The purpose of this directive is to “…direct long-term and short-term insurers (‘insurers’) to comply with the requirements set out in this Directive when outsourcing an aspect of their long-term and short-term insurance business (‘insurance business’) to another person.”
The Directive sets out the general and overarching requirements that an insurer must comply with when outsourcing any aspect of its insurance business. This means that it applies in addition to the existing regulatory framework. An insurer must therefore, in addition to this Directive, comply with the specific regulatory requirements set out in the regulatory framework, such as the requirements relating to the nominee business, binder agreements and assistance business group schemes (Under the Long Term insurance Act)”
We provide a few key points below, but strongly advise readers who may be affected to study the full document which is available in the Moonstone library under the Acts/Legislation section.
- “Outsourcing means an arrangement of any form between an insurer and another person, whether that person is supervised under any law or not, in terms of which that party performs a function or an activity, whether directly or by sub-contracting, which would otherwise be performed by the insurer itself”.
- The Board of Directors and Managing Executives of an insurer remain responsible for the insurance business, regardless of outsourcing.
- Remuneration must be “reasonable and commensurate with the actual function or activity outsourced” – A Person (Including sub-outsourcing to other individuals) cannot be remunerated twice for the same activity.
- Any outsourcing of a control, management or material function must be governed by written contracts. This excludes binder functions as they are covered by specific provisions and have their own requirements.
- Other instructions include how and when the FSB has to be notified of outsourcing arrangements. Details are also provided on how this directive must be applied to existing outsourcing contracts.