PwC brings you a roundup of key regulatory activities around the region in the recent few months.
Australia
Insurers to reform product disclosure process
A taskforce formed by the Insurance Council of Australia (ICA) has made 16 recommendations to reform the product disclosure process so as to better align the provision of policy information with customers’ needs.
The taskforce recommended that technological advances and thorough consumer research should underpin product disclosure reforms in the general insurance industry. Recommendations included:
• Integrating insurance calculators into the sales process, especially for home insurance, and trying to achieve a common basis for them across the industry. This is designed to combat substantial levels of underinsurance in the community.
• Exploring new forms of electronic disclosure that are more engaging and can better target the information most applicable to individual customers.
• Encouraging government to create a central portal for the release of natural hazard data to help consumers determine their insurance needs and take steps to mitigate their level of risk.
China
CIRC to modernise supervision over insurance agencies
The China Insurance Regulatory Commission (CIRC) has announced plans to launch an electronic platform using Big Data technology and cloud computing to monitor and regulate the country’s insurance agencies.
The system will take three years to complete, and in the initial phase, CIRC will require insurers and their agents to upload business and financial data. CIRC also said that it is backing the establishment of an insurance intermediary industry association which is planned to be a self-regulatory organisation.
Online insurance regulations in effect
CIRC’s regulations on online insurance have formally come into force in October last year. The rules are to remain effective for a first period of three years. They will apply to insurance services through self-operated or third-party operated online platforms, using internet and mobile communication technologies. With the rules, CIRC seeks to encourage innovation in online insurance in an orderly manner.
Details on Counterparty Risk Charges for offshore reinsurers
From 1 January 2016, China’s insurance solvency regulations will be brought in line with global standards with the China Risk Orientated Solvency System (C-ROSS) strengthening capital requirements, risk management, and transparency disclosures.
Changes in the treatment of counterparty credit risk to be introduced under C-ROSS have sparked much debate as local cedants could face significantly higher charges for offshore reinsurance cessions compared to cessions to local markets, particularly for proportional coverage.
Hong Kong
Dr Moses Cheng is 1st Chairman of Insurance Authority
Dr Moses Cheng Mo-chi has been appointed as the Chairman of the Independent Insurance Authority (IIA) for a term of three years from 28 December 2015 to 27 December 2018, the Hong Kong government announced.
Seven other persons have been named as Non-Executive Directors of the IIA for the same term. They are Mr Samuel Chan Ka-yan, Professor Chan Wai-sum, Ms Chitty Cheung Fung-ting, Mr Kenneth Kwok Tsun-wa, Mr Ma Ho-fai, Mr James Wong Chien-kuo and Mr Stephen Yiu Kin-wah.
The IIA, a statutory body, is a new insurance regulator independent of the government which will eventually replace the Office of the Commissioner of Insurance (OCI) and take over the regulation of insurance intermediaries through a statutory licensing regime.
India
Repatriation of profits for foreign reinsurers should be allowed – IRDAI panel
Foreign reinsurers operating branches in India should be allowed to repatriate profits to their home countries if their solvency margin meets requirements, said the reinsurance committee of the Insurance Regulatory and Development Authority of India (IRDAI).
Led by Mr Thomas Mathew, a former Managing Director of LIC, to examine issues related to amendments to the insurance law that allow foreign reinsurers to set up branch offices in India, the committee is examining minimum solvency capital requirements, registration of insurers or reinsurers in the International Financial Services Centre (IFSC), regulations relating to actuaries working in these entities and other related matters.
The committee also unanimously agreed that the risk-based capital (RBC) approach is the preferred way to assess the solvency capital of a foreign reinsurance company. However, the report also recognised that the introduction of a RBC regime by the authority would involve a consultation process with the industry and hence, some amount of time will be required.
Regulator issues draft rules for Lloyd’s
The IRDAI is limiting Lloyd’s to operating from only one location in the country as it formulates regulations for the world’s specialist insurance market to set up a presence in the Indian market.
Constituents of Lloyd’s India, which will include members of Lloyd’s UK, service companies of Lloyd’s India and syndicates of Lloyd’s India, will be granted recognition by IRDAI through a certificate of registration.
A Lloyd’s UK applicant can apply to register in one of two categories, which are a) as a reinsurer with an order of preference at par with Indian reinsurer(s) or b) others.
Eligibility norms require the applicant to have obtained in-principle clearance from the home country regulator; to have been registered or certified in a national regulatory environment with whom Government of India has signed a Double Taxation Avoidance Agreement; to have net owned funds of INR50 billion (US$756 million) and a minimum credit rating of at least good financial security characteristics from any of the renowned credit rating agencies for the last three years; to have been in reinsurance business for at least 10 years, and to infuse a minimum assigned capital of INR1 billion into Lloyd’s India with a solvency margin as stipulated by the home regulator.
Foreign reinsurers to lose parity with GIC Re with rule change
The IRDAI has redrafted its regulations for foreign reinsurers setting up branches in the country so as to give the only domestic reinsurance company, the state-owned GIC Re, preference over them for cessions by Indian insurers.
In a notice, regulator proposed to amend the regulations to require Indian insurers to first offer to the “Indian reinsurer” the choice to participate in their facultative and treaty surpluses before other players.
Under the proposed change, Indian insurers will also lose their priority in being offered reinsurance business.
South Korea
Plan to boost and transform insurance business
New measures to deregulate and stimulate the stagnant insurance market are being considered by the Financial Services Commission (FSC), including relaxing reporting requirements for new products.
In addition, rules will be changed to encourage insurers to shift to competition based on quality instead of at present when competition is based on volume.
The FSC also plans to make changes to the current 10 standard provisions that govern the different insurance products including life, casualty, medical and auto insurance. It aims to deregulate eight out of 10 provisions by early 2017.
Insurance companies will also be given greater freedom in their asset management activities, with various regulations, that place limits on the types of assets they are allowed to handle and the amount they are allowed to hold, to be abolished.
Pakistan
Takaful operators allowed to work with conventional insurers
Takaful operators in the country will be allowed to participate on a co-takaful basis with conventional insurers under the lead of a conventional insurer.
The policy board of the Securities and Exchange Commission of Pakistan (SECP) approved the amendment late last year.
SECP to consolidate insurance rules
The SECP has decided to issue a consolidated set of insurance rules for the effective regulation of the insurance sector.
In a statement, the regulator said that it has formulated draft Insurance Rules 2015. This will replace two existing sets of insurance regulations following the due approval process and accommodating stakeholders’ feedback.
In 2014, the Insurance Industry Reforms Committee had recommended consolidating the existing two sets of rules which were creating ambiguity.
The first set of rules, called the Insurance Rules 2002, were issued by the Federal Government – Ministry of Commerce while the second set of rules called the Securities and Exchange Commission (Insurance) Rules, 2002, were issued by SECP.
The consolidation of the existing two sets of rules aims at improving the insurance regulatory framework.
Philippines
Insurance regulator to oversee HMOs
The Insurance Commission (IC) is taking over the regulation and supervision of health maintenance organisations (HMOs) from the Department of Health (DOH), in a move to ensure better financial supervision over such entities.
President Benigno Aquino signed an executive order last November, transferring the regulatory and supervisory function to the IC.