The National Treasury presented its response to public comments received on the Insurance Bill, 2016, to Parliament’s Standing Committee on Finance in May. A copy of the Bill, as well as the presentation was published on Wednesday.
Key Issues Addressed In Proposed Revisions
- Transformation of insurance sector: The objective of the Act was amended to include a specific reference to transformation of the insurance sector.
- Promoting financial inclusion through microinsurance: Changes here addresses concerns that the Bill seeks to distinguish between micro-insurance and macro-insurance business and would exacerbate a lack of transformation in the industry.
- Cost of regulation as a barrier to entry: There were concerns that the Prudential Authority may direct a capital add-on if the risk profile or governance framework of the insurer deviates from the underlying Solvency Capital Requirement calculation. This could result in small black-owned businesses being taken over by big insurers.
- Alignment with the Financial Sector Regulation Bill: The Insurance Bill was tabled on 28 January 2016, while the FSRB was being processed by the SCOF. The Bill needs to be revised to be properly aligned with the FSRB.
Whilst a number of the changes relate to transformation, two revisions are interesting from the perspective that it addresses practical issues relevant to the South African market.
- Section 63: Prudential standards: This section has been amended to explicitly provide for specific matters that must be considered (i.e. the objective of the Bill, international regulatory and supervisory standards, to the extent practicable and with due consideration to the South African context and the nature, scale and complexity of different kinds or types of insurers and controlling companies).
- Section 66: Exemptions: This is a new section that includes specific matters that must be considered when granting exemptions (such as practicalities, proportionality and developmental, financial inclusion and transformation objectives).