Treasury tweaks insurance bill

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This follows criticisms made during hearings on the bill. Black business said it would reinforce barriers to entry in the sector, and MPs across the political spectrum supported this view.

The Black Business Council and four black-owned insurance companies complained that the licensing conditions, high audit and actuarial fees, excessively demanding standards and a heavy regulatory burden served to exclude black players from the market.

A delegation from the Treasury and Financial Services Board led by deputy director-general Ismail Momoniat outlined the amendments in a briefing to the standing committee on finance on Tuesday.

In making the amendments, policyholder protection and the need for strong regulation had to be balanced with transformation, they said.

The objectives of the bill have been amended so that they state explicitly that they are to be achieved in a manner that is consistent with the Constitution and with reference to transformation of the insurance sector.

Transformation has been defined in reference to the Broad-Based Black Economic Empowerment Act.

Amendments have been made to the section on licensing so that applicants for licences would need a "clear plan to meet transformation objectives". The Prudential Authority established under the twin peaks system of regulation will have to take account of the public interest, including transformation, when considering whether or not to grant a licence or to vary one.

Momoniat expressed the fear that perhaps this amendment went too far and proposed that MPs discuss it.

Co-operatives could be insurers and reinsurers, opening the way for mutual insurers.

The section on licence conditions has been amended to allow the Prudential Authority to impose conditions in a manner that facilitates progressive or incremental compliance with the bill. The intention of this is to promote developmental, financial inclusion and transformation objectives.

A section on exemptions has been introduced to empower the authority to exempt any insurer or controlling company from a provision of the bill in order to achieve developmental and transformation objectives or financial inclusion.

The Treasury did not accept objections to the power of the authority to order a capital add-on if the risk profile of an insurer requires this.

It also did not accept the proposal by the black-owned insurers that the provisions for micro-insurance in the bill be scrapped on the grounds that this would create a "playground" for blacks while the main action took place in the established, white-dominated sector of the industry. It said that a micro-insurance licence would allow nontraditional industry participants such as funeral parlours to conduct insurance businesses. Commercial insurers would also be able to conduct micro-insurance business.

"A micro-insurance licence facilitates financial inclusion through having more proportionate regulations, including capital requirements, based on the low risk of micro-insurance products," the Treasury said.

Source: Business Day