The Insurance Bill is adopted, entrenching transformation in the sector
BUSINESS LIVE / 30 NOVEMBER 2017 - 19:41 / LINDA ENSOR
This week, the National Assembly adopted the Insurance Bill, which will legislatively entrench the need for transformation of the sector.
The DA opposed the bill mainly because of the obligation it places on the prudential authority to promote transformation, which the party did not believe was its role, and that it went beyond the scope of the version originally tabled and subject to public hearings — which arguments the committee rejected. The DA tried to prevent the adoption of the bill by calling for a division.
Insurance. Picture: ISTOCK
DA MPs left the house in the hope there would not be sufficient ANC and other opposition party MPs to constitute a quorum. In the event, the bill, which lays down the regulatory framework for micro-insurance, was adopted with 210 votes, with five MPs abstaining.
The bill — first released by Cabinet for public comment in 2015 — gives effect to the "twin peaks model" for the regulation of the financial sector and provides a legal framework for higher prudential standards, group supervision, and stronger re-insurance arrangements. The new legal framework also strengthens the regulatory requirements for insurers related to governance, risk management and internal controls.
One of a series of amendments to the bill made by Parliament’s standing committee on finance was to make transformation explicit in the bill’s objectives and to include it in the functions of the prudential authority, which was a source of concern to DA finance spokesman David Maynier.
During public hearings on the bill, a key issue raised by mainly emerging entrepreneurs and professionals was the barriers to entry in the industry and the need to urgently transform it. They said a deficiency in the bill was its failure to adequately address transformation.
The committee agreed and said in its report on the bill that it believed new entrants "need to be encouraged in the sector and that it needs to be de-racialised and diversified, while at the same time ensuring the needs and interests of policyholders are protected".
The amendments on transformation made by the committee included:
• Making transformation explicit in the objective of the bill. Transformation was defined in reference to the Broad-Based Black Economic Empowerment Act and the financial sector code.
• Linking licensing to plans to meet transformation commitments as envisaged in the financial sector code.
• Empowering the prudential authority to impose licensing conditions to promote developmental, financial inclusion and transformation objectives, as well as to amend licensing requirements for this purpose.
• Providing that the prudential standards applied by the prudential authority have regard to developmental, transformation objectives.
• Providing for transitional arrangements to ensure insurers currently registered under the various insurance acts will, on licence conversion, be subject to the same transformation requirements as new applicants.
The committee argued for insurers to be fined if they failed to meet their transformation commitments and believed that smaller entrants should benefit from lower fees and levies.
Maynier voiced his concern about the involvement of the prudential authority in matters of transformation by saying the authority is part of the Reserve Bank.
"We should be doing everything to oppose the prudential authority, and, by extension, the South African Reserve Bank, being drawn into taking executive decisions, which could be politically charged, based on non-prudential criteria, especially when those criteria are determined by another body, which, in this case, is the Financial Sector Council by way of the Financial Sector Code, which falls under the Department of Trade and Industry, rather than National Treasury," Maynier argued.
He said the Reserve Bank itself had expressed reservations about the whole question of "non-prudential criteria".
LINK - https://www.businesslive.co.za/bd/national/2017-11-30-the-insurance-bill-is-adopted-entrenching-transformation-in-the-sector/
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER