New regulations to tighten grip on insurance sector

The new policies are mainly seeking ways through which insurance firms can protect themselves against risks. FILE PHOTO

What you need to know:

Guarding against risks. The new policy emphasises guarding against risks are usually associated with the industry.

The Insurance Regulatory Authority (IRA) has released a draft of new regulations that are expected to tighten the grip on the insurance sector.

The new rules will require insurance firm to establish an actuary and cash and carry policy for insurance buyers.
Speaking yesterday during a stakeholders meeting in Kampala, Mr Ibrahim Lubega Kaddunabbi, the IRA chief executive officer, said the new regulations will require all insurers to have an actuarial officer.

Actuarial officers deal with risk management, a key facet that protects the company and users.
“We are requiring them to have actuarial services for everything one does to be authenticated by a professional actuary,” he said.

IRA will give insurers a grace period of three years within which they must adopt to the rules as well as establishing the actuarial officer position.

In this period, the insurer is allowed to recruit a certified actuary officer from the universities who after various examinations will be accepted by the regulator.

Mr Paul Kavuma, the Uganda Insurers Association chief executive officer, said the stakeholder discussions was positioned to create discussions between insurers and their regulator to create an amicable legal framework that will not only streamline the legalities but also front growth of the sector.

Other regulations to be put in place include the cash and carry policy which, according to Mr Kavuma will require insurers to receive cash upfront as opposed to the credit system that they had been accustomed.
The regulation, he said, needs to be refined which when coupled with consumer education fronted by the regulator, could be effectively implemented.

“All stakeholders will support the IRA to come up with an official statement to support the cash and carry policy because it will need to be imposed,” he said.

According to the draft regulations, insurers will also be required to have three committees, investment, audit and risk management committee.

The insurer will also need a risk management strategy to illustrate how they intend to manage risks.
Regulation 6 (2b) has introduced a minimum solvency margin for life insurance which will be greater of the contingency reserve (retained earnings that have been set aside to guard against possible future losses).

This will be credited with 1 per cent of the gross written premium.

However, the minimum capital requirements have been maintained. The capital requirements will also alternate after the regulator implements the new regulatory standards of Risk Based Supervision (RBS).

RBS requires insurers to provision for risk averse ventures or investments through their capital.

This means that insurers will need to increase their minimum capital, especially when taking on highly risky policies.
According to Mr Protazio Sande, the IRA assistant director, market and development, Risk Based Capital (RBC) could lead to mergers and acquisition of the small insurance companies, which could strengthen the insurance sector since they will be able to take on bigger risks.

Meanwhile, Mr Ajedra Gabriel Gadison Aridru, the Finance state minister in charge of General Duties, said the insurance sector has been important in promoting agricultural insurance even as it needed to do more.

New regulatory requirements
The new policies will require an insurance firm to recruit an actuarial officer to deal with risks as well as create a cash and carry policy which, according to Mr Kavuma, will require insurers to receive cash upfront as opposed to the credit system that they had been accustomed to.

According to the draft regulations, insurers will also be required to have three committees, which among them include investment, audit and risk management committee.
They will also need a risk management strategy to illustrate how they intend to manage risks.

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