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Insurance & Reinsurance
On 26 November 2021, the Prudential Authority (PA) published Prudential Communication 8 of 2021 (Communication). The Communication sets out the PA’s approach to representations made by insurers on matters related to the licence conversion process contemplated in item 6(2) of Schedule 3 (Transitional Arrangements) of the Insurance Act, 18 of 2017 (Insurance Act).
As background we note that item 6(2) of Schedule 3 required the PA to convert the registration of all previously registered insurers under the Short-term and Long-term Insurance Acts, 1998 to a licence to conduct insurance business in terms of the Insurance Act, within a period of two years after 1 July 2018 (i.e. effective date of the Insurance Act).
The PA confirms in the Communication that the licence conversion process was concluded on 30 June 2020, and that the PA has issued insurers with conversion letters and licence certificates confirming the classes and sub-classes of insurance business that insurers are licensed to underwrite in terms of Schedule 2 of the Insurance Act.
Subsequent thereto, the PA has received (and continues to receive) an influx of representations from affected insurers regarding various conversion matters, in particular, representations regarding the classes and sub-classes of insurance business stated in their licence certificates.
In the Communication the PA notes that certain insurers have not fully examined and ‘matched’ certain of their business activities which they were conducting prior to their licence conversions with the classes and sub-classes detailed in Schedule 2 of the Insurance Act, in particular having regard to item 6(4)(a) of Schedule 3 of the Insurance Act, which provides that the PA must convert previously registered insurers to a licence to conduct the class and sub-classes referred to in Schedule 2 where that insurer was actively and prudently conducting insurance business similar to that class of sub-class.
Furthermore, the PA notes that certain insurers that are licensed to conduct non-life insurance business continue to offer insurance products incorporating a life insurance component in comprehensive policy offerings such as accident and disability benefits.
Consequent to the influx of representations, and specifically, concerns regarding the classes and sub-classes of insurance business, the PA has decided to permit a period of 30 days commencing on 26 November 2021, for insurers to make final representations on outstanding licensing issues arising from the licence conversion process.
The PA has urged all insurers to meticulously consider their insurance obligations to ensure that they are licensed for the appropriate classes and sub-classes of insurance.
No further indulgence will be granted by the PA after the expiry of the 30 days, and the PA intends to take regulatory action against any insurer found to be in contravention of any provision of the Insurance Act and specifically, those insures who continue to conduct insurance business in classes or sub-classes of insurance business for which they are not licensed.
Should you require assistance with making a representation to the PA or have a query regarding the relevant licensing considerations pertaining to your insurance offering please contact Ernie Van Der Vyver and Nicole Britton.
For a copy of the Communication please click here.