nottheaverageactuary

Actuarial news and views from Cape Town and beyond

FSB Proposes to Allow Foreign Reinsurers

1 Comment

Here is the section from the Financial Services Board newsletter on 7 November 2014:

“The FSB proposes to allow foreign reinsurers to operate in South Africa through a branch, if

approved to do so by the FSB. Opening up the reinsurance market to branches will increase

the supply of reinsurance within the South African market. There may also be incentives for

reinsurers that operate on a cross border basis to establish branches in South Africa, adding

to the development of a local reinsurance industry that can serve as a regional hub for

reinsurance business.”

These are subject to meeting the same conditions from SAM (Solvency and Assessment Management Regime) that local reinsurers must meet as stipulated below from the Newsletter:

  • Pillar 1         

o Technical Provisions would also need to be calculated in line with the SAM

requirements and it would be required that assets at least equal to the

technical provisions are held in a trust account. The investments held in the

trust account will be subject to the prudent person principle.

o The assets in the trust would not be accessible by the parent reinsurer without

prior permission from the FSB, and the FSB may access the assets if there

are prudential or conduct failures by the branch.

o If the figures are calculated by the parent reinsurer, they would be subject to

an annual independent review process.

  • Pillar 2

o An ORSA will be required to be conducted in respect of the business written

through the branch.

o The regulator will have the ability to apply capital add-ons where the SCR

does not reflect the risk profile of the branch, or where there are concerns

relating to risk management or governance.

o Control functions will be required, but in a proportionate manner.

  • Pillar 3

o Branches will be required to report to the same level as is required for a locally incorporated reinsurer.”

https://www.fsb.co.za/Departments/insurance/Documents/SAM%20Newsletter%2015.pdf
This should allow for ease of expansion to the South African market, increasing employment possibilities and growth in the industry in general. It will also allow for stronger relationships of local insurance companies with foreign reinsurers and possibly bring more expertise and knowledge into the South African market.

Advertisements

One thought on “FSB Proposes to Allow Foreign Reinsurers

  1. The re-insurer which are already operating in South Africa are not local companies. They are foreign companies, for example, Munich re, is from Munich in Germany and its head office is there. Swiss re is from Swiss ,it only have a branch here in South Africa. Gen re is from America,it also just have a branch in South Africa. So already the market of reinsurance in South Africa is made of foreign companies. South Africa does not have enough capital to start their own reinsurance company.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s