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South African Insurance Association

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Updated Comprehensive Parallel Run 2016

The updated Comprehensive Parallel Run (CPR) exercise taking place in 2016 will allow a final opportunity for insurers and the FSB to establish and test resources, processes and systems ahead of full SAM implementation. The updated CPR encompasses the vast majority of what is anticipated to be the components and requirements of the final SAM framework.

The Updated CPR Technical Specification and supporting documents were issued to the Insurance Industry on 1 April 2016, and can be found on the FSB’s website (www.fsb.co.za). These technical specifications incorporate the latest changes and corrections to the 2015 CPR technical specifications and SA QIS3.

 There are a few outstanding aspects of the SAM technical specifications that remain under consideration and are expected to be finalised by July 2016. Accordingly, the FSB plans one more update to the technical specifications in the second half of 2016. Further details pertaining to these outstanding aspects will be communicated in a 2016 FSB SAM Update document, expected to be issued in due course.

Although the Updated CPR calculations are largely based on the SA QIS3 exercise, there are some further changes that have been made to reflect results coming from SA QIS3 and the first CPR submissions, the latest position of the SAM Governance structure and the expectations from the FSB.

For the updated CPR, insurers are required to produce all the quarterly and annual quantitative, qualitative and group reporting as expected when the SAM framework is fully implemented. The reporting will be augmented with an Updated Mock ORSA report.

Updated MOCK ORSA

Included in the Updated Comprehensive Parallel Run Technical Specification document is information and guidance pertaining to the requirements for the 2016 Updated Mock ORSA.

 The objectives specific to the Updated Mock ORSA are to:

  • Assist in insurers’ journey towards SAM readiness by taking stock of progress on ORSA developments against SAM requirements and guidance;
  • Assist in building the FSB’s supervisory capabilities with respect to analysing ORSA supervisory reports;
  • Assist the FSB in identifying the industry’s overall readiness for SAM (specifically the ORSA) and identify development trends at a macro level; and
  • Assist the FSB in their assessment of where insurance groups can apply for exemptions from the requirement to submit ORSA supervisory reports at solo entity levels.

 It is not the purpose of the Updated Mock ORSA to apply any additional regulatory capital requirements.

Insurers / insurance groups should choose their own effective dates for the ORSA in line with their respective business planning cycles. For the purposes of the Updated Mock ORSA, insurers / insurance groups are however required to submit the information to the FSB by no later than 30 September 2016. Insurers / insurance groups may apply to the FSB to submit the Updated Mock ORSA at a later date, but not later than 30 November 2016.

The scope of the Updated Mock ORSA includes both solo insurers and insurance groups. For insurance groups intending to apply for exemption to perform only a group-wide ORSA report (and thus not to submit supervisory ORSA reports for solo entities within the group), the Updated Mock ORSA supervisory report can be produced on the assumption that such exemption has been granted. There will be no formal exemption approval process as part of the Updated Mock ORSA.

The FSB expects that insurers continue to improve on their previous Mock ORSA submissions. To this effect the FSB will be engaging with insurers to provide individual feedback and guidance relating to their 2015 Mock ORSA submissions, early in the second quarter of 2016.

SAIA members are encouraged to refer to FSB SAM Newsletter 17 and to consider the key findings by the FSB pertaining to the 2015 Mock ORSA submissions, in preparing their Updated Mock ORSA documentation and policies.

 (Most of the information above has been extracted from the Updated Comprehensive Parallel Run Technical Specification Document released to the Insurance Industry on 1 April 2016)

 For more information contact Gareth van Deventer, SAM Projects Manager: Gareth@saia.co.za