OVERVIEW OF THE GENERAL LEGISLATIVE ENVIRONMENT

Transcription

1 OVERVIEW OF THE GENERAL LEGISLATIVE ENVIRONMENT 3 RD PARTY CLIENT WORKSHOP DATE: 28 NOVEMBER 2018 PRESENTER: MAXWELL SIBANDA (CRO)

2 INDEX INTRODUCTION AND BACKGROUND TRANSITIONAL ARRANGEMENTS ( ST & LT ACTS) OVERVIEW: FINANCIAL SECTOR REGULATION ACT OVERVIEW: INSURANCE ACT OVERVIEW: INSURANCE REGULATIONS OVERVIEW: REGULATORY INSTRUMENTS OTHER NOTABLE CONSIDERATIONS & CONCLUSION SLIDE NO: 2

3 INTRODUCTION & BACKGROUND

4 TRANSITION: OLD TO NEW REGULATORY REGIME INSURANCE INDUSTRY REGULATION (FINANCIAL SERVICES BOARD) SHORT-TERM INSURANCE ACT REGULATIONS (SHORT-TERM INSURANCE ACT) LONG -TERM INSURANCE ACT REGULATIONS (LONG-TERM INSURANCE ACT) PRUDENTIAL REGULATION (P. AUTHORITY) FINANCIAL SECTOR REGULATION (FSR) ACT INSURANCE ACT TCF RDR PPR FAIS REGULATIONS COFI BILL MARKET CONDUCT REGULATION (FSCA) SLIDE NO: 4

5 END STATE: NEW REGULATORY REGIME PRUDENTIAL REGULATION FINANCIAL SECTOR REGULATION ACT INSURANCE ACT REGULATORY INSTRUMENTS (INCLUDING: PRUDENTIAL STANDARDS, CONDUCT STANDARDS & JOINT STANDARDS) GUIDANCE NOTES COFI ACT INTERPRETATION RULINGS MARKET CONDUCT REGULATION SLIDE NO: 5

6 TRANSITIONAL ARRANGEMENTS (ST & LT ACTS)

7 PA & FSCA: JOINT COMMUNICATION 1 OF 2018 Status of instruments issued under (LT or ST Ins Acts), post 1 Jul 2018 Insurance Act repealed all prudential requirements under LTI Act and STI Act. Remaining sections of LTI Act & STI Act provide conduct of business legal framework for insurers pending the enactment & implementation of COFI Act. Directives, Board Notices, Insurance Notices, Info Letters & Guidance Notes In terms of above, post 1 July 2018, certain ST & LT insurance instruments: - remain in force; - withdrawn / lapse on the effective date of the Insurance Act; and - are no longer relevant. SLIDE NO: 7

8 OVERVIEW: FINANCIAL SECTOR REGULATION ACT

9 OVERVIEW FINANCIAL SECTOR REGULATION ACT 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. SLIDE NO: 9

10 OVERVIEW: INSURANCE ACT

11 OVERVIEW OF THE INSURANCE ACT Legal framework for prudential regulation & supervision of insurance business. To promote the maintenance of a fair, safe and stable insurance market. Make provision for the broad-based transformation of the insurance sector. Introduce a legal framework for microinsurance to promote financial inclusion. Enhance the protection of policyholders as well as potential policyholders. To replace certain parts of the LT or ST Ins Acts (w.r.t prudential matters). SLIDE NO: 11

12 OVERVIEW: INSURANCE REGULATIONS

13 INSURANCE REGS. (TRANCHE 1): BINDER FEES 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) (c) Determine policy wording Determine policy premiums Function (a) and one or more of functions (b) (d) 5% (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% SLIDE NO: 13

14 INSURANCE REGS. (TRANCHE 1): BINDER FEES 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 July 2018 Agreements entered into between 1 Jan 2017 and 31 Dec July 2018 Agreements entered into before 1 Jan January 2019 SLIDE NO: 14

15 INSURANCE REGULATIONS (TRANCHE 2) Amendments to Regulations i.t.o Tranche 2, came into effect 01 Oct To align the Regulations (specifically terminology) with the Insurance Act. 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. The amendments in respect of premium collection (effective 01 July 2019). SLIDE NO: 15

16 OVERVIEW: REGULATORY INSTRUMENTS

17 PRUDENTIAL STANDARDS (FINANCIAL SOUNDESS) 1 JUL 2018 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 SLIDE NO: 17

18 PRUDENTIAL STANDARDS (GOVERNANCE & OPERATIONAL) 1 JUL 2018 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 SLIDE NO: 18

19 OTHER NOTABLE CONSIDERATIONS & CONCLUSION

20 INTERMEDIARIES GUARANTEE FACILITY (IGF) Joint Communication 3 (PA & FSCA): Deals with temporary continuation of insurance business of the Intermediaries Guarantee Facility (IGF). Requirement that an entity collecting premium must hold a guarantee policy (IGF) or bank guarantee removed in terms of Insurance Act (01 July 2018). 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 Post 31 March 2019, insurers allowing intermediaries to collect premiums on their behalf, no longer able to rely on intermediaries obtaining IGF policies. Insurers therefore expected to implement credit risk mitigation measures. SLIDE NO: 20

21 CONCLUDING REMARKS Significant changes to the insurance environment (in transition from the old to the new regulatory regime under Twin Peaks. Not all the requirements have been finalised by regulatory authorities (there are still debates on key issues i.e. cell captive regulatory framework). Separate presentations on: Regulatory framework for 3 rd Party Cell Captives, Microinsurance, Policyholder Protection Rules & Prudential Standards (SAM). 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). SLIDE NO: 21

22 Thank you