FSB releases Solvency Assessment and Management (SAM) Roadmap

As announced by the Minister of Finance as part of the Medium Term Budget Policy Statement (MTBPS), the Financial Services Board (FSB) is introducing a revised prudential regulatory regime for insurers, based on Solvency II, to ensure that regulation of the South African insurance sector remains in line with international best practice.

The new solvency regime for South African short-term and long-term insurers, known as the Solvency Assessment and Management (SAM) regime, will be implemented in January 2014.

The FSB has today released a “Solvency Assessment and Management (SAM) Roadmap” to provide insurers and other stakeholders with an outline of the main features of the new solvency regime, its objectives, implementation timelines and challenges.

The primary purpose of this new regime is to improve the protection of policyholders and beneficiaries. Additional objectives of the regime are:

• To align the capital requirements of insurers with their underlying risks.

• To develop a proportionate, risk-based approach to the supervision of insurers with appropriate treatment both for small insurance companies as well as large, cross border insurance groups.

• To provide incentives to insurers to adopt more sophisticated risk monitoring and risk management tools.

• To help maintain overall financial stability.

SAM will be based on the Solvency II regime being implemented for European insurers and reinsurers in 2013 and will share the same broad features as Solvency II, being a risk-based set of regulations. SAM is being developed by the FSB in consultation with industry participants and other key stakeholders.

The FSB expects all insurers to familiarise themselves with the SAM Roadmap and to expedite their efforts in preparing for the implementation of the SAM regime. The FSB is confident that the SAM Roadmap will provide all South African insurers with a clearer understanding of what is required of them, thereby ensuring that they are fully able to implement the new solvency regime by 1 January 2014.

The SAM Roadmap provides an important overview of the key messages regarding the new solvency regime that will pertain to all South African insurers. These key messages include amongst others:

• The need for insurers to develop systems to assess capital adequacy and capital planning;

• The need to implement adequate systems of governance;

• The need to manage all material risks within the business; and

• The need to address enhanced levels of reporting and disclosure.

The FSB is confident that the implementation of SAM will ensure that regulation of the South African insurance sector remains in line with emerging international best practice, incorporating key lessons learnt from the recent global financial crisis.

The SAM Roadmap is available on the website of the FSB at http://www.fsb.co.za/.