Insurance Regulatory Framework update 2016 11 14 Insurance Regulatory... · Insurance Regulatory...
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Insurance Regulatory Framework update 2016 November 2016 Presentation for: 2016 Insurance Regulatory Framework Seminar By: Jo-Ann Ferreira
Transcript of Insurance Regulatory Framework update 2016 11 14 Insurance Regulatory... · Insurance Regulatory...
Insurance
Regulatory
Framework
update 2016
November 2016
Presentation for:
2016 Insurance Regulatory
Framework Seminar
By: Jo-Ann Ferreira
Financial
Services
Board
Slide 2
Agenda
• Legislative reforms
−Primary Legislation
−Subordinate Legislation
• Demarcation regulations
• Other regulatory initiatives
Financial
Services
Board
Slide 5
Primary Legislation
Insurance Bill
Where we are:
− Bill tabled in Parliament on 27 January 2016
− To be published for comment by Parliament soon
− Parliament process to commence early in 2017
− Envisaged commencement date: 2nd half of 2017
Includes:
− Consequential amendments to the LTIA & STIA through Schedule 1
to align the LTIA & STIA to the Insurance Bill
Financial
Services
Board
Slide 6
Primary Legislation
Insurance Bill
Overview:
− Bill has a “prudential” focus (insurance “conduct of business” provisions
will in the interim be dealt with through LTIA & STIA and finally in CoFI Bill)
− Consolidates long-term (life) and short-term (non-life) prudential regulatory
framework
− Proportionality principle applies throughout
− Framework legislation - technical requirements in subordinate legislation
i.e. prudential standards
− Complements broader financial sector reforms
− Repeals prudential sections of the LTIA & STIA
Financial
Services
Board
Slide 7
Primary Legislation
Conduct of Financial Institutions (CoFI) Bill
Overview:
− Phase 2 of Twin Peaks
− Phase 1: FSR Bill will build on existing market conduct framework (serve as
an overlay)
− Phase 2: Existing sectoral legislation to be reviewed, amended and
ultimately replaced with CoFI Bill, to ensure a comprehensive, consistent
and complete approach to governing the conduct of financial institutions
across the financial sector
− NT has established a working group, with FSB & SARB representatives, to
develop the CoFI Bill
− Aim to table in Parliament in 2018
Financial
Services
Board
Slide 8
Subordinate Legislation
Regulations
Policyholder Protection Rules (PPRs)
Conduct of
Business
Standards
Prudential
Financial
Services
Board
Slide 9
Subordinate Legislation
Prudential Standards
Financial Soundness Standards (FS) Released 4 Nov 2016 for public consultation
− FSI: Insurers
− FSG: Insurance groups
− FSM: Microinsurers
− FSL: Lloyd’s
− FSB: Branches of foreign reinsurers Released 9 September 2016
Governance Standards (GR) Replaces BN 158 of 2014 & Outsourcing Directive
− Same split as for Financial Soundness Standards
Auditing Standards (AU)
− AU1: Auditing requirements
− AU2: Duties and functions of auditor
Reporting Standards (R)
− Same split as for Financial Soundness Standards
Financial
Services
Board
Slide 10
Subordinate Legislation
Prudential Standards
General Standards (G) Issued for comment on 9 September 2016
− G1: Microinsurance business thresholds
− G2: Insurance business excluded from or included in the application of Bill
− G3: Registration of shares in name of nominee
− G4: Reinsurance Arrangements
Fit & Proper Standards (FP) Replaces BN 158 of 2015
− FP1: Fit & Proper framework
− FP2: Directors, senior managers, heads of a control functions and auditors
− FP3: Trustees of trusts of Lloyd’s or a branch of a foreign reinsurer
− FP4: Significant owners
Financial
Services
Board
Slide 11
Subordinate Legislation
Conduct of Business
• Conduct of business reforms to be given effect to through Regulations and
PPRs under the LTIA & STIA.
• To be given effect to in two tranches during the course of 2016 / 2017
• Separate presentation on these reforms
PRUDENTIAL MARKET CONDUCT
PRIMARY SECONDARY PRIMARY SECONDARY
CURRENT LTIA
STIA
Board Notices
Insurance Notices
PPRs
Regulations
LTIA
STIA
Board Notices
Insurance Notices
PPRs
Regulations
TWIN PEAKS
PHASE 1 Insurance Act Prudential Standards
LTIA
STIA
Insurance Notices
PPRs
Regulations
TWIN PEAKS
PHASE 2 Insurance Act Prudential Standards CoFI Act Conduct Standards
Financial
Services
Board
Slide 13
Demarcation Regulations
Status:
− Regulations were tabled in Parliament on 28 October 2016 with planned
effective date of 1 April 2017
− 3rd revised draft (1st draft - March 2012, 2nd draft - April 2014)
Purpose:
− Demarcates responsibility for supervision of medical schemes and health
insurance products
− Aims to ensure that health insurance products do not undermine the medical
scheme environment
− Specifies which types of contracts are regulated under the LTIA & STIA as
health policies and accident & health policies, and are accordingly excluded from
regulation under the Medical Schemes Act (MSA), despite meeting the definition
of “business of a medical scheme”
Financial
Services
Board
Slide 14
Demarcation Regulations
COVER TYPE
Not deemed to be
business of
medical scheme
(written under
LTIA/STIA; MSA
does not apply)
Deemed to be business of medical
scheme, but exempted from MSA
through the regulations
Deemed to be
business of
medical scheme,
not exempted from
MSA through
regulations
Can be written
under LTIA
Can be written
under STIA
Non-impacted products,
e.g. dread disease X
Medical expense shortfall X
Non-medical expense cover
as a result of hospitalisation X X
HIV, Aids, tuberculosis and
malaria testing & treatment X X
Medical emergency
evacuation or transport X X
Frail care X
International travel
insurance X
Primary health insurance X
Financial
Services
Board
Slide 15
Demarcation Regulations
Primary Health Insurance Products:
− Not allowed to be offered by insurers i.t.o. LTIA/STIA; has to be offered in
accordance with MSA
− 2 year exemption period will be facilitated by CMS to allow development of a
Low Cost Benefit Framework led by Department of Health
Definition of a “business of a medical scheme”:
− Amended by FSLGA Act 45 of 2013 (effective 28 February 2014)
− To come into effect at the same time as the Regulations are finalised
− Aimed for 1 April 2017
Financial
Services
Board
Slide 16
Demarcation Regulations
Transitional periods:
− Existing health policies (LTIA) expected to be aligned as and when varied or
renewed after the Regulations come into operation
− Existing accident and health policies (STIA) expected to be aligned by 1 January
2018
Financial
Services
Board
Slide 17
Demarcation Regulations
Products subject to prescribed requirements:
− Marketing, disclosure and reporting requirements
− Maximum commission levels and maximum policy benefits
− Policy and underwriting limitations, including:
Gap cover, hospital plans, cover for HIV/Aids, TB, malaria testing & treatment
- must be underwritten on a group and non-discriminatory basis
- limitation on waiting periods
- requirements for variation and termination
All (except gap cover)
- may not require medical scheme membership
Hospital plans
- prohibition on policy benefits that fully or partially indemnify against medical
expenses
Financial
Services
Board
Slide 19
Other Regulatory Initiatives
• Third-party Cell Captive Insurance position paper
− To be published before the end of 2016
• Information Request 3 of 2016 (LT&ST&LL)
− Info request on binder functions and binder fees
− Issued on 12 September 2016 due by 14 October 2016
• Information Letter 4 of 2016
− Standing approval under s.24 LTIA and s.23 STIA for the issuance of shares
by or a change in capital structure of cell captive insurers, issued on 13
September 2016, including additional notification and reporting requirements
• Information Request 5 of 2016
− Info request on new and existing third-party cell captive insurance business
− Issued on 12 September 2016 due by 31 October 2016
− Information collected will form the basis for ongoing supervision, including a
planned thematic review in 2017
Financial
Services
Board
Slide 20
Other Regulatory Initiatives
• Key information documents (KID’s)
− Consumer testing for motor policies & credit life policies to start in 2017
• Retail Distribution Review (RDR)
− RDR Status Update to be published before end 2016
− Detailed discussion in dedicated session later today
• Conduct of Business Returns (CBRs)
− To be released shortly
− First CBR for period January to June 2016 due 1H 2017 – date to be
confirmed
• Reinsurance Regulatory Review Position Paper & draft Notice on
the determination of Equivalent Foreign Jurisdictions
− Final paper published on 9 September
− Detailed discussion in SAM Workshop
Financial
Services
Board
Slide 21
Other Regulatory Initiatives
• Consumer credit insurance − As said, amendments to the Regulations and PPRs will facilitate alignment with dti
regulations on credit life insurance and give effect to certain regulatory reforms
proposed in the Technical Report
− Responses on the CCI Information Request (IR 3/2015 (LT&ST)) issued in December
2015 due mid-March 2016 analysed
− Report summarising key trends emerging from the responses being finalised
− Will inform possible supervisory interventions relating to CCI going forward
• Inclusive insurance market − Microinsurance paper will be published soon
− Update on the proposed regulation and supervision of an “inclusive insurance
market” including setting out regulatory options for funeral parlours
− Overview of the work undertaken since NT’s Microinsurance Policy Document
in July 2011, as well as the roadmap for implementing the framework
(including the proposed timelines) and interim arrangements
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