A recent case from the Enforcement Committee reinforced the importance of making sure that one understands the requirements contained in regulations and directives issued from time to time.
The latest version of Directive 149 .A.v. was published in 2013, and contains specific guidelines on how FSPs should proceed when placing business overseas. The Directive applies to both Long- and Short-term insurance.
In this particular case, the FSP “…held a bona fide belief …” that it had complied with the applicable legislation when it submitted a single application under a particular scheme, and incorrectly believed that cover for other cases under the same scheme would also fall under the initial approval by the Registrar.
It did not, and led to a fine of R150 000.
Directive 149 .A.v. dictates the following:
An application under section 8(2)(d) of the Act must simultaneously be submitted to the Registrar and the South African Insurance Association (“SAIA”) via the Offshore Insurance Placement system (the “OSIP” system) at www.osip.co.za. A user manual is available on the system.
Intermediaries that are not members of Financial Intermediaries Association of Southern Africa (“FIA”) must also utilise the OSIP system by registering on the system at www.osip.co.za.
The rationale for also submitting an application to SAIA is to endeavour to protect South African policyholders. It also affords an opportunity to the South African insurance industry to offer the insurance locally. SAIA assists the Registrar in assessing if the insurance is available locally and at competitive rates.
If no registered short-term insurer offers the insurance sought or offers it at competitive terms and conditions and/or the potential policyholder provides reasonable grounds for wanting to place the insurance with an entity outside of the Republic, then the granting of the section 8(2)(d)-application will be favourably considered.
An application under section 8(2)(d) of the Act must be accompanied by a declaration by the potential policyholder that the policyholder is aware that if the application is granted, the policyholder is not afforded any protection under the Act in respect of such insurance and that the foreign insurer does not have assets available in South Africa to cover its liabilities.
Please click here to download a copy of Directive 149 .A.v.