All hands on deck

01 August 2017 Navan Consulting

We are all generally aware of the raft of legislative and regulatory changes coming at the insurance industry.

Some of these are set to move quite quickly since the Financial Sector Regulation Bill was passed by the National Assembly on 22 June, and the Financial Services Board (FSB) has recently said that implementation will start taking effect in 2018.

Paving the way
This in turn paves the way for the implementation of the Insurance Bill which will replace certain elements of the existing Short-Term and Long-Term Insurance Acts and provides the framework for oversight of the insurance industry by the Prudential Authority (PA).

The balance of the two acts will eventually be incorporated into the Conduct of Financial Institutions Bill.

There have been some moves on the Insurance Bill as National Treasury and the FSB made representation to Parliament on 12 May to discuss changes. A copy on the FSB’s website makes for some interesting reading and there are certain elements that insurers need to be aware of.

Framing the changes
The first provides an overview contained in para 10.2.1 in the Memorandum on the objectives of the Insurance Bill:

The Bill is drafted as framework legislation. It is enabling or empowering (and should be in respect of the new solvency regime). … It provides for the basic or minimum issues and powers necessary to regulate insurers, and delegates the power to make secondary legislation and other authority to implement and enforce the Bill to the Prudential Authority.

It may be described as a skeleton form to which flesh is to be added by secondary legislation. The supervisory, regulatory and regulatory action powers afforded to the Prudential Authority under the Financial Sector Regulation Bill, 2015, complements the Bill.

We are already seeing some of the proposed regulations in the form of Financial Soundness Standards for Insurers (FSI’s) and Governance and Operational Standards for Insurers (GOI’s).

New submissions
The second thing that most are aware of because it has been part of the Solvency Assessment and Management (SAM) framework QIS submissions are the new classes of business.

The Insurance Bill in Table 2: Classes and sub-classes of Insurance of Business Non-Life Insurance makes provision for 41 classes and sub-classes of business, and two classes in the reinsurance category.

This has major implications on operational issues, not least of which are systems and reporting. There will also be costs involved, although in some respects a lot of the supporting work will hopefully have been covered in preparing for SAM.

It should also be noted that the proposed classes of business do not necessarily correlate directly with those used under SAM.

Non qualifiers
The next point is that of relicensing. The Insurance Bill, Schedule 3 paragraph 6, makes provision for the Prudential Authority to have all existing insurers relicense under the Act within two years of the effective date.

They in turn have two months from the effective date to issue guidelines on the process to be followed.

This is an important issue as it expected that under the new regime certain insurers potentially will not qualify to write certain classes or sub-classes of business if they do not currently have enough business.

PA powers
Sub-paragraph 4 goes on to deal with what happens if the PA does not grant a license in respect of all the classes and sub-classes similar to the lines of business the insurer has been conducting.

If the insurer is not licensed in certain classes or sub-classes, the PA can then either instruct the insurer to:
- discharge its obligations;
- ensure the orderly resolution of the business; and/or
- transfer the business to another insurer.

This must happen within six months of relicensing, but implies that not all insurers will necessarily be guaranteed licenses that correlate with what they currently enjoy.

There is work ahead but it should be an interesting time providing plenty of opportunity.

Quick Polls


Do you believe this is the toughest period for financial advice in many years?


Yes, it’s hard to navigate the challenges and difficult to adapt. I’m struggling.
No, I have managed to navigate the challenges and have adapted. I’m good.
50/50. I just feel like whether we like it or not, we have to ready ourselves for change… be resilient and scale for the future. It’s not about survival of the fittest anymore but survival of the quickest. We just have to move on with life.
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