Support measures announced for insurers

The impact of Covid-19 on SA’s insurance industry is the focus of a joint communication issued last Friday by the Prudential and Financial Sector Conduct Authorities, CompliNEWS contributor Pam Saxby reports. Noting the international pandemic’s likely implications for the ‘financial soundness’ of insurers worldwide, the document outlines the authorities’ position on key regulatory requirements among other things affecting solvency capital retention, which will remain unchanged. Regarding premium payments, any relief provided by insurers will be excluded from the default risk solvency capital requirement calculation. A communication giving context about the exemption from certain provisions in the regulations with a view to facilitating relief was issued on 15 April 2020 by the Financial Sector Conduct Authority.

Other regulatory requirements during the State of Disaster addressed in the joint communication include foreign exchange limits (whereby insurers will not be required to realign their foreign asset holdings with foreign portfolio investment limits); dividends and staff bonuses (which the authorities believe should be suspended); and reporting requirements (regarding which insurers are referred to the relevant communiqués). More generally, in the Prudential Authority’s view insurers should immediately review their out-of-cycle own risk and solvency assessment policies and ‘triggers’ and, ‘if relevant’, submit the necessary reports as soon as possible. Insurers already experiencing ‘solvency problems’ should avoid ‘drastic actions’ without ‘prior engagement with the authorities’. In that regard, refetence is made to ‘selling investments’ and ‘removing’ non-vested bonuses.