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SECP-PII Microinsurance Symposium Role of regulation and supervision Jules Gribble 29 November 2011
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2 Enterprise Metrics Agenda My task IAIS Insurance Core Principles Role of supervisor Microinsurance (MI) focus Disclaimer: My views, not WB or SECP
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3 Enterprise Metrics World Bank mission Assess demand and supply for MI Assess current regulatory and supervisory status With SECP develop MI regulatory and supervisory framework: ▪ Rules and regulations ▪ Accounting ▪ Policyholder protection
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4 Enterprise Metrics My task Part of assessment of regulatory and supervisory status: ▪ Review current position against IAIS ICPs ▪ Provide input for overall review IAIS = International Association of Insurance Supervisors ICP = Insurance Core Principle
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5 Enterprise Metrics ICPs 26 ICPs (replacing prior set of 28) ▪ Approved 1 October 2011 ▪ See www.iaisweb.org Globally accepted framework for supervision of insurance sector Apply in all jurisdictions regardless of ▪ Level of development ▪ Type of product ▪ Services being supervised
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6 Enterprise Metrics Proportionality Assessment should be appropriate to supervisory objectives Principle of ‘Proportionality’: ▪ Supervisors may adjust some requirements and actions to reflect the nature, scale and complexity of individual insurers Additional IAIS guidance for MI in progress Achieving simplicity may require effort ▪ More than ‘simple’ product structures ▪ Need robust but simple processes
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7 Enterprise Metrics Coverage of ICPs Presume appropriate preconditions 7 groups: ▪ Supervisor (1 - 3) ▪ Supervised entities (4 - 8) ▪ Supervisory processes (9 - 12) ▪ Prudential matters (13 - 17) ▪ Distribution and disclosure (18 - 20) ▪ Fraud and AML (21 - 22) ▪ Groups and macroprudential (23 - 26)
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8 Enterprise Metrics Review process ICPs (26) ▪ Standards (233, average 9 per ICP) ▫ Guidelines (1,600, average 7 per Standard) Assess standards, then ICPs: ▪ Observed ▪ Largely observed ▪ Partly observed ▪ Not observed ▪ Unable to assess ▪ Not applicable
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9 Enterprise Metrics Aspects to consider Life / Nonlife Regulatory / Supervisory ▪ Regulatory: Have powers and establish framework (laws, Rules etc). Intent ▪ Supervisory: Processes to administer framework effectively. Implementation Standard / Micro insurance Multiple issues in standards
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10 Enterprise Metrics Role of supervisor Analogy: A game ▪ Supervisor: Referee ▪ Regulation: Formal game rules ▪ Supervision: Referee game in practice ▪ Industry: Playing teams ▪ Policyholders: Spectators Supervisory regime ▪ Enabler - provides industry with opportunity ▪ Balance - care not to inhibit while retain control and protect policyholder interests
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11 Enterprise Metrics Standard / Micro insurance Continuum, not disjoint Ref: IAIS_2007 Standard ins - used Under/Uninsured Micro ins Uninsurable through market Wealth
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12 Enterprise Metrics Comparison Insurance risk the same ▪ Require grouping ▪ Avoid anti-selection ▪ Importance of insurance risk mitigation Challenge: Operational changes ▪ All steps in ‘chain’ from policyholder to insurer and (possibly) back to policyholder ▪ Simplicity ▪ Robustness ▪ Group focus
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13 Enterprise Metrics MI – key ICPs 4 – Licensing 8 – Risk management and internal controls 17 – Capital 18 – Intermediaries 19 – Distributors 20 – Consumer protection
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14 Enterprise Metrics Supervisory interactions (Sup Int) Need understand the value chain to have appropriate ‘refereeing’ that links are not broken or abused ▪ System fails at the weakest link Starts and finishes with the policyholders ▪ Service providers positions need to be viable MI based, long term, on simplicity, volume, group context, and consumer value
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15 Enterprise Metrics Sup Int: Roles User Distributor Manufacturer Policyholder MFI Insurer
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16 Enterprise Metrics Sup Int: Awareness User Distributor Manufacturer Policyholder MFI Insurer ??
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17 Enterprise Metrics Sup Int: Supervisor Public opinion SBP SECP User Distributor Manufacturer Policyholder MFI Insurer ??
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18 Enterprise Metrics Sup Int: Purchase & premiums Public opinion SBP SECP User Distributor Manufacturer Policyholder MFI Insurer ??
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19 Enterprise Metrics Sup Int: Claims management Public opinion SBP SECP User Distributor Manufacturer Policyholder MFI Insurer ?? Rs
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20 Enterprise Metrics Sup Int: Policy servicing Public opinion SBP SECP User Distributor Manufacturer Policyholder MFI Insurer ?? Rs
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21 Enterprise Metrics Sup Int: Business partnership Public opinion SBP SECP User Distributor Manufacturer Policyholder MFI Insurer ?? Rs
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22 Enterprise Metrics Sup Int: Perceptions & reputations Public opinion SBP SECP Reputational Risk User Distributor Manufacturer Policyholder MFI Insurer ?? Rs
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23 Enterprise Metrics SECP interest in entire ‘chain’ Insurance ordinance, 2000 (preamble) Ordinance to regulate the business of the insurance industry ▪ To ensure the protection of the interests of the insurance policy holders and ▪ To promote sound development of the insurance industry... Holistic ▪ Both insurance risks and all associated operational and business risks
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24 Enterprise Metrics Summary Objectives of this WB project ▪ In independent assessment of the insurance supervisory regime ▪ Provide basis to enhance and address any issues identified MI ▪ No specific recognition in law or insurance regulatory and supervisory regime ▪ Key distinctive aspects that need explicit recognition in supervisory regime. In progress
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25 Enterprise Metrics Contact details Jules Gribble, Director, Enterprise Metrics Phone: +61 408 127 624 Email: jules.gribble@enterprisemetrics.com.au
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