Reinsurance being insurance for insurers, connects the primary insurers and reinsurers, who purchase reinsurance for risks that exceed their retention and capacity.
The review of the reinsurance landscape in South Africa is currently under review with proposed policy decisions to be incorporated in the Insurance Bill expected for comment in 2014 and which will shape and influence the regulatory reinsurance landscape within South Africa.
FSB Reinsurance Regulatory Review and Solvency Assessment and Management
The Financial Services Board (FSB) has embarked on a project to review the reinsurance regulatory environment as part of their main objective of overhauling the entire supervisory landscape within South Africa. The FSB’s Reinsurance Regulatory Review Project falls under the ambit of the FSB’s Solvency Assessment and Management (SAM) regime with the Head of the FSB SAM Unit accepting responsibility for this project.
Solvency Assessment and Management
In 2010 the Financial Services Board (FSB) embarked on its journey towards redesigning the current insurance regulatory landscape within South Africa through the launch of their Solvency Assessment and Management Project (SAM). The SAIA recognised the profound impact that the new proposed SAM regime would have on the industry and in response established the SAIA SAM Project Support Office (PSO), to pilot the short-term insurance industry towards the new regulatory.
The SAIA SAM structures are represented graphically below:
Background toSolvency Assessment and Management
The main focus of the FSB’s new SAM initiative is centered on risk and capital management and is based on the European Union’s Solvency II Directive (2009/138/EC).
The key objective of the final SAM framework is to enhance the protection of the rights of policyholders of insurance products.
Other important objectives of SAM include:
• Alignment of capital requirements with the underlying risks of an insurance company.
• Development of a proportionate, risk-based approach to supervision with appropriate treatment both for small companies and large, cross border groups.
• Provision of incentives to insurers to adopt more sophisticated risk-monitoring and risk-management tools; this would include developing full and partial internal capital models and increased use of risk mitigation and risk transfer tools.
• Ensuring that there is financial stability and fair and stable markets. Solvency Assessment and Management
The primary objective and purpose of the SAIA Project Support Office (PSO) is to:
• Efficiently contribute to the overall design of SAM,
• Be the industry body representative on SAM, and
• Assist members in adhering to the compliance requirements of the new proposed SAM regime through the pursuit of various initiatives.
Critical focus areas for the SAIA PSO in 2014
- Reporting Templates
- Transitional Arrangements
- The Comprehensive Parallel Run
- SAM Legislation