On 21 June 2018, Kuben Naidoo, the chief executive officer of South Africa’s Prudential Authority, published a communication which confirms that the Insurance Act, 2017 will take effect on 1 July 2018, as anticipated.
This article was originally published on Commercial Risk here.
The communication provides that the Minister of Finance has signed the notice of commencement of the Insurance Act, 2017 and that the gazetting thereof is imminent.
The prudential standards necessary for the effective implementation of the Insurance Act will be published on the website of the South African Reserve Bank as soon as the commencement notice has been gazetted.
The communication provides clarity to industry on the Prudential Authority’s approach to several aspects relating to the implementation of the Insurance Act which include:
- Any insurer that is unable to comply with the Insurance Act or the Prudential Standards on 1 July 2018, as set out in Schedule 3 of the Insurance Act, must within 60 days of 1 July 2018, engage with the Prudential Authority to discuss such non-compliance issues to enable the Prudential Authority time to consider how to address such
- On 1 July 2018, insurers must comply with the financial soundness requirements as set out in the Insurance Act and the Prudential Standards. If an insurer on 1 July 2018 fails to comply with the financial soundness requirements, the relevant insurer will be required to submit a scheme or strategy to the Prudential Authority in accordance with Section 39 of the Insurance Act
- An insurer whose financial year end falls before 1 July 2018 must, despite the effective date, comply with the reporting obligations imposed under the Insurance Act, in respect of that financial year
- An insurer that forms part of a group of companies must, by 1 September 2018, notify the Prudential Authority thereof and provide it with detailed information on, inter alia, the structure of the group of companies, its holding company and intra-group transactions.
Note that in terms of the transitional arrangements contained in Schedule 3 to the Insurance Act, the Prudential Authority must, by 30 June 2020, convert the registration of all previously registered insurers to a licence in accordance with the Insurance Act and must before 31 August 2018 publish the process the Prudential Authority will implement to give effect to the aforesaid conversion.
Of import, the communication clarifies that the process of conversion of all previously registered insurers to a licence in accordance with the Insurance Act will proceed, regardless of whether the Tranche 2 amendments to the Regulations and the Policyholder Protection Rules issued under the Long-term and Short-term Insurance Acts (‘Tranche 2 Amendments’) have been promulgated. Notably, no conversion registration can be finalised and actual licence issued until such time that the Tranche 2 Amendments have been promulgated.