Legislative changes Insurance Industry Malawi.....
Gazetted on 4th March, 2011, the directives, according to the Insurance Act, 2010 are indicated below as to be enforced by the Regulator- Reserve Bank of Malawi (RBM).
Risk Management Directive
This directive, gazetted on 4th March, 2011 is formally referred to as Insurance (Risk Management Framework for Insurance Companies) Directive 2011.
The directive requires insurers to have a risk management framework that includes a written management strategy and a risk management function with a person individually responsible for that function. It also requires the board to provide the registrar with risk management declarations signed by two directors. Insurers are also required to maintain a business plan for three years approved by the board.
Fit and Proper Persons Directive
The directive is formally referred to as Insurance (Suitability of persons associated with ownership and management of insurers and insurance brokers) Directive 2011; it was gazetted on 4th March, 2011.
Under this directive, the board is responsible for ensuring that responsible persons of an insurer are fit, proper and defined. The insurer is required to implement a written fit and proper policy of fitness and propriety of responsible persons. Initial appointment or change in appointment of a responsible person is to be submitted to the registrar for approval.
The board is also required to assess fitness and propriety of responsible persons annually. The principal officer of an insurer shall be a chartered insurer and have at least 10 years experience of in the industry. Similarly, the principal officer of an insurance broker shall be a chartered insurer or have at least 10 years of senior management experience in the industry.
Technical functions of claims, underwriting and reinsurance are to be managed by chartered insurers. The accounting function of an insurer is to be managed by a qualified or chartered accountant (ACCA/CIMA) and must to be a member of SOCAM. External auditors are required to have appropriate qualifications, and be registered in Malawi with three years minimum experience.
Corporate Governance Directive
This directive, also gazetted on 5th March, 2011 is formally referred to as Insurance (Minimum Standards on Corporate Governance for Insurance Companies) Directive 2011. It applies to insurers licensed under the Act.
It is read and applied with the Code of Best Practice for Corporate Governance in Malawi (Malawi Code II) published by the Board of Directors in June 2010. The directive has several provisions applicable to boards of companies.
Among others, the board shall have a minimum of 5 directors and the chairman shall be a non-executive director. Majority of directors and the chairman of the board shall reside in Malawi and the maximum time an independent director may serve on the board is 6 years.
The insurer is also required to have an independent internal audit function, publish summaries of financial statements in a local newspaper and its annual report on its official website not later than 4 months after closure of financial year. The company secretary shall be a chartered company secretary, a lawyer or an accountant.
Maximum Capital and Solvency Requirement Directive
The directive is formally referred to as Minimum Capital and Solvency Requirement for General Insurers. It was gazetted on 4th March, 2011 and applies to licensed and registered financial institutions transacting general insurance business in Malawi.
The minimum paid capital for a general insurer shall be MK 50,000,000.
An insurer shall be deemed to have sufficient margin of solvency, if it has a solvency ratio of not less than 20%, being a percentage that adjusted net assets of an insurer bears to the net written premium for the corresponding period.
Premium Payment Directive
This directive, gazetted on 31st May, 2011, is referred to formally as Insurance (Premium Payment to General Insurance Companies) Directive 2011. It applies to general insurance companies, insurance intermediaries, including brokers, agents and all financial and other institutions engaged in the selling of general insurance products.
This directive addresses the problem of outstanding premium to ensure that premium is received by an insurer as and when insurance cover is provided to enable insurers build up appropriate technical reserves. Intermediaries shall cause policy holders to make out all premium cheque payments in favour of insurers.
Quantum of commissions shall be agreed between the intermediary and the insurer or as prescribed by the registrar. If premium on a general insurance product is outstanding for more than 30 days, the insurer shall lapse the cover in the policy and thereby and not pay claims.
The above directives apply to insurance companies doing insurance business in Malawi and applicants for license to conduct insurance business in Malawi. Penalties exist for non compliance.
This development should be viewed as the positive way forward as the industry will have well capitalized companies and policyholder safety will be guaranteed. A well capitalized, properly run and managed, and open industry will benefit all stake holders in the insurance business.
Excerpts from http://www.iim.org.mw/index.php?option=com_content&view=article&id=137:new-reserve-bank-of-malawi-directives&catid=54:news&Itemid=478
Risk Management Directive
This directive, gazetted on 4th March, 2011 is formally referred to as Insurance (Risk Management Framework for Insurance Companies) Directive 2011.
The directive requires insurers to have a risk management framework that includes a written management strategy and a risk management function with a person individually responsible for that function. It also requires the board to provide the registrar with risk management declarations signed by two directors. Insurers are also required to maintain a business plan for three years approved by the board.
Fit and Proper Persons Directive
The directive is formally referred to as Insurance (Suitability of persons associated with ownership and management of insurers and insurance brokers) Directive 2011; it was gazetted on 4th March, 2011.
Under this directive, the board is responsible for ensuring that responsible persons of an insurer are fit, proper and defined. The insurer is required to implement a written fit and proper policy of fitness and propriety of responsible persons. Initial appointment or change in appointment of a responsible person is to be submitted to the registrar for approval.
The board is also required to assess fitness and propriety of responsible persons annually. The principal officer of an insurer shall be a chartered insurer and have at least 10 years experience of in the industry. Similarly, the principal officer of an insurance broker shall be a chartered insurer or have at least 10 years of senior management experience in the industry.
Technical functions of claims, underwriting and reinsurance are to be managed by chartered insurers. The accounting function of an insurer is to be managed by a qualified or chartered accountant (ACCA/CIMA) and must to be a member of SOCAM. External auditors are required to have appropriate qualifications, and be registered in Malawi with three years minimum experience.
Corporate Governance Directive
This directive, also gazetted on 5th March, 2011 is formally referred to as Insurance (Minimum Standards on Corporate Governance for Insurance Companies) Directive 2011. It applies to insurers licensed under the Act.
It is read and applied with the Code of Best Practice for Corporate Governance in Malawi (Malawi Code II) published by the Board of Directors in June 2010. The directive has several provisions applicable to boards of companies.
Among others, the board shall have a minimum of 5 directors and the chairman shall be a non-executive director. Majority of directors and the chairman of the board shall reside in Malawi and the maximum time an independent director may serve on the board is 6 years.
The insurer is also required to have an independent internal audit function, publish summaries of financial statements in a local newspaper and its annual report on its official website not later than 4 months after closure of financial year. The company secretary shall be a chartered company secretary, a lawyer or an accountant.
Maximum Capital and Solvency Requirement Directive
The directive is formally referred to as Minimum Capital and Solvency Requirement for General Insurers. It was gazetted on 4th March, 2011 and applies to licensed and registered financial institutions transacting general insurance business in Malawi.
The minimum paid capital for a general insurer shall be MK 50,000,000.
An insurer shall be deemed to have sufficient margin of solvency, if it has a solvency ratio of not less than 20%, being a percentage that adjusted net assets of an insurer bears to the net written premium for the corresponding period.
Premium Payment Directive
This directive, gazetted on 31st May, 2011, is referred to formally as Insurance (Premium Payment to General Insurance Companies) Directive 2011. It applies to general insurance companies, insurance intermediaries, including brokers, agents and all financial and other institutions engaged in the selling of general insurance products.
This directive addresses the problem of outstanding premium to ensure that premium is received by an insurer as and when insurance cover is provided to enable insurers build up appropriate technical reserves. Intermediaries shall cause policy holders to make out all premium cheque payments in favour of insurers.
Quantum of commissions shall be agreed between the intermediary and the insurer or as prescribed by the registrar. If premium on a general insurance product is outstanding for more than 30 days, the insurer shall lapse the cover in the policy and thereby and not pay claims.
The above directives apply to insurance companies doing insurance business in Malawi and applicants for license to conduct insurance business in Malawi. Penalties exist for non compliance.
This development should be viewed as the positive way forward as the industry will have well capitalized companies and policyholder safety will be guaranteed. A well capitalized, properly run and managed, and open industry will benefit all stake holders in the insurance business.
Excerpts from http://www.iim.org.mw/index.php?option=com_content&view=article&id=137:new-reserve-bank-of-malawi-directives&catid=54:news&Itemid=478
