South Africa: Extensive regulatory reform
Lloyd’s is closely monitoring extensive regulatory reform taking place in South Africa.
South Africa’s insurance regulatory architecture is undergoing fundamental reform and, while there is no immediate impact on Lloyd’s underwriters at this stage, Lloyd’s is monitoring developments closely and will keep the market informed and up to date as the changes are finalised.
The South African insurance regulator, the Financial Services Board (FSB), has undertaken a full programme of regulatory reform in recent years. A large number of these reforms directly affect general insurers. The broad programme of change is accelerating in late 2014.
The FSB has announced that it will be issuing consultations and draft legislation affecting health insurance, consumer credit insurance, agency arrangements, retail distribution of financial services and new proposals will be announced for a consumer protection framework and associated outcome reporting regime.
Additionally, the FSB is expected to publish legislation to implement a new ‘twin peaks’ regulatory framework similar to that in the UK. This will be a fundamental shift in South Africa’s regulatory architecture, with the FSB being reconstituted as a market conduct regulator and prudential functions being transferred to the South African Reserve Bank.
The FSB is also planning to redraft the principal general insurance legislation in South Africa, the Short Term Insurance Act 1998, and is moving ahead with the implementation of a prudential regulatory regime known as Solvency Assessment and Management (SAM) which will be equivalent to Solvency II. The FSB has also put consumer protection firmly at the forefront of its agenda and it plans to release discussion documents on a new consumer protection framework and complaint management standards in the coming month.
A number of these regulatory changes impact Lloyd’s underwriters, both in terms of open market business and delegated authority underwriting in South Africa itself. Lloyd’s will continue to build on its constructive relationship with the FSB to ensure that the implementation of the reforms are practical and suitable for the industry as a whole. Lloyd’s, through the LITA team, will be communicating the important aspects of these reforms to the market as they crystallise.