Treasury lifts veil ahead of Insurance Bill hearings

Cape Town - Public hearings on the Insurance Bill will be held in the second week of February to give stakeholders in the industry an opportunity to comment on the latest changes made by National Treasury. 

In December last year, National Treasury again tabled an amended version of the bill after incorporating the public comments it received during the consultation process. 

The bill, which was originally approved by Cabinet in April 2016, aims to bring about a fair, safe and stable insurance market by strengthening oversight through higher prudential standards, make the industry more accessible for new entrants such as micro-insurers, and align the sector with international standards. 

The Insurance Bill forms part of broader policy changes in the financial services sector. On the one hand it ties in with the Twin Peaks reforms through which government wants to establish a prudential regulator under the helm of the Reserve Bank that will be responsible for regulating all financial institutions – banks, insurance houses and the asset management sector. 

READ: Twin Peaks bill makes way back to Parliament 

Currently the Financial Services Board is overseeing the conduct of insurance houses and asset managers, but in future the body will be tasked with regulating market conduct and protecting consumers.

On the other hand, the Insurance Bill will also give effect to the Solvency Assessment and Management (SAM) framework that aims to increase protection of policyholders, and to ensure that insurers' capital requirements are in line with their risk exposure. 

In addition, the bill will give effect to the Micro-Insurance Policy document, which will allow new entrants into the market and give low-income groups increased access to insurance products. 

National Treasury on Tuesday briefed Parliament’s Standing Committee on Finance on the bill's background, saying South Africa still has a high degree of concentration and interconnectedness. 

READ: Insurance sector vital for sustainable economy - Treasury 

The top five insurers account for 74% of the long-term insurance market, while the seven largest fund managers control 60% of unit trust assets in South Africa. Of the 181 long- and short-term insurers, only 13 are wholly black-owned, National Treasury said in its presentation. 

Jonathan Dixon, the deputy executive for insurance at the Financial Services Board and who was part of the delegation from National Treasury, said during question and answer time one of the purposes of the Insurance Bill is to lower regulatory barriers for new entrants into the market. 

“Under the Twin Peaks legislation specifically, we are creating regulatory sandboxes or innovation hubs through which we’ll try to provide support to new entrants,” Dixon said.