New insurer regulations for Europe may influence SA - 13 Aug 2009 08:14
New regulations for the insurance industry look set to influence the way local insurance companies do business. The new Solvency 2 framework, to replace the Solvency 1 framework set up in 2004, will be implemented in 2012 and reassess capital, risk analysis and transparency.
Advances in risk management over recent years will be catered for in the new framework and will adhere to international norms. Although these regulations will be enforced in Europe, South African insurers will likely follow suit with an adapted version of the framework to suit local markets.
The new regulations will monitor the amount of capital each insurer will hold, how risk management and governance should be handled and requirements for disclosing information. The new framework shows a shift towards more transparency which will benefit the consumer.
While not being forced by regulatory bodies to adhere to the same requirements, South Africa has historically followed the lead of the European sector and will most likely apply the same rules as the new framework. According to some, if the new rules were in place before, there would have been advanced warning regarding the difficulties that some international insurers are experiencing now. An intervention would not have been as dramatic as it is now sans Solvency 2.
The new regulations will control solvency levels and alert regulatory bodies when these are breached, requiring intervention - such as working with the insurer or supervisory action whereby the insurer hands over liabilities to another insurer and withdraws its license.
New regulations for the insurance industry look set to influence the way local insurance companies do business. The new Solvency 2 framework, to replace the Solvency 1 framework set up in 2004, will be implemented in 2012 and reassess capital, risk analysis and transparency.
Advances in risk management over recent years will be catered for in the new framework and will adhere to international norms. Although these regulations will be enforced in Europe, South African insurers will likely follow suit with an adapted version of the framework to suit local markets.
The new regulations will monitor the amount of capital each insurer will hold, how risk management and governance should be handled and requirements for disclosing information. The new framework shows a shift towards more transparency which will benefit the consumer.
While not being forced by regulatory bodies to adhere to the same requirements, South Africa has historically followed the lead of the European sector and will most likely apply the same rules as the new framework. According to some, if the new rules were in place before, there would have been advanced warning regarding the difficulties that some international insurers are experiencing now. An intervention would not have been as dramatic as it is now sans Solvency 2.
The new regulations will control solvency levels and alert regulatory bodies when these are breached, requiring intervention - such as working with the insurer or supervisory action whereby the insurer hands over liabilities to another insurer and withdraws its license.