SECP-PII Microinsurance Symposium Role of regulation and supervision Jules Gribble 29 November 2011.

SECP-PII Microinsurance Symposium

Role of regulation and supervision

Jules Gribble

29 November 2011

2 Enterprise Metrics

Agenda

My task IAIS Insurance Core Principles Role of supervisor Microinsurance (MI) focus

Disclaimer: My views, not WB or SECP

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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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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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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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

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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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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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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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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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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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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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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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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Enterprise Metrics

Sup Int: Roles

User Distributor Manufacturer

Policyholder MFI Insurer

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Enterprise Metrics

Sup Int: Awareness

User Distributor Manufacturer

Policyholder MFI Insurer

??

17

Enterprise Metrics

Sup Int: Supervisor

Public opinion SBP SECP

User Distributor Manufacturer

Policyholder MFI Insurer

??

18

Enterprise Metrics

Sup Int: Purchase & premiums

Public opinion SBP SECP

User Distributor Manufacturer

Policyholder MFI Insurer

??

19

Enterprise Metrics

Sup Int: Claims management

Public opinion SBP SECP

User Distributor Manufacturer

Policyholder MFI Insurer

??

Rs

20

Enterprise Metrics

Sup Int: Policy servicing

Public opinion SBP SECP

User Distributor Manufacturer

Policyholder MFI Insurer

??

Rs

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Enterprise Metrics

Sup Int: Business partnership

Public opinion SBP SECP

User Distributor Manufacturer

Policyholder MFI Insurer

??

Rs

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Enterprise Metrics

Sup Int: Perceptions & reputations

Public opinion SBP SECP

Reputational Risk

User Distributor Manufacturer

Policyholder MFI Insurer

??

Rs

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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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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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Enterprise Metrics

Contact details

Jules Gribble, Director, Enterprise Metrics

Phone: +61 408 127 624

Email:

[email protected]