCT LEGISLATION Some important draft sub-ordinate legislation to take note of: FAIS Draft Amendments to the General Code of Conduct Draft revised Policy Holder Protection Rules Tranche 2 alignment with Insurance Act and issuing of micro insurance product standards that will also apply to funeral policies Equivalence of Reward Determination Sets out which forms of remuneration or consideration the Registrar regards as not being compliant with the principles of Equivalence of reward (consultant app) Other legislative instruments expected - Guidance note on low advice - Paper on commission (activities included /excluded) - Amendments to services under supervision Board Notice - Foreign FSP s conducting business in South Africa to be registered with FSB - Paper on advisory categorisation

37 Background Prudential legislation Financial Sector Regulation Act Insurance Act Financial Sector Levies Bill Financial Sector Code Other prudential legislation Market Conduct legislation Conduct of Financial Institutions Bill Financial Advisory and Intermediary Services Act Short-and Long-term Insurance Acts Other non-financial sector specific legislation Protection of Personal Information Act Competition Amendment Bill National Credit Amendment Bill Guardrisk new membership

38 PROTECTION OF PERSONAL INFORMATION ACT POPIA effective date will not be before the Information Regulator is operational, expected to be during 2018 (website launched a year ago) POPIA Regulations to be tabled in Parliament - April 2018 Involves three parties namely - data subject - responsible party - operator

39 PROTECTION OF PERSONAL INFORMATION ACT Involves three parties namely - The data subject: the person to whom the information relates - The responsible party: the person who determines why and how to process Three elements 1. Receiving or collating information 2. Information flows from an organisation and is disseminated further (i.e. making available) 3. Merging or linking information - The operator: a person who processes personal information on behalf of the responsible party

40 COMPETITION AMENDMENT BILL Aimed at addressing concerns that concentrated markets inhibit new entrants and exclude large numbers of black South Africans to run successful enterprises Commissioner to explicitly consider impact of anticompetitive conduct on small business and firms owned by historically disadvantaged persons MOU between BBBEE Commission and CIPC - Exchange of information and interface of systems to enable the BBBEE Commission to have access to CIPC business registration information

41 NATIONAL CREDIT AMENDMENT BILL The so-called Debt Relief Bill proposes new concept of debt intervention process by NCR on behalf of consumers including assistance with insurance claims Introduces a limited form of poor man s sequestration, with clear indications about who can apply for this debt intervention, such has those who can under no circumstances afford to pay off their debt Expanding the NCR s functions to suspend reckless credit agreements The Bill further proposes a range of new criminal offences, which among others, includes the offence where a person gives him or herself out as a credit provider, without being registered with the NCR Mandatory credit life insurance of certain agreements incl. credit exceeding 6 months and for debt less than R50 000

42 Background Prudential legislation Financial Sector Regulation Act Insurance Act Financial Sector Levies Bill Financial Sector Code Other prudential legislation Market Conduct legislation Conduct of Financial Institutions Bill Financial Advisory and Intermediary Services Act Short-and Long-term Insurance Acts Other non-financial sector specific legislation Protection of Personal Information Act Competition Amendment Bill National Credit Amendment Bill Guardrisk new membership

43 INSURANCE CRIME BUREAU The Insurance Crime Bureau is a non-profit company dedicated to fighting organised insurance crimes and fraud Collective resources of insurance companies, law enforcement agencies and other stakeholders are deployed to facilitate the detection, prevention and mitigation of insurance crimes as well as assisting in the prosecution of repeat offenders and fraudsters through ongoing insurance fraud investigation Guardrisk is a member and this extends to our FSP s that may use the services offered Please engage with your Portfolio manager on how to access the services

44 INSURANCE CRIME BUREAU The Insurance Crime Bureau s operational activities include: Management and monitoring of the insurance industry Fraudline Project management of insurance fraud investigations on personal, commercial, life and health insurance Providing consultation to the SAPS during covert operations and investigative projects Vehicle crime fighting initiatives in partnership with the SAPS Pound clean up initiatives Automated Number Plate recognition system Cloned vehicle operations Bait car operations Providing an on-demand enquiry service to members

45 End Questions. Slide 45