` Solvency Assessment and Management: Pillar III – Reporting & Disclosure Sub Committee SAM Communication Task Group Discussion Document 117 (v 3) A Comprehensive Glossary of SAM Terms 1. INTRODUCTION AND PURPOSE This glossary has been produced by the SAM Communication Task Group (CTG) in order to assist the user in gaining a better understanding of certain terms and definitions that have been developed within the Financial Services Boards (FSB) proposed Solvency Assessment and Management (SAM) regime. The terms and definitions contained within this document have been drawn from various sources and draft documents in circulation within the FSB‘s SAM Governance Structure, and as such are subject to further change and refinement. This document will be monitored and updated by the SAM CTG as and when deemed necessary and appropriate as the design of the new proposed SAM legislation approaches finality. This glossary contains proposed terms and definitions that have been exclusively derived for use within the FSB‘s SAM Governance Structure. A previous glossary document, Discussion Document 11, was also produced by the SAM CTG and was based primarily on terms, acronyms and definitions taken from the EU Solvency II Directive. (Please note that this document is still in draft and as such subject to further change and refinement leading up to the SAM implementation date of 1 January 2016)
Welcome message from author
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
`
Solvency Assessment and Management:
Pillar III – Reporting & Disclosure Sub Committee
SAM Communication Task Group
Discussion Document 117 (v 3)
A Comprehensive Glossary of SAM Terms
1. INTRODUCTION AND PURPOSE
This glossary has been produced by the SAM Communication Task Group (CTG) in order to assist
the user in gaining a better understanding of certain terms and definitions that have been developed
within the Financial Services Boards (FSB) proposed Solvency Assessment and Management (SAM)
regime.
The terms and definitions contained within this document have been drawn from various sources and
draft documents in circulation within the FSB‘s SAM Governance Structure, and as such are subject
to further change and refinement. This document will be monitored and updated by the SAM CTG as
and when deemed necessary and appropriate as the design of the new proposed SAM legislation
approaches finality.
This glossary contains proposed terms and definitions that have been exclusively derived for use
within the FSB‘s SAM Governance Structure.
A previous glossary document, Discussion Document 11, was also produced by the SAM CTG and
was based primarily on terms, acronyms and definitions taken from the EU Solvency II Directive.
(Please note that this document is still in draft and as such subject to further change and refinement leading up to the SAM implementation date of 1 January 2016)
Page | 2
2. SAM TERMS INCLUDED IN THE GLOSSARY
Absolute MCR (AMCR)
Accounting Consolidation
Act
Adjudicator
Adjustment for counterparty
default
Administrative action
committee
Administrative action
Administrative action procedure
Administrative penalty
Admissible assets
Ancillary own funds
Appellant
Application
Assessor
Associate
Auditing Profession Act
Auditor
Authorisation
Banks Act
Basic own funds (BOF)
Beneficial interest
Beneficiary
Best estimate (BEL)
Biometric risk factors
Board of directors
Boundaries of the contract
Branch of a foreign reinsurer
Branch of an insurer
Breach of the Solvency Capital Requirement
Business premises
Capital requirements
Captive Insurance Company
Captive insurer
Case record
Cash and cash equivalents
Cash-back and other loyalty provisions
Catastrophe risk
Cell
Cell Captive Insurer
Cell structure
Chair
Chief Executive Officer
Collective investment scheme
Commercial lines
Commissioner
Companies Act
Company
Competition Act
Complainant
Complaint
Complementary Identification Code (CIC) table
Conduct standard
Constitution
Consumer Protection Act
Contagion risk
Contingency Policy/Rent-a-captive
Contingent commission provisions
Contingent considerations
Contract Boundary
Contractual option
Contravention
Control function
Controlling company
Co-operatives Act
Cost-of-Capital
Council
Council for Medical Schemes
Council of Financial Regulators
Council standard
Court
Credit agreement
Currency risk
Current Tax Assets
Current Tax liabilities
Death event
Decision
Decision-maker
Deduction & Aggregation (D&A)
Deferred Tax Assets
Deferred Tax liabilities
Deputy Commissioner
Deputy Governor
Designated Authority
Director
Director-General
Disability
Disability event
Discretionary benefits
Discretionary participation features
Disqualified person
Document
Dual-regulated activity
Eligible financial institution
Eligible own funds
Employee Benefits and Termination Benefits
Page | 3
Encumber
Entitlement
Equity risk
Executive Committee
Executive Committee member
Expected Profits included in Future Cashflows (EPIFC)
Expected profits included in future premiums (EPIFP)
Expense risk
Finance Leases
Financial Advisory and Intermediary Services Act
Financial benchmark
Financial conglomerate
Financial crime
Financial crisis
Financial customer
Financial education
Financial guarantee
Financial inclusion
Financial institution
Financial institution representative
Financial Institutions (Protection of Funds) Act
Financial Intelligence Centre
Financial Intelligence Centre Act
Financial Liabilities
Financial Markets Act
Financial organ of state
Financial product
Financial product provider
Financial risk mitigation techniques
Financial Sector Conduct Authority
Financial sector law
Financial sector regulator
Financial service
Financial service provider
Financial Services Board Act
Financial Services Board
Financial Services Tribunal
Financial stability
Financial Stability Oversight Committee (FSOC)
Financial statements
Financial system
Financial year
First party cell
Fit and proper requirement
Foreign financial product
Foreign reinsurer
Friendly Societies Act
Fruitless and wasteful expenditure
Fully guaranteed
Fund
Fund member policy
Fungibility
Goodwill acquired
Governing body
Governor
Group Business
Grouped Individual Business
Grouped Individual policies
Group of companies
Group policy
Group undertaking
Head of a control function
Health event
Health insurance obligations
Holding company
Income protection and lump sum disability
Independent director
Individual policy
Inflation
Insourcing
Insurance business
Insurance group
Insurance obligations
Insurance policy
Insurance sub-group
Insured
Insurer
Intangible asset
Interest rate risk
Inter-group transaction
Inter-ministerial Council
Internal auditing
Inter-related
Inter-related person
Intra-group transaction
Inventories
Investigation
Investment value
Irregular expenditure
Joint rule
Joint standard
Key person
Lapse risk
Legislative instrument
Leniency agreement
Level of Basic Own Funds
Levies Act
Levy
LGD
Licence
Life Authorisation classes
Life event
Life insurance business
Page | 4
Life insurance policy
Life underwriting risk module
Linked
Linked business
Linked insurer
Linked Investment contracts
Listed
Lloyd‘s
Lloyd‘s underwriter
Longevity risk
Long-term Insurance Act
Look –through approach
Loss given default
Lump sum
Major business unit
Market Conduct Authority
Market infrastructure
Market-related
Market risk
Materiality
MCR
Medical expense insurance obligations
Member of the staff
Micro-insurance business
Micro-insurer
Minister
Mono-regulated activity
Morbidity
Morbidity or disability risk
Mortality risk
National Credit Act
National Credit Regulator
National Payment System Act
National Treasury
Net asset value
Nominee
Non-compliance
Non-Current Assets held for sale or discontinued operations
Non-equivalent jurisdictions
Non-executive director
Non-Life Authorisation classes
Non-life CAT Risk
Non-life insurance business
Non-life insurance policy
Non-life premium & reserve risk
Non-life underwriting risk
Non-life underwriting risk module
Non-operating holding company (NOHC)
Non-patrimonial loss
Non-regulated person
Non-SLT Health (Not Similar to Life Techniques) underwriting risk sub-module
Non-strategic participations
Official web site
Ombud
Ombud for Financial Services Providers
On-site inspection
Operating expenses
Operating levy
Operational risk
Organ of state
ORSA
Other contingent payment provisions
Other financial regulator
Outsourced
Outsourcing
Oversight Committee
Oversight Committee member
Own funds
Parent undertaking
Partially guaranteed
Participant
Participating undertaking
Payment system
Payment system operator
Payment system participant
Pension Funds Act
Person
Personal lines
Policy
Policyholder
Pooled fund
Premium
Prescribed
Probability distribution forecast
Promotion of Administrative Justice Act
Property Plant and Equipment
Property risk
Protection of Personal Information Act (POPI)
Provisions
Prudential Authority
Prudential standard
Public company
Public Finance Management Act
Pure discretionary benefit
Recognised scheme
Register
Registrar
Regulated activity
Page | 5
Regulated financial institution
Regulated person
Regulation
Regulator‘s directive
Regulatory action
Regulatory authority
Regulatory law
Regulatory strategy
Reinsurance business
Reinsurer
Related
Related party
Related person
Related undertaking
Remuneration
Reserve Bank
Reserve Bank Act
Resolution power
Respondent
Retrenchment risk
Return
Reverse Stress
Rider benefit
Ring-fenced funds
Risk concentration
Risk management system
Risk Margin
Risk mitigating action or management action
Rule
Scenario testing
Scheme
SCR
Section 25 memoranda of understanding
Section 77 memoranda of understanding
Securities
Senior management
Senior manager
Sensitivity testing
Settlement system
Shareholder value
Short-term Insurance Act
Significant influence
Significant owner
Special levy
Spread risk
Standard
Start of the policy
State-owned insurer
Statutory Ombud
Statutory scheme
Strategic participations
Stress testing
Submit
Subsidiary undertaking
Systemic
Systemically important financial institution (SIFI)
Systemic event
Systemic risk
The Act
The Basic Solvency Capital Requirement (BSCR)
The life catastrophe sub-module
The life underwriting risk module
The value of technical provisions
Third party cell
This Act
Transferability
Tribunal
Underwritten on a group basis
Universal Life policies
Value-at-risk
Variable payment morbidity insurance obligations
Website
Winding-up
3. GLOSSARY OF SAM TERMS
Absolute MCR (AMCR) - The values of the absolute floor AMCR are the higher of: (a) ZAR 15 000 000 for non-life insurers, including captive insurers conducting non-life insurance business, (b) ZAR 15 000 000 for life insurers, including captive insurers conducting life insurance business, (c) 25% of the annualised operating expenses of the preceding 12 months. (Operating expenses as defined in Board Notice 169) (Source: SA QIS3 Technical Specifications)
Accounting Consolidation based on the standard formula - The standard formula for the calculation of the Solvency Capital Requirement (SCR) applied to the consolidated assets and liabilities. (Source: SA QIS3 Technical Specifications)
Page | 6
Act means the Short-term Insurance Act, 1998 (Act no. 53 of 1998), and a word or explanation, of which a meaning has been given in the Act, has that meaning; (Source: Board Notice 169 of 2011)
Adjudicator means the Pension Funds Adjudicator appointed in terms of section 181, and includes a Deputy Adjudicator and an Acting Adjudicator; (Source: Draft Twin Peaks Bill version 2)
Adjustment for counterparty default Therefore, the secondary legislation should include a definition as follows: The adjustment for counterparty default should approximate the loss given default of the counterparty, weighted with the probability of default of the counterparty. (Source: Final Position Paper 30)
Administrative action committee means a committee established in terms of section 150; (Source: Draft Twin Peaks Bill version 2)
Administrative action has the meaning defined in section 1 of the Promotion of Administrative Justice Act; (Source: Draft Twin Peaks Bill version 2)
Administrative action procedure means a procedure adopted in terms of section 149; (Source: Draft Twin Peaks Bill version 2)
Administrative penalty means a penalty imposed in terms of section 151; (Source: Draft Twin Peaks Bill version 2)
Admissible assets means the kinds of assets referred to in section 29 of the Act; (Source: Board Notice 169 of 2011)
Ancillary own funds - shall consist of items other than basic own funds which can be called up to absorb losses and that ―1 The amounts of ancillary own fund items to be taken into account when determining own funds shall be subject to prior supervisory approval. ‖Solvency II Level 1 Article 89 defines Ancillary own funds as―1. Ancillary own funds shall consist of items other than basic own funds which can be called up to absorb losses. Ancillary own funds may comprise the following items to the extent that they are not basic own fund items:(a) unpaid share capital or initial fund that has not been called up;(b) letters of credit and guarantees;(c) any other legally binding commitments received by insurance and reinsurance undertakings. In the case of a mutual or mutual-type association with variable contributions, ancillary own funds may also comprise any future claims which that association may have against its members by way of a call for supplementary contribution, within the following 12 months ICP 17 refers to contingent assets and capital interchangeably and defines them as ―contingent elements which are not considered as assets under the relevant accounting standards, where the likelihood of payment if needed is sufficiently high according to criteria specified by the supervisor (Source: Final Position Paper 25)
Ancillary own funds are items of capital other than basic own-funds which can be called up to absorb losses. They can comprise the following items to the extent they are not basic own-funds items: (a) Unpaid share capital or initial fund that has not been called up; (b) Letters of credit or guarantees; (c) Any other legally binding commitments received by insurers and reinsurers. (Source: SA QIS3 Technical Specifications)
Ancillary own funds consist of items, other than basic own funds, that may be called up by the insurer to absorb losses, and, to the extent that the items have not been called up or paid, may comprise of such items as may be prescribed. (Source: Draft Primary Legislation - Financial Soundness)
Appellant means a person who has lodged an appeal in terms of Part 3 of Chapter 6 against a decision of a regulatory authority; (Source: Draft Twin Peaks Bill)
Application, in relation to a regulatory law, means an application in terms of a regulatory law—(a) for the granting of an entitlement;(b) for the amendment or renewal of an entitlement;(c) for the amendment or withdrawal of any condition attached or other encumbrance applicable to an entitlement; or (d) in connection with any other matter provided for in a regulatory law; (Source: Draft Twin Peaks Bill)
Assessor means a person appointed as an assessor in terms of section 162(6); (Source: Draft Twin Peaks Bill version 2)
Page | 7
Associate has the meaning set out in the International Financial Reporting Standards issued by the International Accounting Standards Board or a successor body (Source: Draft Insurance Bill issued May 2015)
Auditing Profession Act means the Auditing Profession Act, 2005 (Act No. 26 of2005) (Source: Draft Insurance Bill issued May 2015)
Auditor means an auditor registered in terms of the Auditing Profession Act (Source: Draft Insurance Bill issued May 2015)
Authorisation means a license or registration or any other type of approval, permission or authorisation issued in terms of a regulatory law to carry out a regulated activity; (Source: Draft Twin Peaks Bill)
Banks Act means the Banks Act, 1990 (Act No. 94 of 1990); (Source: Draft Twin Peaks Bill version 2)
Basic own funds (BOF) is defined as the excess of assets over liabilities, valued in accordance with SAM rules, plus subordinated liabilities, less any exclusions listed below. Own funds is the sum of "BOF" and "ancillary own funds‖. (Source: SA QIS3 Technical Specifications)
Beneficial interest has the meaning set out in section 1 the Companies Act; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Beneficiary means the person to whom an insurer undertakes to fulfil insurance obligations, which person may be or may not be the policyholder (Source: Draft Insurance Bill issued May 2015)
Best estimate (BEL) should correspond to the probability weighted average of future cash-flows taking account of the time value of money. Therefore, the best estimate calculation should allow for the uncertainty in the future cash-flows. The calculation should consider the variability of the cash flows in order to ensure that the best estimate represents the mean of the distribution of cash flow values. Allowance for uncertainty does not suggest that additional margins should be included within the best estimate. The best estimate is the average of the outcomes of all possible scenarios, weighted according to their respective probabilities. Although, in principle, all possible scenarios should be considered, it may not be necessary, or even possible, to explicitly incorporate all possible scenarios in the valuation of the liability, nor to develop explicit probability distributions in all cases, depending on the type of risks involved and the materiality of the expected financial effect of the scenarios under consideration. Moreover, it is sometimes possible to implicitly allow for all possible scenarios, for example in closed form solutions in life insurance or the chain-ladder technique in non-life insurance (Source: SA QIS3 Technical Specifications)
Biometric risk factors are underwriting risks covering any of the risks related to human life conditions, e.g.: (a) mortality/longevity rate; (b) morbidity rate; (c) disability rate. (Source: SA QIS3 Technical Specifications)
Board of directors means the board of directors of a public company or the controlling body of an association of persons formed under an Act of Parliament that performs similar roles and responsibilities as the board of directors of a public company; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Board of directors means the—(a) board of directors of a company registered under the Companies Act;(b) board of directors of a co-operative registered under the Co-operatives Act; or (c) governing body of a member-based democratically controlled association of persons established by an Act of Parliament (Source: Draft Insurance Bill issued May 2015)
Boundaries of the contract - For the purpose of determining which insurance and reinsurance obligations arise in relation to an insurance or reinsurance contract, the boundaries of the contract shall be defined in the following manner: (a) Where the insurer or reinsurer has i. a unilateral right to terminate the contract; ii. a unilateral right to reject the premiums payable under the contract; or iii. a unilateral right to amend the premiums or the benefits payable under the contract at a future date in such a way that the premiums fully reflect the risks, then Any obligations which relate to insurance or reinsurance cover which might be provided by the insurance or reinsurer after that date do not belong to the existing contract, unless the insurers or reinsurer can compel the policyholder to pay the premium for those obligations. (b) Where the insurer or reinsurer has a unilateral right referred to in
Page | 8
point (a) that relates only to a part of the contract, the same principle as defined in point (a) above shall be applied to this part. (c) All other obligations relating to the contract, including obligations relating to unilateral rights of the insurer or reinsurer to renew and extend the scope of the contract, belong to the contract. (Source: SA QIS3 Technical Specifications)
Branch of a foreign reinsurer means an operating entity of a foreign reinsurer that is not a legal entity separate from the foreign reinsurer, and is part of a foreign reinsurer in terms of its organisation (Source: Draft Insurance Bill issued May 2015)
Branch of an insurer means an operating entity of an insurer that is part of the insurer in terms of its organisation and is not a legal entity separate from the insurer, but is established outside of the Republic (Source: Draft Insurance Bill issued May 2015)
Breach of the Solvency Capital Requirement (A significant breach) is defined as the earlier of the following events: (a) Own funds are equal to or less than 75% of the Solvency Capital Requirement. (b) A breach of the Solvency Capital Requirement is not resolved within a two month period (Source: SA QIS3 Technical Specifications)
Business premises means a building or a part of a building that is used in connection with the carrying on of a business of providing a financial product or financial service; (Source: Draft Twin Peaks Bill version 2)
Capital requirements means - collectively the solvency capital requirement and minimum capital requirement; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Captive Insurance Company: A ―captive insurance company‖ means – an insurance or reinsurance juristic party created and owned by one or several industrial, commercial or financial entities, other than an insurance or reinsurance group entity. The purpose of which is to provide insurance or reinsurance cover for the entity‘s risks or entities to which it belongs, and only a small part, if any, of its risk exposure is related to providing insurance or reinsurance to other related parties where the other related parties are limited to the employees of the entity or entities to which it belongs. (Source: SA QIS3 Technical Specifications)
Captive insurer means an insurer that only insures its own operational risks, the operational risks of its holding company or subsidiaries of its holding company; (Source: Draft Insurance Bill issued May 2015)
Case record, in relation to an administrative appeal lodged or to be lodged in terms of Part 3 of Chapter 6, means—(a) any documentation and any written or electronic evidence, recommendations or other factual information which was before there regulatory authority when it took the decision appealed or to be appealed against; and (b) the reasons for the decision; (Source: Draft Twin Peaks Bill)
Cash and cash equivalents - Cash comprises cash on hand and demand deposits (Source: SA QIS3 Technical Specifications)
Cash-back and other loyalty provisions: The total technical provisions per line of business for insurance policy benefits that entitle a policyholder to predetermined benefits on the expiry of a specified period and under specified circumstances. This includes loyalty benefits that depend only on whether or not the policyholder lapses but not on whether or not the policyholder has claimed during a specified period. (Source: SA QIS3 Technical Specifications)
Cash-back bonus means a benefit provided for in a policy document that entitles a policyholder to a predetermined benefit on the expiry of a specified period and under specified circumstances; (Source: Board Notice 169 of 2011)
Catastrophe risk Under the non-life underwriting risk module, catastrophe risk is defined in the Solvency II Framework Directive (Directive 2009/138/EC) as: ―the risk of loss, or of adverse change in the value of insurance liabilities, resulting from significant uncertainty of pricing and provisioning assumptions related to extreme or exceptional events (Source: SA QIS3 Technical Specifications) CAT risks stem from extreme or irregular events that are not sufficiently captured by the capital requirements for premium and reserve risk. The catastrophe risk capital requirement is calibrated at the 99.5% VaR (annual view) (Source: SA QIS3 Technical Specifications)
Page | 9
Cell Captive insurer means an insurer that only conducts insurance business through cell structures (Source: Draft Insurance Bill issued May 2015)
Cell Captive Insurer: A ―cell captive insurer‖ (referred to as the „cell provider‟ or „promoter‟) is an insurance company which rents its insurance license to other organisations under onerous terms. The license may be used strictly for an organisations own assets risk, which is referred to as first party cell or for the organisations clients, which is referred to as third party cell. The conditions extended upon the organisation renting under the third party basis are express and onerous and the organisation seeking the license will have to comply with all applicable legislation and capitalisation requirements before the application will be granted by the cell captive insurer. (Source: SA QIS3 Technical Specifications)
Cell means an equity participation in a specific class of shares of an insurer, which equity participation is administered and accounted for separately from other classes of shares; (Source: Board Notice 169 of 2011)
Cell: A ―cell‖ means an equity participation in a specific class of shares of an insurer. This equity participation is administered and accounted for separately from other classes of shares. (Source: SA QIS3 Technical Specifications)
Cell structure means an arrangement under which an entity (cell owner)—(a) holds an equity participation in a specific class or type of shares of an insurer, which equity participation is administered and accounted for separately from other classes or types of shares; and(b) is entitled to a share of the profits and liable for a share of the losses as a result of the equity participation linked to profits or losses generated by the insurance business referred to in paragraph (c); and(c) places insurance business with the insurer referred to in paragraph (a), which business is ring-fenced on a going concern basis from the other insurance business of that insurer (Source: Draft Insurance Bill issued May 2015)
Chair means the person holding the office of the Chair of the Tribunal in terms of section 155(4); (Source: Draft Twin Peaks Bill version 2)
Chief Executive Officer means the Chief Executive Officer of the Prudential Authority appointed in terms of section 31(1), or a person acting as the Chief Executive Officer; (Source: Draft Twin Peaks Bill version 2)
Collective investment scheme has the meaning defined in section 1 of the Collective Investments Schemes Control Act, 2002 (Act No. 45 of 2002); (Source: Draft Twin Peaks Bill version 2)
Commercial lines means non-life insurance business other than in respect of personal lines; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Commissioner means the Commissioner of the Financial Sector Conduct Authority appointed in terms of section 57(1), or a person acting as the Commissioner; (Source: Draft Twin Peaks Bill version 2)
Commissioner means the Commissioner of the Market Conduct Authority appointed in terms of section 21(1), or a person acting as Commissioner designated in terms of section 21(6); (Source: Draft Twin Peaks Bill)
Companies Act means the Companies Act, 2008 (Act No. 71 of 2008) (Source: Draft Insurance Bill issued May 2015)
Companies Act means the Companies Act, 2008 (Act No. 71 of 2008); (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Companies Act means the Companies Act, 2008 (Act No. 71 of 2008); (Source: Draft Twin Peaks Bill version 2)
Company has the meaning defined in section 1 of the Companies Act; (Source: Draft Twin Peaks Bill version 2)
Competition Act means the Competition Act, 1998 (Act No. 89 of 1998); (Source: Draft Twin Peaks Bill version 2)
Page | 10
Complainant, for the purposes of Chapter 16 means– (a) a specific client as defined in section 1(1) of the Financial Advisory and Intermediary Services Act, who submits a complaint to the Ombud for Financial Services Providers; (b) a complainant as defined in section 1(1) of the Pension Funds Act; (c) a financial customer who submits a complaint to a recognised scheme; (Source: Draft Twin Peaks Bill version 2)
Complaint, for the purposes of Chapter 16 means– (a) in relation to a recognised scheme, an expression of dissatisfaction by a financial customer relating to a financial service or product provided or offered by a financial institution, or to an agreement with a financial institution in respect of its products or services, and in which it is alleged that– (i) the financial institution has contravened or failed to comply with a provision of an agreement, law, standard, rule or a code of conduct which is binding on the financial institution or to which it subscribes; (ii) the financial institution‘s maladministration or wilful or negligent action or failure to act, has caused the financial customer harm, prejudice, distress or substantial inconvenience; or (iii) the financial institution has treated the financial customer unfairly; (b) in relation to the Adjudicator, a complaint as defined in the Pension Funds Act, read with paragraph (b) of the definition of complainant; and (c) in relation to the Ombud for Financial Services Providers, a complaint as defined in the Financial Advisory and Intermediary Services Act, read with the definitions of client in section 1(1) of that Act and paragraph (a) of the definition of complainant; (Source: Draft Twin Peaks Bill version 2)
Complementary Identification Code (CIC) table
Assets listed in Definition
Country
ISO 3166-1-alpha-2 country code
Identify the country ISO code where the asset is listed in. An asset is considered as being listed if it is negotiated on a regulated market or on a multilateral trading facility. If the asset is listed in more than one country, the country should be the one used as the reference for valuation purposes
XL Assets that are not listed in a stock exchange
Identify assets that are not negotiated on a regulated market or on a multilateral trading facility.
XT Assets that are not exchange tradable
Identify assets that by their nature are not subject to be negotiated on a regulated market or on a multilateral trading facility. This includes assets categories 7, 8 and 9
Category Definition
1 Government bonds Bonds issued by public authorities, whether by central governments supra-national government institutions, regional governments or municipal governments
11 Central Government bonds
Bonds issued by central governments, i.e. Central government of the Republic as well as a Minister of the Republic
12 Supra National bonds Bonds issued by public institutions established by a commitment between national states / countries, e.g. issued by a multilateral development bank
13 Regional government bonds
Regional government or autonomous communities debt instruments offered to the public in a public offering on the capital market, i.e. Provincial Government of the Republic
14 Municipal government bonds
Bonds issued by municipalities, including cities, provinces, districts and other municipal authorities
15 Treasury bonds Short term government bonds, issued by central governments (issued with a maturity term up to 1 year)
16 Covered bonds Government bonds which have a pool of assets that secures or "covers" the bond if the originator becomes insolvent. The cover assets are restricted to cash flows from mortgages or public sector loans and those assets remain on the issuer balance sheet
17 Parastatal bonds Bonds issued by parastatals backed by the Government, i.e. Rand Water Board, Land & Agricultural Bank and Eskom
19 Other Other government bonds, not classified under the above categories
Page | 11
2 Corporate bonds (including fixed and variable interest bonds)
Bonds issued by corporations
21 Conventional bonds Bonds issued by corporations, that don't fall into the categories identified below. Subordinated bonds to be included in this category.
22 Convertible bonds Corporate bonds that the holder can convert into shares of common stock in the issuing company or cash of equal value, having debt and equity-like features
23 Commercial paper Corporate bonds classifiable as money market securities, with original maturity lesser than 270 days; i.e. promissory notes
24 Money market instruments
Short term debt securities (original maturity lesser than 1 year), e.g. certificate of deposit, bankers' acceptances and other highly liquid instruments
25 Hybrid bonds Corporate bonds that have debt and equity-like features, but are not convertible.
26 Common covered bonds Corporate bonds which have a pool of assets that secures or "covers" the bond if the originator becomes insolvent. The cover assets are restricted to cash flows from mortgages or public sector loans and those assets remain on the issuer balance sheet
27 Parastatal bonds Bonds issued by parastatals not backed by the Government
28 Preference shares Preference shares redeemable at a future date.
29 Other Other corporate bonds, not classified under the above categories
3 Equity Shares representing corporations' capital, i.e., representing ownership in a corporation
31 Common equity Equity that represent basic property rights on corporations
32 Equity of real estate related corporation
Equity representing capital from real estate related corporations
33 Equity rights Rights to subscribe to additional shares of equity at a set price, i.e. share options
34 Convertible and other preference shares
Preference shares convertible to common equity (ordinary shares) as well as other preference shares, i.e. perpetual preference shares.
39 Other Other equity, not classified under the above categories
4 Investment funds Undertakings the sole purpose of which is the collective investment in transferrable securities and/or in other financial assets
41 Equity funds Investment funds mainly invested in equity relative to the total portfolio
42 Debt funds Investment funds mainly invested in bonds relative to the total portfolio
43 Money market funds Investment funds mainly invested in money market instruments relative to the total portfolio
44 Asset allocation funds Fund which invests its assets pursuing a specific asset allocation objective, e.g. primarily investing in the securities of companies in countries with nascent stock markets or small economies, specific sectors or group of sectors, specific countries of other specific investment objective; i.e. Forex balance funds
45 Real estate funds Investment funds mainly invested in real estate relative to the total portfolio
46 Alternative funds Funds whose investment strategies include such as hedging, event driven, fixed income directional and relative value, managed futures, commodities etc.
47 Private Equity Funds Investment funds used for making investments in equity securities following strategies associated with private equities.
Page | 12
48 Infrastructure funds Funds that invest in utilities such as toll roads, bridges, tunnels, ports and airports, oil and gas distribution, electricity distribution and social infrastructure such as healthcare and educational facilities
49 Other Other investment funds, not classified under the above categories, i.e. commodity funds
5 Structured notes Hybrid securities, combining a fixed income instrument with a series of derivative components. Excluded from this category are fixed income securities that are issued by sovereign governments. Concerns to securities that have embedded all categories of derivatives, including Credit Default Swaps (CDS), Constant Maturity Swaps (CMS), Credit Default Options (CDO). Assets under this category are not subject to unbundling like in the case of IFRS.
51 Equity risk Structured notes mainly exposed to equity risk relative to the total portfolio
52 Interest rate risk Structured notes mainly exposed to interest rate risk relative to the total portfolio
53 Currency risk Structured notes mainly exposed to currency risk relative to the total portfolio
54 Credit risk Structured notes mainly exposed to credit risk relative to the total portfolio
55 Real estate risk Structured notes mainly exposed to real estate risk relative to the total portfolio
56 Commodity risk Structured notes mainly exposed to commodity risk relative to the total portfolio
57 Catastrophe and Weather risk
Structured notes mainly exposed to catastrophe or weather risk relative to the total portfolio
58 Mortality risk Structured notes mainly exposed to mortality risk as well as longevity risk relative to the total portfolio
59 Other Other structured notes, not classified under the above categories
6 Collateralised securities Securities whose value and payments are derived from a portfolio of underlying assets. Includes Asset Backed Securities (ABS), Mortgage Backed securities (MBS), Commercial Mortgage Backed securities (CMBS), Collateralised Debt Obligations (CDO), Collateralised Loan Obligations (CLO) , Collateralised Mortgage Obligations (CMO). Assets under this category are not subject to unbundling like in the case of IFRS. Equity linked notes and other instruments that simulates an index.
61 Equity risk Collateralised securities mainly exposed to equity risk relative to the total portfolio
62 Interest rate risk Collateralised securities mainly exposed to interest rate risk relative to the total portfolio
63 Currency risk Collateralised securities mainly exposed to currency risk relative to the total portfolio
64 Credit risk Collateralised securities mainly exposed to credit risk relative to the total portfolio
65 Real estate risk Collateralised securities mainly exposed to real estate risk relative to the total portfolio
66 Commodity risk Collateralised securities mainly exposed to commodity risk relative to the total portfolio
67 Catastrophe and Weather risk
Collateralised securities mainly exposed to catastrophe or weather risk relative to the total portfolio
68 Mortality risk Collateralised securities mainly exposed to mortality risk as well as longevity risk relative to the total portfolio
69 Other Other collateralised securities, not classified under the above categories
Page | 13
7 Cash and equivalents (issued by registered Banking institutions)
Money in the physical form, bank deposits and other money deposits
71 Cash Notes and coins in circulation that are commonly used to make payments
72 Transferable deposits (cash equivalents)
Deposits exchangeable for currency on demand at par and which are directly usable for making payments by cheque, draft, giro order, direct debit/credit, or other direct payment facility, without penalty or restriction including call deposits, current accounts, fixed deposits, bankers‘ acceptance and negotiable certificate of deposit
73 Other deposits short term (less than one year)
Deposits other than transferable deposits, with initial maturity inferior to 1 year, that cannot be used to make payments at any time and that are not exchangeable for currency or transferable deposits without any kind of significant restriction or penalty
74 Other deposits with term longer than one year
Deposits other than transferable deposits, with initial maturity superior to 1 year, that cannot be used to make payments at any time and that are not exchangeable for currency or transferable deposits without any kind of significant restriction or penalty
75 Cash deposits to cedents Cash deposits relating to reinsurance accepted
79 Other Other cash and equivalents, not classified under the above categories
8 Mortgages and loans Financial assets created when creditors lend funds to debtors, with collateral or not, including cash pools.
81 Uncollateralized loans made
Loans made without collateral, i.e. debentures
82 Loans made collateralized with securities
Loans made with collateral in the form of financial securities, i.e. policyholder loans and claims against LT insurers ito a policy
84 Mortgages Loans made with collateral in the form real estate
85 Other collateralized loans made
Loans made with collateral in any other form
89 Other Other mortgages and loans, not classified under the above categories
9 Property Buildings, land, other constructions that are immovable and equipment
91 Property (office and commercial)
Office and commercial building used for investment
92 Property (residential) Residential buildings used for investment
94 Property (under construction)
Real estate that is under construction, for future own usage or future usage as investment
99 Other Other real estate, not classified under the above categories
A Futures Standardised contract between two parties to buy or sell a specified asset of standardised quantity and quality at a specified future date at a price agreed today
A1 Equity and index futures Futures with equity or stock exchange indices as underlying
A2 Interest rate futures Futures with bonds or other interest rate dependent security as underlying
A3 Currency futures Futures with currencies or other currencies dependent security as underlying
A5 Commodity futures Futures with commodities or other commodities dependent security as underlying
A7 Catastrophe and Weather risk
Futures mainly exposed to catastrophe or weather risk
A8 Mortality risk Futures mainly exposed to mortality risk as well as longevity risk
A9 Other Other futures, not classified under the above categories
Page | 14
B Call Options Contract between two parties concerning the buying of an asset at a reference price during a specified time frame, where the buyer of the call option gains the right, but not the obligation, to buy the underlying asset
B1 Equity and index options Call options with equity or stock exchange indices as underlying
B2 Bond options Call options with bonds or other interest rate dependent security as underlying
B3 Currency options Call options with currencies or other currencies dependent security as underlying
B4 Warrants Call options that entitles the holder to buy stock of the issuing company at a specified price
B5 Commodity options Call options with commodities or other commodities dependent security as underlying
B6 Swaptions Call options granting its owner the right but not the obligation to enter into a long position in an underlying swap, i.e., enter into a swap where the owner pays the fixed leg and receive the floating leg
B7 Catastrophe and Weather risk
Call option mainly exposed to catastrophe and weather risk
B8 Mortality risk Call option mainly exposed to mortality risk as well as longevity risk
B9 Other Other call options, not classified under the above categories
C Put Options Contract between two parties concerning the selling of an asset at a reference price during a specified time frame, where the buyer of the put option gains the right, but not the obligation, to sell the underlying asset
C1 Equity and index options Put options with equity or stock exchange indices as underlying
C2 Bond options Put options with bonds or other interest rate dependent security as underlying
C3 Currency options Put options with currencies or other currencies dependent security as underlying
C4 Warrants Put options that entitles the holder to buy stock of the issuing company at a specified price
C5 Commodity options Put options with commodities or other commodities dependent security as underlying
C6 Swaptions Put options granting its owner the right but not the obligation to enter into a short position in an underlying swap, i.e., enter into a swap in which the owner will receive the fixed leg, and pay the floating leg
C7 Catastrophe and Weather risk
Put option mainly exposed to catastrophe and weather risk
C8 Mortality risk Put option mainly exposed to mortality risk as well as longevity risk
C9 Other Other put options, not classified under the above categories
D Swaps Contract in which counterparties exchange certain benefits of one party's financial instrument for those of the other party's financial instrument, and the benefits in question depend on the type of financial instruments involved
D1 Interest rate swaps Swap that exchange interest flows
D2 Currency swaps Swap that exchange currency
D3 Interest rate and currency swaps
Swap that exchange interest and currency flows
D5 Security swaps Swap that exchange securities
D7 Catastrophe and Weather risk
Swaps mainly exposed to catastrophe and weather risk
D8 Mortality risk Swaps mainly exposed to mortality risk as well as longevity risk
Page | 15
D9 Other Other swaps, not classified under the above categories
E Forwards Non-standardised contract between two parties to buy or sell an asset at a specified future time at a price agreed today
E1 Forward interest rate agreement
Forward contract in which one party pays a fixed interest rate, and receives a floating interest rate equal to a underlying rate, at the predefined forward date
E2 Forward exchange rate agreement
Forward contract in which one party pays an amount in one currency, and receives an equivalent amount in a different currency resulting from the conversion using the contractual exchange rate, at the predefined forward date
E7 Catastrophe and Weather risk
Forwards mainly exposed to catastrophe and weather risk
E8 Mortality risk Forwards mainly exposed to mortality risk as well as longevity risk
E9 Other Other forwards, not classified under the above categories
F Credit derivatives Derivative whose value is derived from the credit risk on an underlying bond, loan or any other financial asset
F1 Credit default swap Credit derivative transaction in which two parties enter into an agreement whereby one party pays the other a fixed periodic coupon for the specified life on the agreement and the other party makes no payments unless a credit event relating to a predetermined reference asset occurs
F2 Credit spread option Credit derivative that will generate cash flows if a given credit spread between two specific assets or benchmarks changes from its current level
F3 Credit spread swap A swap in which one party makes a fixed payment to the other on the swap's settlement date and the second party pays the first an amount based on the actual credit spread
F4 Total return swap A swap in which the non-floating rate side is based on the total return of an equity or fixed income instrument with the life longer that the swap
F9 Other Other credit derivatives, not classified under the above categories
(Source: Light Parallel Run CIC Table and definitions)
Conduct standard means a standard made in terms of section 95; (Source: Draft Twin Peaks Bill version 2)
Constitution means the Constitution of the Republic of South Africa, 1996; (Source: Draft Twin Peaks Bill)
Consumer Protection Act means the Consumer Protection Act, 2008 (Act No. 68 of 2008); (Source: Draft Twin Peaks Bill version 2)
Contagion risk is taken from the IAIS glossary as follows: ―As part of a group or conglomerate, and aside from intragroup exposures of a financial nature, there may be a risk that the support of the insurer by internal or external parties may suffer if there is a concern about another part of the group of which it is a part (Source: Final Position Paper 85)
Contingency Policy/Rent-a-captive: A ―contingency policy‖ is an insurance policy typically used to provide for the primary layers of an insurance programme or for ―difficult to insure‖ risks.. A contingency policy may insure multiple risks and is typically written for a one year period. A contingency policy may be issued as a standalone policy or may form part of a reinsurance arrangement, whereby reinsurance is structured above the protection provided by the contingency policy. At renewal or cancellation a performance bonus may be declared to the insured, based on claims experience. (Source: SA QIS3 Technical Specifications)
Contingent commission provisions: The total technical provisions per line of business for contingent commissions payable by a reinsurer to a cedant under a reinsurance agreement where these contingent commissions depend on the profitability of the total business ceded. From the
Page | 16
cedant‟s perspective this will be typically a negative technical provision (i.e. technical asset). From the reinsurer‘s perspective this will be typically a positive technical provision (i.e. technical liability). e.g. profit-share, sliding scale and other contingent commissions. (Source: SA QIS3 Technical Specifications)
Contingent considerations - A contingent consideration is either:(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or (b) a present obligation that arises from past events but is not recognised because: (i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or (ii) the amount of the obligation cannot be measured with sufficient reliability. (Source: SA QIS3 Technical Specifications)
Contract Boundary - For the purpose of determining which insurance and reinsurance obligations arise in relation to an insurance or reinsurance contract, the boundaries of the contract shall be defined in the following manner:(a) Where the insurer or reinsurer has i. a unilateral right to terminate the contract; ii. a unilateral right to reject the premiums payable under the contract; or iii. a unilateral right to amend the premiums or the benefits payable under the contract at a future date in such a way that the premiums fully reflect the risks, then Any obligations which relate to insurance or reinsurance cover which might be provided by the insurance or reinsurer after that date do not belong to the existing contract, unless the insurers or reinsurer can compel the policyholder to pay the premium for those obligations.(b) Where the insurer or reinsurer has a unilateral right referred to in point (a) that relates only to a part of the contract, the same principle as defined in point (a) above shall be applied to this part. (c) All other obligations relating to the contract, including obligations relating to unilateral rights of the insurer or reinsurer to renew and extend the scope of the contract, belong to the contract. (Source: SA QIS3 Technical Specifications)
Contractual option is defined as a right to change the benefits, to be taken at the choice of its holder (generally the policyholder), on terms that are established in advance. Thus, in order to trigger an option, a deliberate decision of its holder is necessary. Some (non-exhaustive) examples of contractual options which are pre-determined in contract and do not require again the consent of the parties to renew or modify the contract include the following: (a) Surrender value option, where the policyholder has the right to fully or partially surrender the policy and receive a pre-defined lump sum amount;(b) Paid-up policy option, where the policyholder has the right to stop paying premiums and change the policy to a paid-up status;(c) Annuity conversion option, where the policyholder has the right to convert a lump survival benefit into an annuity at a pre-defined minimum rate of conversion;(d) Policy conversion option, where the policyholder has the right to convert from one policy to another at pre-specific terms and conditions; and(e) Extended coverage option, where the policyholder has the right to extend the coverage period at the expiry of the original contract without producing further evidence of health. (Source: SA QIS3 Technical Specifications)
Contravention includes a non-compliance with a financial sector law, and an offence in terms of a financial sector law; (Source: Draft Twin Peaks Bill version 2)
Control function means -(a) the risk management function;(b) the compliance function;(c) internal audit function;(d) in the case of a long-term insurer, the actuarial function; or(e) all of these functions; (Source: Board Notice 158 of 2014)
Control function within a governance framework, means – (a) the risk management function; (b) the compliance function; (c) the actuarial control function;(d) internal audit function;(e) all of these functions; or(f) any combination of these functions; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Control function within a governance framework, means the risk management function, the compliance function, the actuarial control function and internal audit function;‘‘; (Source: Draft ILAB version 2 - Non-Life)
Control function within a governance framework, means the risk management function, the compliance function, the actuarial control function and internal audit function;‘‘; (Source: Draft ILAB version 2 - Life)
Control functions means the dedicated functions (whether in the form of a unit or department) of an insurer responsible for supporting the board in the fulfilment of its oversight responsibilities in respect
Page | 17
of risk management, compliance, actuarial control, internal audit and any other function prescribed (Source: Draft Insurance Bill issued May 2015)
Controlling company means a holding company of an insurance group that is a public company whose only business is the acquiring, holding and managing of another company or other companies (Source: Draft Insurance Bill issued May 2015)
Controlling company means a non-operating holding company of an insurance group that is subject to this Act; (Source: Draft Primary Legislation – Solo and Group requirements)
Controlling company means a non-operating holding company of an insurance group that is subject to this Part; (Source: Draft ILAB version 2 - Life)
Controlling company means a non-operating holding company of an insurance group that is subject to this Part; (Source: Draft ILAB version 2 - Non-Life)
Controlling company means a non-operating holding company of an insurance group that is subject to this Chapter; (Source: Final Position Paper 27)
Controlling company means the non-operating holding company of a financial conglomerate that is subject to Chapter 11; (Source: Draft Twin Peaks Bill version 2)
Co-operatives Act means the Co-operatives Act, 2005 (Act No. 14 of 2005) (Source: Draft Insurance Bill issued May 2015)
Cost-of-Capital rate is the annual rate to be applied to the capital requirement in each period. Because the assets covering the capital requirement themselves are assumed to be held in marketable securities, this rate does not account for the total return but merely for the spread over and above the risk free rate. (Source: SA QIS3 Technical Specifications)
Council for Medical Schemes means the Council for Medical Schemes established in terms of section 3 of the Medical Schemes Act, 1998 (Act No. 131 of 1998); (Source: Draft Twin Peaks Bill version 2)
Council means the Financial Services Ombud Schemes Council referred to in section 168; (Source: Draft Twin Peaks Bill version 2)
Council of Financial Regulators means the Council established in terms of section 79; (Source: Draft Twin Peaks Bill version 2)
Council standard means a standard made by the Council, after having followed a procedure substantially similar to that required in terms of part 2 of Chapter 7; (Source: Draft Twin Peaks Bill version 2)
Court means a Superior Court as defined in section 1 of the Superior Courts Act, 2013 (Act No. 10 of 2013); (Source: Draft Twin Peaks Bill version 2)
Credit agreement includes, but is not limited to, a credit agreement referred to in section 1 of the National Credit Act; (Source: Draft Twin Peaks Bill version 2)
Currency risk arises from changes in the level or volatility of currency exchange rates. (Source: SA QIS3 Technical Specifications)
Current Tax Assets - Income taxes include all domestic and foreign taxes based on taxable profits and withholding taxes payable by a group entity (Source: SA QIS3 Technical Specifications)
Current Tax liabilities - Income taxes include all domestic and foreign taxes based on taxable profits and withholding taxes payable by a group entity. (Source: SA QIS3 Technical Specifications)
Death event means the event of the life of a person or an unborn having ended; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Death event means the event of the life of a person or an unborn having ended (Source: Draft Insurance Bill issued May 2015)
Decision, in relation to an administrative action, means a decision taken in relation to a specific person affecting the rights of that person; (Source: Draft Twin Peaks Bill)
Page | 18
Decision-maker means– (a) a financial sector regulator;(b) any other person who has made a decision in terms of a power conferred or a duty imposed on that person by or in terms of a financial sector law, and that financial sector law grants a right of appeal to the Tribunal to any person aggrieved by a decision of that person; (c) a statutory ombud (Source: Draft Twin Peaks Bill version 2)
Deduction & Aggregation (D&A) - The sum of the standard formula solo SCR and solo own funds of the participating insurance undertaking (adjusted to remove the treatment of intragroup transactions from the solo SCR and own funds) and the proportional share of each related insurance undertaking in the group. Under this method, group solvency is assessed through the sum of the adjusted solo solvency capital requirements and own funds of the participating undertakings and of the proportional48 share of its related undertakings. The treatment of participations in particular types of entities at solo level will be reflected in the aggregated group SCR. For participations in non-financial entities, the equity risk charge as described in section SCR.2. in the solo SCR of the participating entity should be applied to ensure a consistent approach with the other methods (Source: SA QIS3 Technical Specifications)
Deferred Tax Assets - Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of: (a) deductible temporary differences; (b) the carry forward of unused tax losses; and (c) the carry forward of unused tax credits. (Source: SA QIS3 Technical Specifications)
Deferred Tax liabilities - Income taxes include all domestic and foreign taxes based on taxable profits and withholding taxes payable by a group entity. (Source: SA QIS3 Technical Specifications)
Deputy Commissioner means a person appointed as a Deputy Commissioner in terms of section 57(3), or a person acting as a Deputy Commissioner; (Source: Draft Twin Peaks Bill version 2)
Deputy Governor means a person appointed in terms of section 4 or 6(1)(a) of the Reserve Bank Act as a Deputy Governor of the Reserve Bank; (Source: Draft Twin Peaks Bill version 2)
Designated authority, for the purposes of Part 1 of Chapter 17, means–(a) an organ of state responsible for the regulation, supervision or enforcement of legislation regulating the financial sector, taxation, the administration of justice, and law enforcement; (b) a body similar to an organ of state referred to in paragraph (a), that is designated in terms of the laws of a foreign country as being responsible for the regulation, supervision or enforcement of legislation regulating the financial sector, taxation, the administration of justice, and law enforcement; (c) a market infrastructure that is responsible for the supervision of persons authorised by that infrastructure in terms of the Financial Markets Act; or (d) an Ombud established in terms of a financial sector law or a recognised scheme, including a scheme that was recognised in terms of the Financial Services Ombud Schemes Act, 2004 (Act No. 37 of 2004); (e) a payment system management body as recognised and established in terms of section 3(3) of the National Payment System Act; (Source: Draft Twin Peaks Bill version 2)
Director means a member of a board of directors (Source: Draft Insurance Bill issued May 2015)
Director means a member or an alternate member of a governing body; (Source: Draft Twin Peaks Bill version 2)
Director-General means the Director-General of the National Treasury, or a person acting as the Director-General; (Source: Draft Twin Peaks Bill version 2)
Disability event means the event of a person becoming temporarily or permanently disabled so that the person is unable to— (a) continue his or her occupation or employment;(b) participate in any occupation or employment that is reasonably suitable for that person given, amongst other matters, his or her education, experience and age; or (c) carry on the functions required for normal activities of life (Source: Draft Insurance Bill issued May 2015)
Disability event means the event of the –(a) occupational ability of the mind or body of a person becoming so temporarily or permanently impaired that the person is unable to –(i) continue his or her occupation or employment or; or(ii) participate in any occupation or employment that is reasonably suitable for that person given, amongst others, his or her education, experience and age; or(b) the functional ability of the mind or body of a person becoming so temporarily or permanently impaired
Page | 19
that the a person is fully or partially unable to carry on normal activities of life; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Disability refers to the inability of the life assured - due to sickness, injury, disease, illness or infirmity - to engage in his/her own occupation, or any other occupation for which he is suited in terms of training, education and experience. (Source: SA QIS3 Technical Specifications)
Discretionary benefits correspond to the sum of the ―conditional discretionary benefit‖ and ―pure discretionary benefit‖ items. The definitions of ―conditional discretionary benefit‖ and ―pure discretionary benefit‖ should not be understood as requirement that they should be valued separately. Only a distinction between guaranteed benefits and discretionary benefits should be required (Source: Final Position Paper 32)
Discretionary participation features are defined as additional benefits that are contractually based on: a) the performance of a specified pool of contracts or a specified type of contract or a single contract b) realised and/or unrealised investment return on a specified pool of assets held by the issuer; orc) the profit or loss of the company, fund or other entity that issues the contract (Source: Final Position Paper 32)
Discretionary participation features means where the insurance obligations under a policy are supplemented with additional insurance obligations -(a) that are likely to be a significant portion of the total insurance obligations under the policy;(b) the amount or timing of which are contractually at the discretion of the insurer; and(c) that are contractually based on -(i) the performance of a specified pool of policies or a specified type of policy;(ii) realised and/or unrealised investment returns on a specified pool of assets held by the insurer; or(iii) the profit or loss of the insurer that issues the policy (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Disqualified person means a person who– (a) is engaged in the business of a financial institution, or has a direct material financial interest in a financial institution, except as a financial customer; (b) is a Member of the Cabinet referred to in section 91 of the Constitution, a Member of the Executive Council of a Province referred to in section 215 of the Constitution, a member of Parliament, a member of a provincial legislature, or a mayor or councillor of a municipal council; (c) is an office-bearer of, or is in a remunerated leadership position in, a political party; (d) has at any time been removed from an office of trust; (e) is or has been subject to disbarment; (f) is or has at any time been sanctioned for contravening a law relating to the regulation or supervision of financial institutions, or the provision of financial products or financial services; (g) is or has at any time been convicted of– (i) theft, fraud, forgery, uttering of a forged document, perjury or an offence involving dishonesty, whether in the Republic or elsewhere; or(ii) an offence in terms of the Prevention of Corruption Act, 1958 (Act No. 6 of 1958), the Corruption Act, 1992 (Act No. 94 of 1992) or Parts 1 to 4, or sections 17, 20 or 21, of the Prevention and Combating of Corrupt Activities Act, 2004 (Act No. 12 of 2004), or a similar offence in terms of the law of a foreign country; (h) who is or has been convicted of any other offence committed after the Constitution of the Republic of South Africa, 1993, came into operation, where the penalty imposed for the offence is or was imprisonment without the option of a fine; (i) is subject to a provisional sequestration order or is an unrehabilitated insolvent; (j) is disqualified from acting as a director or executive officer of a financial institution in terms of legislation; or (k) is declared by the High Court to be of unsound mind or mentally disordered, or is detained in terms of the Mental Health Act, 1973 (Act No. 18 of 1973); (Source: Draft Twin Peaks Bill version 2)
Document includes books, records, securities or accounts, and any information, including information stored or recorded electronically, digitally, photographically, magnetically or optically, and any device by means of which information is recorded or stored; (Source: Draft Twin Peaks Bill version 2)
Dual-regulated activity means business of the nature contemplated in Part 2 of Schedule 2; (Source: Draft Twin Peaks Bill)
Eligible financial institution means any of the following: (a) a financial institution licensed or required to be licensed as a bank in terms of the Banks Act; (b) a financial institution licensed or required to be licensed as a long-term insurer in terms of the Long-term Insurance Act or a short-term insurer in terms of the Short-term Insurance Act; (c) a market infrastructure; (d) a financial institution prescribed in Regulations;1 (Source: Draft Twin Peaks Bill version 2)
Eligible own funds comprise the sum of basic own funds and ancillary own funds adjusted in accordance with the prescribed tiering restrictions; ―basic own funds‖ consist of -(a) the excess of
Page | 20
assets over liabilities valued in accordance with sections 41, 42 and 43 of this Act; and(b) subordinated liabilities; (Source: Draft Primary Legislation - Financial Soundness)
Employee Benefits and Termination Benefits - As defined in IAS 19(Source: SA QIS3 Technical Specifications)
Encumber means any limitation on or qualification in respect of the exercise of a contractual right, including, but not limited to, any contractual obligation that must be fulfilled before that contractual right may be exercised (Source: Draft Insurance Bill issued May 2015)
Entitlement means—(a) an authorisation, as defined in this Act; (b) any exemption or exclusion issued in terms of a regulatory law from a requirement of a regulatory law or imposed in terms of a regulatory law; or(c) any other benefit or privilege issued in terms of a regulatory law; (Source: Draft Twin Peaks Bill)
Equity risk arises from the level or volatility of market prices for equities. Exposure to equity risk refers to all assets and liabilities whose value is sensitive to changes in equity prices. (Source: SA QIS3 Technical Specifications)
Executive Committee means the Committee established in terms of section 56; (Source: Draft Twin Peaks Bill version 2)
Executive Committee member means the Commissioner or a Deputy Commissioner of the Financial Sector Conduct Authority; (Source: Draft Twin Peaks Bill version 2)
Expected Profits included in Future Cashflows (EPIFC) result from the recognition of profits yet to be earned, emanating from the cash flows from existing (in-force) business that are expected to be received in the future. EPIFC is also known as the surrender value gap (SVG), and both terms can be used interchangeably. (Source: SA QIS3 Technical Specifications)
Expected profits included in future premiums (EPIFP) result from the recognition of profits yet to be earned, emanating from the premiums from existing (in-force) business that are expected to be received in the future. (Source: SA QIS3 Technical Specifications)
Expense risk arises from the variation in the expenses incurred in servicing insurance and reinsurance contracts. This includes the risk arising from the variation in the growth of expenses over and above that of inflation. (Source: SA QIS3 Technical Specifications)
Finance Leases - Classification of leases is based on the extent to which risks and rewards incidental to ownership of a leased asset lie with the lessor or the lessee. (Source: SA QIS3 Technical Specifications)
Financial Advisory and Intermediary Services Act means the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002); (Source: Draft Twin Peaks Bill version 2)
Financial benchmark means an analysis by which the performance of an investment is assessed; (Source: Draft Twin Peaks Bill version 2)
Financial conglomerate means a group of companies that comprises – (a) one or more eligible financial institutions; (b) the holding companies, including any controlling companies, of an eligible financial institution; (c) their related persons or inter-related persons, including persons located or incorporated outside of the Republic; and (d) their associates as identified in the International Financial Reporting Standards issued by the International Accounting Standards Board or a successor body, but excludes any holding company or similar entity that is incorporated outside of the Republic; (Source: Draft Twin Peaks Bill version 2)
Financial conglomerate means an insurance group that includes -(a) at least one person subject to registration under this Act; and(b) at least one person subject to registration, licensing or approval under –(i) the laws, other than this Act, referred to in the definition of ―financial institution‖ in section 1 of the Financial Institutions (Protection of Funds) Act, 2001 (Act 28 of 2001);(ii) the Banks Act, 1990 (Act No. 94 of 1990), the Mutual Banks Act, 1993 (Act No. 124 of 1993) or the Co-operative Banks Act, 2007 (Act No. 40 of 2007); or(iii) the National Credit Act, 2005 (Act No. 34 of 2005); or(c) at least one non-regulated person; and(d) their related and inter-related persons; (Source: Draft Primary Legislation – Solo and Group requirements)
Page | 21
Financial conglomerate means an insurance group that includes -(a) At least one person subject to registration under this Act; and(b) At least one person subject to registration, licensing or approval under The laws, other than this Act, referred to in the definition of ―financial institution‖ in section 1 of the Financial Institutions (Protection of Funds) Act, 2001 (Act 28 of 2001),(ii) The Banks Act, 1990 (Act No. 94 of 1990), the Mutual Banks Act, 1993 (Act No. 124 of 1993) or the Co-operative Banks Act, 2007 (Act No. 40 of 2007); or (iii) The National Credit Act, 2005 (Act No. 34 of 2005); or(c) At least one person that issues a financial product as defined in the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002) or furnishes advise or renders intermediary services in respect of a financial product as defined in the Financial Advisory and Intermediary Services Act, 2002, and the issuing of that financial product is not subject to registration, licensing or approval under any Act of Parliament; and (d) Their related and inter-related persons. (Source: Final Position Paper 27)
Financial conglomerate means an insurance group that includes at least one person subject to registration, licensing or approval under— (a) the laws, other than this Act, referred to in the definition of "financial institution" in section 1 of the Financial Institutions (Protection of Funds) Act;(b) the Banks Act, 1990 (Act No. 94 of 1990), the Mutual Banks Act, 1993 (Act No. 124 of 1993) or the Co-operative Banks Act, 2007 (Act No. 40 of 2007); or (c) the National Credit Act, 2005 (Act No. 34 of 2005) (Source: Draft Insurance Bill issued May 2015)
Financial conglomerate means an insurance group that includes—(a) at least one person subject to registration under this Act; and(b) at least one person subject to registration, licensing or approval under—(i) the laws, other than this Act, referred to in the definition of‗ ‗financial institution‘‘ in section 1 of the Financial Institutions(Protection of Funds) Act, 2001 (Act No. 28 of 2001);(ii) the Banks Act, 1990 (Act No. 94 of 1990), the Mutual Banks Act, 1993 (Act No. 124 of 1993) or the Co-operative Banks Act, 2007 (Act No. 40 of 2007); or(iii) the National Credit Act, 2005 (Act No. 34 of 2005); or(c) at least one person that provides a financial product as defined in the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37of 2002), and the activity of providing that financial product is not subject to registration, licensing or approval under another Act of Parliament; and(d) their related and inter-related persons; (Source: Draft ILAB version 2 - Life)
Financial conglomerate means an insurance group that includes—(a) at least one person subject to registration under this Act; and(b) at least one person subject to registration, licensing or approval under—(i) the laws, other than this Act, referred to in the definition of ‗financial institution‘ in section 1 of the Financial Institutions(Protection of Funds) Act, 2001 (Act No. 28 of 2001);(ii) the Banks Act, 1990 (Act No. 94 of 1990), the Mutual Banks Act, 1993 (Act No. 124 of 1993), or the Co-operative Banks Act, 2007 (Act No. 40 of 2007); or(iii) the National Credit Act, 2005 (Act No. 34 of 2005); or(c) at least one person that provides a financial product as defined in the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37of 2002), and the activity of providing that financial product is not subject to registration, licensing or approval under another Act of Parliament; and(d) their related and inter-related persons; (Source: Draft ILAB version 2 - Non-Life)
Financial crime means each of the following:(a) an offence in terms of a financial sector law; (b) an offence in connection with the provision of a financial product or a financial service; (c) an offence related to the handling of the proceeds of crime; (d) an offence in terms of the Financial Intelligence Centre Act; (Source: Draft Twin Peaks Bill version 2)
Financial crisis means a crisis in the financial system caused by a systemic risk, weakness or disruption in the financial system; (Source: Draft Twin Peaks Bill)
Financial customer means a person to or for whom a financial product or a financial service is offered or provided, irrespective of the capacity in which the person is offered or receives the product or service, and includes the– (a) successor in title of the person; and (b) beneficiary of the product or service; (Source: Draft Twin Peaks Bill version 2)
Financial education means a process by which members of the general public are aided to improve their understanding of financial products, financial services and financial concepts and risks and opportunities and, through instruction and objective information, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for assistance, and to take other effective actions to improve their financial well-being; (Source: Draft Twin Peaks Bill version 2)
Page | 22
Financial guarantee is present when there is the possibility to pass losses to the insurer or to receive additional benefits8 as a result of the evolution of financial variables (solely or in conjunction with non-financial variables) (e.g. investment return of the underlying asset portfolio, performance of indices, etc.). In the case of guarantees, the trigger is generally automatic (the mechanism would be set in the policy‘s terms and conditions) and thus not dependent on a deliberate decision of the policyholder / beneficiary. In financial terms, a guarantee is linked to option valuation. (Source: SA QIS3 Technical Specifications)
Financial inclusion means that households and businesses have transparent and fair access to, and can effectively use, appropriate financial products and financial services, which products and services are provided responsibly and sustainably in a well-regulated environment; (Source: Draft Twin Peaks Bill version 2)
Financial institution means– (a) a financial product provider; (b) a financial service provider; (c) a market infrastructure; (d) a payment system operator, excluding the Reserve Bank; (e) a settlement system; (f) a controlling company of a financial conglomerate; and includes any person licensed or required to be licensed in terms of a financial sector law and the National Payment System Act; (Source: Draft Twin Peaks Bill version 2)
Financial institution representative means a representative as defined in section 1(1) of the Financial Advisory and Intermediary Services Act; (Source: Draft Twin Peaks Bill version 2)
Financial Institutions (Protection of Funds) Act means the Financial Institutions (Protection of Funds) Act, 2001 (Act No. 28 of 2001) (Source: Draft Insurance Bill issued May 2015)
Financial Intelligence Centre Act means the Financial Intelligence Centre Act, 2001 (Act No. 38 of 2001); (Source: Draft Twin Peaks Bill version 2)
Financial Intelligence Centre means the Financial Intelligence Centre established in terms of section 2 of the Financial Intelligence Centre Act; (Source: Draft Twin Peaks Bill version 2)
Financial Liabilities - Only recognized when an entity becomes a party to the contractual provisions of the instrument (Source: SA QIS3 Technical Specifications)
Financial Markets Act means the Financial Markets Act, 2012 (Act No. 19 of 2012); (Source: Draft Twin Peaks Bill version 2)
Financial organ of state means—(a) an organ of state responsible for the supervision or enforcement of legislation; (b) a body similar to an organ of state referred to in paragraph (a), designated in the laws of a country other than the Republic to supervise or enforce legislation of that country;(c) a market infrastructure that is responsible for the supervision of persons authorised by such infrastructure under the Financial Markets Act, 2012 (Act No. 19 of 2012); or(d) an Ombud established under a regulatory law or a recognised Scheme under the Financial Services Ombud Schemes Act, 2004 (Act No. 37 of 2004); (Source: Draft Twin Peaks Bill)
Financial product has the meaning defined in section 2; (Source: Draft Twin Peaks Bill version 2)
Financial product means– (a) a participatory interest in a collective investment scheme; (b) an interest, subscription, contribution, or commitment in a pooled fund; (c) a long-term or a short-term policy, as defined in section 1(1) of the Long-term Insurance Act and section 1(1) of the Short-term Insurance Act, respectively; (d) a benefit provided by– (i) a pension fund organisation as defined in section 1(1) of the Pension Funds Act, to the members of the organisation by virtue of membership; or (ii) a friendly society as defined in section 1(1) of the Friendly Societies Act, to the members of the society by virtue of membership; (e) a deposit as defined in section 1(1) of the Banks Act; (f) a health service benefit provided by a medical scheme as defined in section 1(1) of the Medical Schemes Act, 1998 (Act No. 131 of 1998); (g) a credit agreement; (h) a facility, arrangement or system that is designated by the Minister in terms of subsection (2) in Regulations as being a ―financial product‖; (i) any combined product containing one or more of the financial products referred to in paragraphs (a) to (h). (2) Subject to subsection (3), the Minister may, in terms of section 215 and in accordance with section 231(3), designate in Regulations as a ―financial product‖, a category or type of facility, arrangement, or system that– (a) is not already regulated in terms of a financial sector law; and (b) cannot be designated in Regulations in terms of another financial sector law to be regulated in terms of that financial sector law. (3) The Minister may only designate a ―financial product‖ in terms of subsection (2) if – (a) it would further the object of this Act to regulate the category or type of facility,
Page | 23
arrangement or system; and (b) it is a category or type of facility, arrangement or system through which, or through the acquisition of which, a person conducts one or more of the following activities: (i) lending, as referred to in subsection (4); (ii) making a financial investment, as referred to in subsection (5); (iii) managing financial risk, as referred to in subsection (6); (iv) effecting a financial transaction, as referred to in subsection (7). (4) ―Lending‖ as referred to in subsection (3)(b)(i), means the utilisation of money or securities, or of the interest, fees or other income earned on money or securities– (a) for the granting by any person, acting as a lender in the person‘s own name or through the medium of a trust or a nominee, of loans to other persons; (b) for the investment by any person, acting as an investor in the person‘s own name or through the medium of a trust or a nominee; or (c) for the financing, wholly or to any material extent, by any person of any other business activity conducted by the person in the person‘s own name or through the medium of a trust or a nominee. (5) ―Making a financial investment‖, as referred to in subsection (3)(b)(ii), takes place when– (a) an investor gives a contribution, in money or money‘s worth, to another person and any of the following apply: (i) the other person uses the contribution to generate a financial return for the investor; (ii) the investor intends that the other person will use the contribution to generate a financial return for the investor, even if no return is in fact generated; (iii) the other person intends that the contribution will be used to generate a financial return for the investor, even if no return is in fact generated; and (b) the investor has no day-to-day control over the use of the contribution to generate the return.9 (6) ―Managing financial risk‖, as referred to in subsection (3)(b)(iii), takes place when a person– (a) manages the financial consequences to the person of particular circumstances occurring or not occurring; or (b) avoids or limits the financial consequences of fluctuations in, or in the value of, receipts or costs, including prices and interest rates.10 (7) ―Effecting a financial transaction‖, as referred to in subsection (3)(b)(iv), takes place when a person: (a) makes payments, or causes payments to be made; or (b) provides for the buying, selling, clearing or settlement of securities, whether or not the person is acting as principal or agent in that transaction. (Source: Draft Twin Peaks Bill version 2)
Financial product provider means a person that, as a business or as part of a business, provides a financial product (Source: Draft Twin Peaks Bill version 2)
Financial risk mitigation techniques - The following are examples of financial risk mitigation techniques covered by this subsection: (a) Put options bought to cover the risk of falls in assets, (b) Protection bought through credit derivatives or collateral to cover the risk of failure or downgrade in the credit quality of certain exposures, (c) Currency swaps and forwards to cover currency risk in relation to assets or liabilities, (d) Swaptions acquired to cover variable/fixed risks. (Source: SA QIS3 Technical Specifications)
Financial Sector Conduct Authority means the authority established in terms of section 51; (Source: Draft Twin Peaks Bill version 2)
Financial sector law means –(a) this Act; (b) a law listed in Schedule 1; and (c) legislative instruments made in terms of a law referred to in paragraphs (a) and (b); (Source: Draft Twin Peaks Bill version 2)
Financial sector regulator includes— (a) the Prudential Authority; (b) the Financial Sector Conduct Authority; (c) in respect of Chapters 1-6 and Part 1 of Chapter 17, the National Credit Regulator; (d) in respect of Chapter 9, the Council for Medical Schemes; (Source: Draft Twin Peaks Bill version 2)
Financial service has the meaning defined in section 3; (Source: Draft Twin Peaks Bill version 2)
Financial service means– (a) in relation to a financial product, foreign financial product, securities, market infrastructure or the payment system as applicable — (i) promotion, marketing or distribution; (ii) providing advice, recommendations or guidance; (iii) dealing or making a market; (iv) operating or managing, or providing administration services; (v) services provided in relation to credit agreements, including legal services; (vi) services provided by payment system participants; (b) providing an intermediary service as defined in section 1(1) of the Financial Advisory and Intermediary Services Act;11 (c) securities services provided by a regulated person as defined in section 1(1) of the Financial Markets Act; (d) providing credit rating services as defined in section 1(1) of the Credit Rating Services Act, 2012 (Act No. 24 of 2012); (e) the calculation of a financial benchmark; (f) services related to an interest, subscription, contribution, or commitment in a pooled fund; (g) services related to the buying and selling of foreign exchange; (h) dealing with trust property, as defined in section 1 of the Financial Institutions (Protection of Funds) Act, 2001 (Act No. 23 of 2001), as a regular feature of business; (i) a service that is designated by the Minister in terms of subsection (2) in
Page | 24
Regulations as a financial service. (2) Subject to subsection (3), the Minister may, in terms of section 215 and in accordance with section 231(3), designate in Regulations a service provided by a person as a ―financial service‖ that– (a) is not already regulated in terms of a financial sector law; and (b) cannot be designated in Regulations in terms of another financial sector law to be regulated in terms of that financial sector law. (3) The Minister may only designate a ―financial service‖ in terms of subsection (2) if– (a) a financial product cannot be designated by the Minister in terms of section 2(2) that the service is related to; and (b) doing so would further the object of this Act. (4) For the purposes of subsection (1)(c), each of the following, whether done as a principal or as an agent, constitutes ―dealing‖ in a financial product: (a) in relation to securities, or participatory interests in a collective investment scheme as defined in section 1 of the Collective Investments Schemes Control Act, 2002 (Act No. 45 of 2002), underwriting the securities or interests; (b) varying the terms of a financial product; or (c) disposing of a financial product. (5) For the purposes of subsection (1)(c), ―making a market‖ in a financial product takes place when–(a) a person, through a facility, at a place or otherwise, states the prices at which the person offers to acquire or dispose of financial products, whether or not on the person‘s own account; and (b) other persons reasonably expect that they can enter into a transaction for those products at those prices, but this subsection does not apply to an isolated transaction. (Source: Draft Twin Peaks Bill version 2)
Financial service provider means a person that, as a business or as part of a business, provides a financial service; (Source: Draft Twin Peaks Bill version 2)
Financial Services Board Act means the Financial Services Board Act, 1990 (Act No. 97 of 1990) (Source: Draft Insurance Bill issued May 2015)
Financial Services Board means the Financial Services Board established by section 2 of the Financial Services Board Act (Source: Draft Insurance Bill issued May 2015)
Financial Services Tribunal means the Financial Services Tribunal established in terms of section 71; (Source: Draft Twin Peaks Bill)
Financial stability has the meaning defined in section 4; (Source: Draft Twin Peaks Bill version 2)
Financial stability if– (a) financial institutions generally provide financial products and financial services without interruption and are capable of continuing to do so; and (b) there is general confidence in their ability to continue to do so. (2) A reference in this Act to maintaining financial stability includes, where financial stability has been adversely affected, a reference to restoring financial stability. (Source: Draft Twin Peaks Bill version 2)
Financial Stability Oversight Committee (FSOC) means the Committee established in terms of section 17; (Source: Draft Twin Peaks Bill version 2)
Financial statements has the meaning set out in section 1 of the Companies Act; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Financial system means the system of institutions and markets through which financial products and financial services are provided and traded, and includes the operation of a market infrastructure and a payment system; (Source: Draft Twin Peaks Bill version 2)
Financial year means the period of 12 months commencing on 1 April; (Source: Draft Twin Peaks Bill version 2)
First party cell: A ―first party cell‖ is a cell where the shares issued to a cell owner provide the cell owner with the ability to underwrite their own risks and that of their subsidiaries. The cell owner is responsible for the capital funding of the cell and the on-going capital retention levels at the stipulated solvency level. Claims are limited through the use of a policy limitation clause, or other similar clauses. (Source: SA QIS3 Technical Specifications)
First party cell: A ―first party cell‖ is a cell where the shares issued to cell owners provide the cell owners with the ability to underwrite their risk and that of their subsidiaries. The cell owner is responsible for the funding of the cell and the cell should be maintained at such levels as may be required to ensure that the required solvency is maintained at all times. Claims are limited to funds available in the cell after providing for solvency as well as reinsurance cover arranged. (Source: SA QIS3 Technical Specifications)
Page | 25
Fit and proper requirement means a requirement made in terms of section 94 or 95; (Source: Draft Twin Peaks Bill version 2)
Fit and proper requirements means, amongst other things—(a) in relation to a key person, qualities of competence and integrity as may be prescribed; and (b) in relation to a significant owner, qualities of integrity and financial standing as may be prescribed (Source: Draft Insurance Bill issued May 2015)
Fit and proper requirements means, amongst others—(a) in relation to a director, senior management and head of a control function, qualities of competence and integrity as may be prescribed by the Registrar;(b) in relation to a person to whom a control function is outsourced, qualities of competence and integrity as may be prescribed by the Registrar; and (c) in relation to any person that directly or indirectly controls along-term insurer within the meaning of section 2(2) of the Companies Act, qualities of integrity and financial standing as maybe prescribed by the Registrar;‘‘; (Source: Draft ILAB version 2 - Life)
Fit and proper requirements means, amongst others—(a) in relation to a director, senior management and head of a control function, qualities of competence and integrity as may be prescribed by the Registrar;(b) in relation to a person to whom a control function is outsourced, qualities of competence and integrity as may be prescribed by the Registrar; and(c) in relation to any person that directly or indirectly controls a short-term insurer within the meaning of section 2(2) of the Companies Act, qualities of integrity and financial standing as maybe prescribed by the Registrar;‘‘; (Source: Draft ILAB version 2 - Non-Life)
Fit and proper requirements means, amongst others, –(a) in relation to a director, senior management and head of a control function, qualities of competence and integrity as may be prescribed; and (b) in relation to a significant owner, qualities of integrity and financial standing as may be prescribed; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Foreign financial product means a product issued by a person located outside of the Republic, which in nature and character is essentially similar or corresponding to a financial product; (Source: Draft Twin Peaks Bill version 2)
Foreign reinsurer means an institution—(a) authorised and supervised by a regulatory authority to perform business similar to reinsurance business as defined in this Act under the laws of a country other than the Republic; and(b) registered as an external company under the Companies Act (Source: Draft Insurance Bill issued May 2015)
Friendly Societies Act means the Friendly Societies Act, 1956 (Act No. 25 of 1956); (Source: Draft Twin Peaks Bill version 2)
Fruitless and wasteful expenditure means expenditure which was made in vain and would have been avoided had reasonable care been exercised; (Source: Draft Twin Peaks Bill version 2)
Fully guaranteed means where the total insurance obligations under a policy payable at the end date of the policy or, in respect of an annuity, at each annuity instalment, are at the start of the policy –(a) stated in the policy in Rand terms; or(b) stated in or ascertainable from the policy with reference to the growth rate used in calculating the policy‘s investment value or, in the case of an annuity, each annuity instalment, which growth rate is stated in the policy as a fixed rate of return or stated return linked to inflation over the full term of the policy; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Fund means -(a) a friendly society as defined in section 1 of the Friendly Societies Act, 1956;(b) a pension fund organisation as defined in section 1 of the Pension Funds Act, 1956;and(c) a medical scheme as defined in section 1 of the Medical Schemes Act, 1998; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Fund member policy means an individual policy— (a) of which a fund is the policyholder; (b) under which a specified member of the fund (or the surviving spouse, children, dependants or nominees of the member) is the life insured; and (c) which is entered into by the fund exclusively for the purpose of funding that fund‘s liability to the member (or the surviving spouse, children, dependants or nominees of the member) in terms of the rules of that fund. (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Page | 26
Fungibility within the group, regardless of the undertaking within which those own funds are held or where the
automatically imply fungibility at group level and should be considered during the assessment phase. (Source: Final Position Paper 27 - SII Group solvency definition)
Goodwill acquired in a business combination represents a payment made by the acquirer in anticipation of future economic benefits from assets that are not capable of being individually identified and separately recognised. (Source: SA QIS3 Technical Specifications)
Governing body means one or more persons, whether elected or not, which manages, controls, formulates the policy and strategy, directs the affairs, or has the authority to exercise the powers and perform any of the functions of a financial institution, and includes, but is not limited to– (a) the general partner of an en commandite partnership or any partner of any other partnership; (b) a member of a close corporation; (c) a trustee of a trust; (d) a board of directors of a company; (e) a board of a pension fund referred to in section 7A of the Pension Funds Act; (Source: Draft Twin Peaks Bill version 2)
Governing body means one or more persons, whether elected or not, which manages, controls,
formulates the policy and strategy, directs the affairs of, or has the authority to exercise the powers
and perform any of the functions of a member based democratically-controlled association of persons
established by an Act of Parliament (Source: Draft Insurance Bill issued May 2015)
Governor means the person appointed in terms of section 4 or 6(1)(a) of the Reserve Bank Act as the Governor of the Reserve Bank; (Source: Draft Twin Peaks Bill version 2)
Group Business: Insurance where an insurance policy is issued to a policyholder other than an individual that covers a group of persons identified by reference to their relationship to the entity buying the contract provided this excludes grouped individual business. (Source: SA QIS3 Technical Specifications)
Group of companies has the meaning defined in section 1 of the Companies Act; (Source: Draft Twin Peaks Bill version 2)
Group policy for purposes of the classes and sub-classes of insurance business set out in the Table means a policy concluded with –(a) an autonomous association of persons united voluntarily to meet their common or shared economic and social needs and aspirations (other than obtaining insurance) which association is democratically-controlled;(b) an employer; or (c) a fund, where the association, employer or fund holds the policy exclusively for the benefit of the members of the association or fund, or the employees; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Group undertaking means any juristic person in which an insurer alone, or together with a subsidiary or holding company, holds 20% or more of – in relation to a company, the shares issued by that person; or in relation to a person other than a company, an ownership interest in that person; (Source: Board Notice 169 of 2011)
Grouped Individual Business - Insurance where an insurance policy is issued to a policyholder other than an individual. In terms of the policy an identifiable individual(s) or member(s) is the life insured(s). Only the individual(s) or member(s) may terminate the cover. (Source: SA QIS3 Technical Specifications)
Grouped Individual policies mean - an individual policy which is underwritten on a group basis. These policies will thus form part of the ―Individual‖ authorisation classes, but are reported on separately. (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Head of a control function means any person that is in charge of a control function, and includes a person to whom a control function is outsourced; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Head of a control function means any person that is in charge of a control function, and includes a person to whom a control function is outsourced;‘‘;: (Source: Draft ILAB version 2 - Life)
Page | 27
Head of a control function means any person that is in charge of a control function, and includes a person to whom a control function is outsourced;‘‘; (Source: Draft ILAB version 2 - Non-Life)
Head of a control function means the employee of the insurer that is in charge of a control function; (Source: Draft Board Notice 114 of 2014)
Head of a control function means the person appointed by an insurer to ensure the performance of the responsibilities of a control function, and includes a person to whom a control function is outsourced; (Source: Board Notice 158 of 2014)
Head of a control function means the person appointed to ensure the performance of the responsibilities of a control function, and includes a person to whom a control function is outsourced (Source: Draft Insurance Bill issued May 2015)
Health event means an event relating to the health (other than occupational or functional ability) of the mind or body of a person or an unborn (Source: Draft Insurance Bill issued May 2015)
Health event means an event relating to the health of the mind or body of a person or an unborn; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Health insurance obligations are all types of insurance compensating or reimbursing losses (e.g. loss of income) caused by illness, accident or disability (income insurance), or medical expenses due to illness, accident or disability, whether preventive or curative (medical insurance) (Source: Final Position Paper 77)
Holding company means a company that, in terms of sections 2(2) and 3(1) of the Companies Act, is a holding company of another company; (Source: Draft Twin Peaks Bill version 2)
Income protection and lump sum disability/morbidity insurance obligations include all of the following insurance obligations: i. Lump sum disability insurance where the payment of benefits (lump sum either by single payment or by a fixed number of instalments) is contingent on disability risk e.g. capital disability policies. These obligations typically have much stricter definitions and conditions than morbidity obligations and deferred periods are generally longer (between 6 and 12 months). As a result, short term fluctuations will be lower. ii. Income protection disability insurance obligations where the payment of benefits is by multiple payments contingent on disability risk e.g. Permanent Health Insurance (PHI) and Total and Temporary Disability (TTD) policies. Deferred periods for these contracts vary from 1 week to 6 months hence the short term fluctuations will be higher than for lump sum disability obligations. iii. Lump sum morbidity insurance obligations where the payment of benefits (lump sum either by single payment or by a fixed number of instalments) is contingent on morbidity risk. The experience of these contracts is only dependent on morbidity rates, unlike disability contracts which are also influenced by moral and economic risks. Although deferred periods are short (1 to 3 months) or do not exist, definitions and conditions are more objectively defined than for lump sum disability contracts hence short term volatility would be
licences and pursued on a similar technical basis to Life assurance (here the benefit levels are agreed upfront, as opposed to medical expense insurance obligations which provide indemnity against medical costs). (Source: SA QIS3 Technical Specifications)
Independent director - (I) means a non-executive director that - (aa) is not and has not in the past three years been an employee of the insurer or any of its related or inter-related persons (as defined in section 1 of the Companies Act); (bb) is not a member of the immediate family of an individual mentioned in subparagraph (aa); or (cc) is not a material supplier or customer of the insurer, such that a reasonable and informed third party would conclude in the circumstances that the integrity, impartiality or objectivity of that director is compromised by that relationship; and (ii) includes a director of the direct or indirect holding company of the insurer that meets the requirements set out in paragraph (i) in respect of that holding company. (Source: Board Notice 158 of 2014)
Independent director means a non-executive director who is free from any business or other association that could materially interfere with the exercise of independent judgment. (Source: Draft ILAB version 2 - Life)
Page | 28
Independent director means a non-executive director who is free from any business or other association that could materially interfere with the exercise of independent judgment. (Source: Draft ILAB version 2 - Non-Life)
Individual policy means a policy other than a group policy issued to a person, and includes a policy that is underwritten on a group basis; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Inflation means any rate of inflation published by Statistics South Africa, or any successor body, from time to time; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Insourcing means an arrangement of any form between an insurer or a branch of an insurer and another person (whether that person is supervised under any law or not), in terms of which the insurer or branch of the insurer performs any function or activity, whether directly or indirectly on behalf of that person (Source: Draft Insurance Bill issued May 2015)
Insurance business means non-life insurance business and life insurance business conducted or deemed to be conducted in the Republic in the various classes and subclasses of insurance business set out in the Tables; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Insurance business means, subject to section 5, non-life insurance business and life insurance business conducted or deemed to be conducted in the Republic in the various classes and sub-classes of insurance business set out in Schedule 2, and includes reinsurance business in respect of the various classes and sub-classes of insurance business set out in Schedule 2 (Source: Draft Insurance Bill issued May 2015)
Insurance group means two or more persons -(a) at least one of whom is subject to registration under this Act; and(b) at least one of whom has a significant influence on the person referred to under paragraph (a); and(c) their related and inter-related persons, but excludes any holding company of a person referred to in paragraphs (a), (b) and (c) that is incorporated outside of the Republic; (Source: Draft Primary Legislation – Solo and Group requirements)
Insurance group means two or more persons -(a) At least one of whom is subject to registration under this Act; and(b) At least one of whom has a significant influence on the person referred to under paragraph (a); and(c) Their related and inter-related persons, but excludes any holding company of a person referred to in paragraphs (a), (b) and (c) that is incorporated outside of the Republic; (Source: Final Position Paper 77)
Insurance group means two or more persons -(a) at least one of whom is subject to registration under this Act; and(b) at least one of whom has a significant influence on the person referred to under paragraph (a); and(c) their related and inter-related persons, but excludes any holding company of a person referred to in paragraphs (a), (b) and (c) that is incorporated outside of the Republic; (Source: Draft Primary Legislation - Insurance Groups Supervisory Framework)
Insurance group means two or more persons—(a) at least one of whom is subject to registration under this Act; and(b) at least one of whom has a significant influence on the person referred to under paragraph (a); and(c) their related and inter-related persons, but excludes any holding company of a person referred to in paragraphs (a),(b) and (c) that is incorporated outside of the Republic; ‗insurance sub-group‘ means a subset of an insurance group consisting of, but not limited to, all persons that are subject to registration under this Act or the Long-term Insurance Act, 1998 (Act No. 52 of 1998); (Source: Draft ILAB version 2 - Non-Life)
Insurance group means two or more persons—(i) at least one of whom is subject to registration under this Act; and(ii) at least one of whom has a significant influence on the person referred to under paragraph (a); and(iii) their related and inter-related persons, but excludes any holding company of a person referred to in paragraphs (a), (b)and (c) that is incorporated outside of the Republic; (Source: Draft ILAB version 2 - Life)
Insurance group means two or more persons, at least one of whom is an insurer, and includes—(a) the holding companies of any such persons, incorporated in the Republic;(b) their related persons or inter-related persons, including persons located or incorporated outside the Republic; and(c) their associates (Source: Draft Insurance Bill issued May 2015)
Page | 29
Insurance obligations means all obligations, including guaranteed and reasonably expected obligations, of an insurer under and arising from contracts of insurance entered into by the insurer irrespective of the risk covered under those contracts of insurance; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Insurance obligations means all obligations, whether those obligations constitute an obligation to pay one of more sums of money, render services or fulfil other obligations, including guaranteed and reasonably expected obligations, of an insurer under and arising from policies entered into by the insurer irrespective of the nature of the risk covered under those policies; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Insurance obligations means all obligations, whether those obligations constitute an obligation to pay one or more sums of money, render services or provide any other obligations, including guaranteed and reasonably expected obligations of an insurer under or arising from insurance policies entered into by the insurer, irrespective of the risk covered under those policies (Source: Draft Insurance Bill issued May 2015)
Insurance policy means a non-life insurance policy or a life insurance policy (Source: Draft Insurance Bill issued May 2015)
Insurance sub-group means a subset of an insurance group consisting of but not limited to, all persons that are subject to registration under this Act or the Short-term Insurance Act, 1998 (Act No. 53 of 1998); (Source: Draft ILAB version 2 - Life)
Insurance sub-group means a subset of an insurance group consisting of, but not limited to, all persons that are subject to registration under the Short/Long-term Insurance Acts (Source: Final Position Paper 27)
Insured means the person to whom a life, disability or death event under a life insurance policy relates, which person may be or may not be the policyholder (Source: Draft Insurance Bill issued May 2015)
Insurer means a long-term insurer or a short-term insurer, as the case may be; (Source: Board Notice 158 of 2014 and Board Notice 113 of 2015 )
Insurer means a person licensed or deemed to be licensed as an insurer; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Insurer means a person licensed or deemed to be licensed as an insurer under this Act, and includes Lloyd‘s, a Lloyd‘s underwriter and a reinsurer, unless specifically provided for otherwise in this Act (Source: Draft Insurance Bill issued May 2015)
Intangible asset needs to be identifiable and fulfil the criteria of control as stipulated in the standard. An Intangible asset is identifiable if it is separable (deviation from Goodwill) or if it arises from contractual or other legal rights. The control criteria are fulfilled if an entity has the power to obtain the future economic benefits flowing from the underlying resource and to restrict the access of others to those benefits. Fair Value Measurement is not possible when it is not separable or it is separable but there is no history or evidence of exchange transactions for the same or similar assets. (Source: SA QIS3 Technical Specifications)
Interest rate risk arises when the market-consistent values of assets and liabilities are sensitive to changes in the market yield curves. This includes both the nominal and real yield curves. All assets and liabilities that are sensitive to changes in either yield curve should be considered under the interest rate risk module, whether valued by mark-to-model or mark-to-market techniques. (Source: SA QIS3 Technical Specifications)
Inter-group transaction means any arrangement or agreement in terms of which a long-term insurer, directly or indirectly, relies on another person that is part of the insurance group or a related or inter-related person of the aforementioned person, for the fulfilment of an obligation; (Source: Draft ILAB version 2 - Life)
Inter-group transaction means any arrangement or agreement in terms of which a short-term insurer, directly or indirectly, relies on another person that is part of the insurance group or a related or inter-related person of the aforementioned person, for the fulfilment of an obligation; (Source: Draft ILAB version 2 - Non-Life)
Page | 30
Inter-group transaction means any arrangement or agreement in terms of which a short/long-term insurer, directly or indirectly, relies on another person that is part of the insurance group or a related or inter-related person of the aforementioned person, for the fulfilment of an obligation (Source: Final Position Paper 27)
Inter-ministerial Council means the Financial Sector Inter-ministerial Council established in terms of section 84; (Source: Draft Twin Peaks Bill version 2)
Internal auditing is an independent, objective assurance and consulting activity designed to add
value and improve an organization's operations. It helps an organization accomplish its objectives by
bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk
management, control, and governance processes. (Source: www.theiia.org)
Inter-related has the meaning assigned in the Companies Act;‘‘; (Source: Draft ILAB version 2 - Life)
Inter-related has the meaning assigned in the Companies Act;‘‘; (Source: Draft ILAB version 2 - Non-Life)
Inter-related has the meaning defined in section 1 of the Companies Act; (Source: Draft Twin Peaks Bill version 2)
Inter-related has the meaning set out in section 1 of the Companies Act; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Inter-related has the meaning set out in section 1 of the Companies Act (Source: Draft Insurance Bill issued May 2015)
Inter-related person has the meaning assigned in the Companies Act; (Source: Draft ILAB version 2 - Life)
Inter-related person has the meaning assigned in the Companies Act; (Source: Draft ILAB version 2 - Non-Life)
Inter-related person has the meaning assigned in the Companies Act; (Source: Final Position Paper 27)
Intra-group transaction means any arrangement or agreement in terms of which an insurer, directly or indirectly, relies on another person that is part of the insurance group or a related or inter-related person of the aforementioned person, for the fulfilment of an obligation; (Source: Draft Primary Legislation – Solo and Group requirements)
Intra-group transaction means any arrangement or agreement in terms of which an insurer, directly or indirectly, relies on another person that is part of that insurer‘s insurance group or a related or inter-related person of the aforementioned person, for the fulfilment of an obligation; "key person" means—(a) a director; (b) a senior manager; (c) a head of a control function; (d) an auditor referred to in section 30; (e) a representative and a deputy representative of Lloyd‘s or a branch of a foreign reinsurer referred to in section 32; and (f) a trustee of a trust referred to in section 38 (Source: Draft Insurance Bill issued May 2015)
Inventories - Assets that are :(a) held for sale in the ordinary course of business;(b) in the process of production for such sale; or (c) in the form of materials or supplies to be consumed in the production process or in the rendering of services. (Source: SA QIS3 Technical Specifications)
Investigation means an enquiry– (a) to determine whether a person– (i) has contravened, or is in contravention of, a financial sector law; or (ii) has conducted or is conducting a regulated activity; or (b) to comply with a request pursuant to an agreement, communiqué or memorandum of understanding contemplated in section 197, of the affairs or part of the affairs of any person referred to in, or identified by the requesting regulatory authority acting in terms of an agreement, communiqué or memorandum of understanding; (Source: Draft Twin Peaks Bill version 2)
Investment value means the value of a policy calculated as the accumulated basic premium and growth rate stated in the policy less deductions specifically provided for in the policy; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Page | 31
Irregular expenditure means expenditure incurred in contravention of, or that is not in accordance with, a requirement of any applicable legislation; (Source: Draft Twin Peaks Bill version 2)
Joint rule means a joint rule made by the regulatory authorities jointly in terms of section 48(1); (Source: Draft Twin Peaks Bill)
Joint standard means a standard made in terms of section 96; (Source: Draft Twin Peaks Bill version 2)
Key person means– (a) any person responsible for managing or overseeing the activities relating to a financial product or financial service of a financial institution, including a director or senior manager; (b) the head of a risk management function and an actuarial function; (c) the head of internal audit, and any person appointed to oversee the financial institution‘s compliance function and to monitor compliance (including a compliance officer); (d) a nominee; (e) the auditor and the valuer or valuation agent; and (f) a significant owner; (Source: Draft Twin Peaks Bill version 2)
Lapse risk (NLLapse) Non-life insurance contracts can include policyholder options which significantly influence the obligations arising from them. Examples for such options are options to terminate a contract before the end of the previously agreed insurance period and options to renew contracts according to previously agreed conditions. Where such policyholder options are included in a non-life insurance contract, the calculation of premium provisions is based on assumptions about the exercise rates of these options. Lapse risk is the risk that these assumptions turn out to be wrong or need to be changed. (Source: SA QIS3 Technical Specifications)
Lapse risk is the risk of loss or change in liabilities due to a change in the expected exercise rates of policyholder options. In relation to the policyholder options that the lapse sub-module covers, a comprehensive approach is taken. The module takes account of all legal or contractual policyholder options which can significantly change the value of the future cash-flows. This includes options to fully or partly terminate, decrease, restrict or suspend the insurance cover as well as options which allow the full or partial establishment, renewal, increase, extension or resumption of insurance cover as well as, where relevant, the rate of non-payment of premiums. (Source: SA QIS3 Technical Specifications)
Legislative instrument means subordinate legislation made in terms of a financial sector law, and includes– (a) regulations; (b) a prudential standard; (c) a conduct standard; (d) a joint standard; (e) an instrument identified as a legislative instrument in a financial sector law; and (f) an amendment to the instruments referred to in paragraphs (a) to (e);
Leniency agreement means an agreement referred to in section 143; (Source: Draft Twin Peaks Bill version 2)
Level of Basic Own Funds is defined as the difference between assets and liabilities (excluding Subordinated Liabilities29), valued in accordance with SAM rules, less any exclusions from Own Funds. As explained above, the liabilities may be calculated without including the risk margin of technical provisions. The change of BOF resulting from the scenario is referred to as ΔBOF. ΔBOF is defined to be positive where the scenario results in a loss of BOF (Source: SA QIS3 Technical Specifications)
Levies Act means the Financial Sector Levies, Fees and Charges Act, 2015; (Source: Draft Twin Peaks Bill version 2)
Levy means an operating levy or a special levy; (Source: Draft Twin Peaks Bill version 2)
LGD of an exposure is conceptually defined to be the loss of basic own funds which the insurer would incur if the counterparty defaulted (Source: SA QIS3 Technical Specifications)
Licence means a licence, registration, approval, recognition, permission, authority, consent or other authorisation, by whatever term it may be referred to, to be a financial institution, or to provide a financial product or financial service, in terms of a financial sector law; (Source: Draft Twin Peaks Bill version 2)
Life Authorisation classes (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Risk
Page | 32
Individual Life and Death policies - Lump sum payable on the happening of a life event or death event
Individual Health – lump sum policies Lump sum payable on the happening of a health event
Individual Health – recurring payment policies Specified or determinable equal or unequal sums of money payable at specified intervals payable on the happening of a health event
Individual Disability – lump sum policies Lump sum payable on the happening of a disability event
Individual Disability – recurring payment policies Specified or determinable equal or unequal sums of money payable at specified intervals payable on the happening of a disability event
Group Life and Death policies - Lump sum payable on the happening of a life event or death event
Group Health – lump sum policies Lump sum payable to a member of a group on the happening of a health event
Group Health – recurring payment policies Specified or determinable equal or unequal sums of money payable at specified intervals to a member of a group on the happening of a health event
Group Disability – lump sum policies Lump sum payable to a member of a group on the happening of a disability event
Group Disability – recurring payment policies Specified or determinable equal or unequal sums of money payable at specified intervals to a member of a group on the happening of a disability event
Credit Life
Individual and Group - Lump sum payable to satisfy all or part of a financial liability to a credit provider on the happening of a death event, health event or a disability event; in the event of unemployment, or other insurable risk that is likely to impair a person’s ability to earn an income or meet credit obligations
Funeral
Individual - Lump sum not exceeding an amount prescribed by the Registrar to cover cost associated with a funeral or the rendering of a service on the happening of a death event
Group - Lump sum not exceeding an amount prescribed by the Registrar payable to a member of a group to cover costs associated with a funeral or the rendering of a service on the happening of a death event
Life Annuities
Guaranteed (fully or partially), Market related, With discretionary Participation features - Specified or determinable equal or unequal sums of money payable at specified intervals from the start of the policy, or a fixed or determinable date linked to a life event – for the remainder of the life of the policyholder; or to one or more dependants or nominees after the death of the policyholder
Individual Investment
Guaranteed (fully or partially), Market related, Linked, With discretionary Participation features -Lump sum or periodic payments payable – on or from a fixed or determinable date not related to a life event, disability event or death event of a person; or at the request of the policyholder
Fund Investment
Guaranteed (fully or partially), Market related, Linked, With discretionary Participation features -Benefits provided for the purpose of funding in whole or in part the obligation of a fund to provide investment benefits to its members in terms of its rules, other than a policy relating exclusively to a particular member of the fund or to the surviving spouse, children, dependants or nominees of a particular member of the fund
Income Drawdown
Guaranteed (fully or partially), Market related, Linked, With discretionary Participation features Specified or determinable equal or unequal sums of money payable at specified intervals from the
Page | 33
start of the policy, or a fixed or determinable date linked to a life event until the investment value is exhausted; or a lump sum or specified or determinable equal or unequal sums of money payable at specified intervals equal to the remaining investment value to the estate, or one or more dependants or nominees after the death of the policyholder
Reinsurance
Proportional in respect of a class or sub-class referred to above (Life)
Non-proportional in respect of a class or sub-class referred to above (Life)
Life event means the event of the life of a person or an unborn - (a) having begun;(b) continuing; or (c) having continued for a period; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Life event means the event of the life of a person—(a) having begun; (b) continuing; or (c) having continued for a period (Source: Draft Insurance Bill issued May 2015)
Life insurance business means any arrangement under which a person against payment of a premium – (a) accepts a specified risk from another person by undertaking to pay that other person or that other person‘s estate or another identified person a specified or determinable amount or specified or determinable equal or unequal sums of money payable at specified intervals to –(i) satisfy that other person or that other person‘s estate or another identified person for a non-actual financial loss, on the happening of a specified uncertain future life event, health event, disability event or death event relating to that person or another identified person; or (ii) make good the actual financial loss or liability for actual financial loss (or a part thereof) of that person or that person‘s estate or another identified person on the happening of a specified uncertain future life event, disability event or death event of that person or another identified person;(b) agrees to pay another person or that person‘s estate a specified or determinable amount or specified or determinable equal or unequal sums of money payable at specified intervals from the start of the policy, or on or from a fixed or determinable date not related to a life event, disability event or death event of a person or at the request of the policyholder, but excludes deposit with an institution authorised under the Banks Act, 1990 (Act No. 94 of 1990), the Mutual Banks Act, 1993 (Act No. 124 of 1993) or the Co-operative Banks Act, 2007 (Act no. 40 of 2007; (ii) participatory interests in a collective investment scheme registered in terms of the Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002), and includes a renewal or variation of that arrangement (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Life insurance business means business that consists of one or more of the following— (a) concluding life insurance policies; (b) assuming risk under life insurance policies; (c) undertaking insurance obligations under life insurance policies; (d) meeting insurance obligations under life insurance policies; or (e) any business that relates to business referred to in paragraph (a), (b), (c) or (d); excluding— (a) business that is conducted by a person to whom or to which that specific business has been outsourced in terms of an outsourcing arrangement; (b) business that is insourced (Source: Draft Insurance Bill issued May 2015)
Life insurance policy means any arrangement under which a person in return for the payment of a premium— (a) assumes a specified risk from another person by undertaking to— (i) pay that other person or that other person‘s estate or another identified person— (aa) a lump sum; (bb) specified or determinable equal or unequal sums of money at specified intervals; or (ii) render a service or services which— (aa) serves to make good a full or partial patrimonial loss or liability for patrimonial loss of that other person, that other person‘s estate, or another identifiable person, on the happening of an uncertain or unplanned life event, disability event or death event relating to that other person or another identified person; or (bb) serves as solace for a non-patrimonial loss of that other person, such other person‘s estate, or another identifiable person; or (b) agrees to pay another person or that person‘s estate, a lump sum or specified or determinable equal or unequal sums of money, from the start of the arrangement, or on or from a fixed or determinable date or at the request of the policyholder, but excludes— (i) a deposit with an institution authorised under the Banks Act, 1990 (Act No. 94 of 1990), the Mutual Banks Act, 1993 (Act No. 124 of 1993) or the Co-operative Banks Act, 2007 (Act No. 40 of 2007); and (ii) participatory interests in a collective investment scheme registered in terms of the Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002); and includes a renewal or variation of that arrangement (Source: Draft Insurance Bill issued May 2015)
Page | 34
Life underwriting risk module captures the risk of life (re)insurance obligations (including health (re)insurance obligations). (Source: SA QIS3 Technical Specifications)
Linked business is defined as follows: (a) Business that relates to liabilities under a ―linked policy‖, where a ―linked policy‖ means a long-term policy of which the amount of the policy benefits is not guaranteed by the long-term insurer and is to be determined solely by reference to the value of particular assets or categories of assets which are specified in the policy and are actually held by or on behalf of the insurer specifically for the purposes of the policy. A further feature of linked business is that it contains no guarantees on charges that the insurer may apply to the policyholder (Source: SA QIS3 Technical Specifications)
Linked insurer means an insurer licensed to conduct life insurance business only in the linked sub-classes set out in Schedule 2 (Source: Draft Insurance Bill issued May 2015)
Linked Investment contracts are defined as pure linked business, where all risks (other than operational risk) are passed on to policyholders (Source: SA QIS3 Technical Specifications)
Linked means where the insurance obligations under a policy are not fully guaranteed or partially guaranteed, and are determined solely by reference to the value of particular assets or categories of assets which are specified in the policy and are actually held by or on behalf of the insurer specifically for the purposes of the policy; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Listed has the meaning assigned under Schedule 1 of the Act; (Source: Board Notice 169 of 2011)
Lloyd’s means the association of persons generally known as Lloyd‘s which is incorporated by the Lloyd‘s Act of 1871 (34 Vict.c21), passed by the Parliament of the United Kingdom of Great Britain and Northern Ireland (Source: Draft Insurance Bill issued May 2015)
Lloyd’s underwriter means an underwriting member of Lloyd‘s (Source: Draft Insurance Bill issued May 2015)
Longevity risk is the risk of loss, or of adverse change in the value of (re)insurance liabilities, resulting from the changes in the level, trend, or volatility of mortality rates, where a decrease in the mortality rate leads to an increase in the value of (re)insurance liabilities. Longevity risk is associated with (re)insurance obligations (such as annuities) where a (re)insurer guarantees to make recurring series of payments until the death of the policyholder and where a decrease in mortality rates leads to an increase in the technical provisions, or with (re)insurance obligations (such as pure endowments) where a (re)insurer guarantees to make a single payment in the event of the survival of the policyholder for the duration of the policy term. (Source: SA QIS3 Technical Specifications)
Long-term Insurance Act means the Long-term Insurance Act, 1998 (Act No. 52 of 1998); (Source: Draft Twin Peaks Bill version 2)
Look –through approach -In order to properly assess the market risk inherent in collective investment funds, it will be necessary to examine their economic substance. Wherever possible, this should be achieved by applying a look-through approach in order to assess the risks applying to the assets underlying the investment vehicle. Each of the underlying assets would then be subjected to the relevant sub-modules (Source: SA QIS3 Technical Specifications)
Loss given default is the expected present value of the change in cash-flows underlying the recoverables, resulting from a default of the counterparty at a certain point in time. Hence, the proposed approach is aiming for a market consistent price. (Source: Final Position Paper 30)
Lump sum means a single once-off payment of a sum of money (Source: Draft Insurance Bill issued May 2015)
Lump sum means a single once-off payment of a sum of money; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Major business unit with regards to partial internal models shall be defined as a functional unit in an
one or more risks(sub)modules of Article 101 of the Level 1 Text; the adjustment for the loss
Page | 35
absorbing capacity of technical provisions and deferred taxes as mentioned in the referred Article; the capital requirement for operational risk and/or the capital charge for any other material quantifiable risk(s). (Source: Final Position Paper 57)
Market Conduct Authority means the regulatory authority established in terms of section 11(1)(a); (Source: Draft Twin Peaks Bill)
Market infrastructure means each of the following: (a) a central securities depository; (b) a clearing house; (c) an exchange; (d) a trade repository; as defined in section 1(1) of the Financial Markets Act; (Source: Draft Twin Peaks Bill version 2)
Market risk arises from the level or volatility of market prices of financial instruments. Exposure to market risk is measured by the impact of movements in the level of financial variables such as stock prices, interest rates, real estate prices and exchange rates(Source: SA QIS3 Technical Specifications)
Market-related means where the insurance obligations under a policy are not guaranteed, and are determined solely by reference to the value of particular assets or categories of assets which are specified in the policy and the policyholder immediately shares in the performance of the underlying investment; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Materiality - ―Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements. Materiality depends on the size of the item or error judged in the particular circumstances of its omission or misstatement. Thus, materiality provides a threshold or cut-off point rather than being a primary qualitative characteristic which information must have if it is to be useful‖. (Materiality is defined in the glossary of the International Accounting Standards Board’s “Framework for the Preparation and Presentation of Financial Statements”) (Source: SA QIS3 Technical Specifications)
Materiality Definition of materiality Principle: The following definition of materiality, based in International Accounting Standards (IAS), shall be used as a reference throughout the reporting and disclosure requirements: ―Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements. Materiality depends on the size of the item or error judged in the particular circumstances of its omission or misstatement. Thus, materiality provides a threshold or cut-off point rather than being a primary qualitative characteristic which information must have if it is to be useful (Source: Final Position Paper 12)
Materiality is defined in the glossary of the International Accounting Standards Board‘s ―Framework for the Preparation and Presentation of Financial Statements (Source: SA QIS3 Technical Specifications) ―Omissions or misstatements of items are material if they could, by their size or nature, individually or collectively; influence the economic decisions of users taken on the basis of the SAM financial reports.‖ Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances. The size, nature or potential size of the item, or a combination of those, could be the determining factor
MCR - This section provides instructions for calculating the Minimum Capital Requirement (MCR) of the insurer. The calculation of the MCR combines a linear formula with a floor of 25% and a cap of 45% of the SCR (whether calculated using the standard formula or an internal model). The MCR is subject to an absolute floor, expressed in Rands, depending on the nature of the insurer and also includes an allowance for operating expenses (Source: SA QIS3 Technical Specifications)
Medical expense insurance obligations (me) are obligations which cover the provision of preventive or curative medical treatment or care including medical treatment or care due to illness, accident, disability and infirmity, or financial compensation for such treatment or care. Medical expense insurance is a form of indemnity insurance. For medical expense (re)insurance, the determination of the disability/morbidity capital requirement cannot be based on disability or morbidity probabilities. A large part of the risk in medical expense (re)insurance is independent from the actual health status of the insured person. For example, it may be very expensive to find out whether the insured person is ill or to prevent the insured person from becoming ill – these expenses are usually covered by the health policy. If an insured person is ill, the resulting expenses significantly depend on the individual case. It can also happen that an insured person is ill but does not generate significant medical expenses. Technically the business is not based on disability/morbidity probabilities but on expected annual medical expenses. It is envisaged that only two types of contracts will fall in this
Page | 36
-term insurance licences but
workers compensation business pursued on a similar technical basis to Life assurance business. (Source: SA QIS3 Technical Specifications)
Member of the staff or staff member, in relation to– (a) a financial sector regulator, means an employee or person seconded to the regulator, and includes contractors, consultants and service providers to the regulator;(b) the Reserve Bank, means an employee of the Reserve Bank; (Source: Draft Twin Peaks Bill version 2)
Micro-insurance business means insurance business— (a) conducted in respect of any of the following classes and sub-classes of insurance business set out in Schedule 2— (i) non-life insurance business, personal lines in— (aa) classes 1-3, 11 and 14; and (bb) class 10, but only to the extent that the liability directly relates to the classes referred to in item (aa); and (ii) life insurance business, classes 1 to 3; and (b) in the case of non-life insurance business, in respect of which the aggregate value of the insurance obligations under an insurance policy do not exceed the maximum amounts prescribed; (c) in the case of life insurance business, in respect of which the aggregate value of the insurance obligations relating to each insured under an insurance policy do not exceed the maximum amounts prescribed; and (d) in respect of which all policies comply with the Policyholder Protection Rules prescribed by the Registrar under the Long-term Insurance Act, 1998 (Act No. 52 of 1998) or the Short-term Insurance Act, 1998 (Act No. 53 of 1998) (Source: Draft Insurance Bill issued May 2015)
Micro-insurer means an insurer licensed to conduct only micro-insurance business (Source: Draft Insurance Bill issued May 2015)
Minister means the Minister of Finance (Source: Draft Insurance Bill issued May 2015)
Minister means the Minister of Finance; (Source: Draft Twin Peaks Bill version 2)
Mono-regulated activity means business of the nature contemplated in Part 1 of Schedule 2; (Source: Draft Twin Peaks Bill)
Morbidity or disability risk is the risk of loss, or of adverse changes in the value of insurance liabilities, resulting from changes in the level, trend or volatility of disability and morbidity rates as well as changes to medical inflation relating to medical expenses insurance (applicable to legacy medical expenses business prior to the introduction of the Medical Schemes Act). (Source: SA QIS3 Technical Specifications)
Morbidity refers to sickness, injury, disease, illness or infirmity, either directly observed or leading to the need for a defined surgical procedure or hospitalisation. (Source: SA QIS3 Technical Specifications)
Mortality risk is the risk of loss, or of adverse change in the value of (re)insurance liabilities, resulting from changes in the level, trend, or volatility of mortality rates. Mortality risk is associated with (re)insurance obligations (such as term assurance or endowment policies) where a (re)insurer guarantees to make a single or recurring series of payments in the event of the death of the policyholder during the policy term. (Source: SA QIS3 Technical Specifications)
National Credit Act means the National Credit Act, 2005 (Act No. 34 of 2005); (Source: Draft Twin Peaks Bill version 2)
National Credit Regulator means the National Credit Regulator established in terms of section 12 of the National Credit Act; (Source: Draft Twin Peaks Bill version 2)
National Payment System Act means the National Payment System Act, 1998 (Act No. 78 of 1998); (Source: Draft Twin Peaks Bill version 2)
National Treasury means the National Treasury established in terms of section 5 of the Public Finance Management Act; (Source: Draft Twin Peaks Bill version 2)
Net asset value in relation to a group undertaking, means its net asset value calculated in accordance with paragraph 3.2; (Source: Board Notice 169 of 2011)
Page | 37
Nominee means a person who acts as the holder of assets in the person‘s own name in trust on behalf of another person; (Source: Draft Twin Peaks Bill version 2)
Non-compliance means any act or omission that constitutes a failure to comply with a provision of a financial sector law or the National Payment Systems Act or any order, determination, or directive made in terms of a financial sector law or the National Payment Systems Act, and which does not constitute a criminal offence in terms of a financial sector law or the National Payment Systems Act, and ‗fails to comply‘, ‗failure to comply‘ and ‗not complying‘ have the same meaning; (Source: Draft Twin Peaks Bill version 2)
Non-Current Assets held for sale or discontinued operations -Assets whose carrying amount will be recovered principally through a sale transaction (Source: SA QIS3 Technical Specifications)
Non-equivalent jurisdictions are defined as jurisdictions that have not adopted the SAM regime or equivalent to Solvency II; and For the purposes of this document FPP 85, the term ―insurance operations‖ include short-term insurance and long-term insurance companies. (Source: Final Position Paper 85)
Non-executive director means an individual who is not involved in the day-to-day management of the long-term insurer; (Source: Draft ILAB version 2 - Life)
Non-executive director means an individual who is not involved in the day-to-day management of the short-term insurer; (Source: Draft ILAB version 2 - Non-Life)
Non-executive director means an individual who is not involved in the day-to-day management of the insurer or has not been so involved at any time during the last 12 months; (Source: Board Notice 158 of 2014)
Non-Life Authorisation classes (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Motor
Personal lines and Commercial lines - Covers damage or loss resulting from the possession, use or ownership of motor vehicles and other vehicles operating on land, excluding railway rolling stock and warranty business
Property
Personal lines and Commercial lines - Covers damage to or loss resulting from the possession, use or ownership of property (other than classes 1 above and 3 to 8 below), and, in respect of commercial lines, includes business interruption cover, including unforeseen trading expenses and loss of rent or revenue
Agriculture
Covers damage or loss to crop, agricultural equipment and other agricultural activities due to fire, explosion, natural forces including storm, hail or frost, nuclear energy and land subsidence
Engineering
Covers damage to or loss resulting from the possession, use or ownership of machinery or equipment; the erection of buildings or other structure; the undertaking of other works; or the installation of machinery or equipment, and includes loss of revenue
Marine
Covers damage or loss resulting from the possession, use or ownership of vessels used on a river, canal, dam, lake and sea
Aviation
Covers damage or loss resulting from the possession, use or ownership of aircraft or spacecraft
Transport
Covers damage to or loss resulting from the conveyance, storage, treatment and handling of goods in transit, irrespective of the form of transport
Page | 38
Rail
Covers damage or loss resulting from the possession, use or ownership of railway rolling stock
Legal Expense
Covers any legal expenses and costs of litigation
Liability
a. Directors and officers,
b. Employer liability,
c. Fidelity guarantee,
d. Product liability,
e. Professional indemnity,
f. Public liability,
g. Aviation,
h. Engineering,
i. Marine,
j. Motor,
k. Rail,
l. Transport,
m. Other - Covers liability to a third party
Consumer credit
Lump sum payable to satisfy all or part of a financial liability to a credit provider in the event of loss resulting from the possession, use, ownership or benefits of the goods or services supplied in terms of the credit agreement
Trade Credit
Covers loss resulting from the provision of export credit or agricultural credit or any other trade credit
Guarantee
Covers loss resulting from insolvency, direct and indirect guarantees (failure of a person to discharge an obligation) and suretyship offered as part of the normal business activities
Accident and Health
Covers costs or loss of income resulting from a health event, other than costs or services regulated under the Medical Schemes Act, including any contracts identified by the Minister by regulation as an accident and health policy
Travel
Covers damage or loss resulting from cancellation, interruption, loss of property (including baggage), or Other unforeseen events before, while and after travelling
Miscellaneous
Covers damage to or loss resulting from a risk not addressed under any other class or sub-class referred to in this Table, which risk is approved by the Registrar
Reinsurance
Proportional in respect of a class or sub-class referred to above (Non-life)
Page | 39
Non-proportional in respect of a class or sub-class referred to above (Non-life)
Non-life CAT Risk - Under the non-life underwriting risk module, catastrophe risk is defined in the Solvency II Framework Directive (Directive 2009/138/EC) as: ―the risk of loss, or of adverse change in the value of insurance liabilities, resulting from significant uncertainty of pricing and provisioning assumptions related to extreme or exceptional events.‖ CAT risks stem from extreme or irregular events that are not sufficiently captured by the capital requirements for premium and reserve risk. The catastrophe risk capital requirement is calibrated at the 99.5% VaR (Source: SA QIS3 Technical Specifications)
Non-life insurance business means any arrangement under which a person against payment of a premium, accepts a risk from another person - (a) by undertaking to make good the actual financial loss or liability for actual financial loss (or a part thereof) of that other person or that person‘s estate or another identified or identifiable person; (b) incurred on the happening of a specific uncertain future event, excluding a life event, disability event or death event of a person; and includes a renewal or variation of that arrangement; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Non-life insurance business means business that consists of one or more of the following— (a) Concluding non-life insurance policies; (b) assuming risk under non-life insurance policies; (c) undertaking insurance obligations under non-life insurance policies; (d) meeting insurance obligations under non-life insurance policies; or (e) any business that relates to business referred to in paragraph (a), (b), (c) or (d); excluding— (a) business that is conducted by a person to whom or to which that specific business has been outsourced in terms of an outsourcing arrangement; (b) business that is insourced (Source: Draft Insurance Bill issued May 2015)
Non-life insurance policy means any arrangement under which a person, in return for the payment of a premium, assumes a risk from another person by undertaking to— (a) pay a lump sum; (b) pay specified or determinable equal or unequal sums of money at specified intervals; (c) render a service or services; or (d) effect a reinstatement, which serves to make good a full or partial patrimonial loss or liability for patrimonial loss of that other person, that other person‘s estate, or another identified or identifiable person, on the happening of an uncertain or unplanned event, excluding a life event, disability event or death event, and includes a renewal or variation of that arrangement (Source: Draft Insurance Bill issued May 2015)
Non-life premium & reserve risk (NLpr) - Premium risk results from fluctuations in the timing, frequency and severity of insured events. Premium risk relates to policies (or reinsurance agreements in the case of reinsurance business) to be written (including renewals) during the period, and to unexpired risks on existing contracts. Premium risk includes the risk that premium provisions turn out to be insufficient to compensate claims or need to be increased. (Source: SA QIS3 Technical Specifications)
Non-life premium & reserve risk (NLpr) - Reserve risk results from fluctuations in the timing and amount of claim settlements. (Source: SA QIS3 Technical Specifications)
Non-life underwriting risk is the risk arising from non-life insurance obligations, in relation to the perils covered and the processes used in the conduct of business. Non-life underwriting risk also includes the risk resulting from uncertainty included in assumptions about exercise of policyholder options like renewal or termination options. (Source: SA QIS3 Technical Specifications)
Non-life underwriting risk module captures the risk of non-life (re)insurance obligations (other than health (re)insurance obligations). (Source: SA QIS3 Technical Specifications)
Non-operating holding company (NOHC) means a holding company that is a public company whose only business is the acquiring, holding and managing of another company or other companies; (Source: Draft Primary Legislation - Insurance Groups Supervisory Framework)
Non-operating holding company (NOHC) means a holding company that is a public company whose only business is the acquiring, holding and managing of another company or other companies; (Source: Draft ILAB version 2 - Life)
Non-operating holding company (NOHC) means a holding company that is a public company whose only business is the acquiring, holding and managing of another company or other companies; (Source: Draft ILAB version 2 - Non-Life)
Page | 40
Non-operating holding company (NOHC) means a holding company whose only business is the acquiring, holding and managing of another company or other companies. (Source: Draft Twin Peaks Bill version 2)
Non-operating holding company (NOHC) means a public company whose only business is the acquiring, holding and managing of another company or other companies; (Source: Final Position Paper 27)
Non-patrimonial loss means distress in some form or another flowing from the impairment of an interest in a person‘s life or wellbeing, such as the loss of amenities of life, the loss of a limb, impairment of health, the suffering of pain, sadness, hardship, unhappiness or inconvenience, and any other significant harm, where the interest relates to— (a) the own life and wellbeing of the person or that of his or her permanent life partner or spouse or civil union partner of a member in accordance with the Marriage Act, 1961 (Act No. 68 of 1961), the Recognition of Customary Marriages Act, 1998 (Act No. 68 of 1997), or the Civil Union Act, 2006 (Act No. 17 of 2006), or the tenets of a religion; or (b) the life and wellbeing of a third party, where close ties based on family, dependence or employment exist between the person and the third party (Source: Draft Insurance Bill issued May 2015)
Non-regulated person means a person that is not subject to registration, licensing or approval under any Act of Parliament; (Source: Draft Primary Legislation – Solo and Group requirements)
Non-SLT Health (Not Similar to Life Techniques) underwriting risk sub-module -Non-SLT Health underwriting risk arises from the underwriting of health (re)insurance obligations, not pursued on a similar technical basis to that of life insurance, following from both the perils covered and processes used in the conduct of business. Non-SLT Health underwriting risk also includes the risk resulting from uncertainty included in assumptions about exercise of policyholder options like renewal or termination options (Source: SA QIS3 Technical Specifications)
Non-strategic participations and participations that do not conduct insurance related business should be treated as any other investment within the Market Risk sub-module. For this purpose, underwriting management agents and insurance brokers etc. should be deemed to be insurance related. (Source: SA QIS3 Technical Specifications)
Official web site means the web site of the Financial Services Board (Source: Draft Insurance Bill issued May 2015)
Ombud for Financial Services Providers means the Ombud for Financial Services Providers appointed in terms of section 181(1), and includes a Deputy and an Acting Ombud for Financial Services Providers; (Source: Draft Twin Peaks Bill version 2)
Ombud means a person who is empowered in terms of a scheme to resolve a complaint; (Source: Draft Twin Peaks Bill version 2)
On-site inspection means an inspection at the business premises of a regulated person– (a) to determine compliance with a financial sector law; or (b) for the purpose of supervising regulated activities; (Source: Draft Twin Peaks Bill version 2)
Operating expenses means gross expenses incurred in carrying on the insurer‘s day-to-day activities-including, but not limited to, claims handling expenses, management expenses, asset management and fund management fees; excluding –acquisition expenses relating to the cost of acquiring new short-term insurance business; the depreciation of inventories to net realisable value; the depreciation of property, plant and equipment to recoverable amount and the reversal of such write-downs; the cost of recurring the activities of the insurer and the reversal of any provisions for the costs of restructuring; the disposal of property, plant and equipment; the realisation of long-term investments; and gains and losses arising from natural disasters and expropriation. (Source: Board Notice 169 of 2011)
Operating levy means a levy imposed as an operating levy in terms of the Levies Act; (Source: Draft Twin Peaks Bill version 2)
Operational risk is the risk of loss arising from inadequate or failed internal processes, or from personnel and systems, or from external events. Operational risk should include legal risks, and exclude risks arising from strategic decisions, as well as reputation risks. The operational risk module
Page | 41
is designed to address operational risks to the extent that these have not been explicitly covered in other risk modules. (Source: SA QIS3 Technical Specifications)
Organ of state has the meaning defined in section 239 of the Constitution; (Source: Draft Twin Peaks Bill version 2)
Organ of state means an organ of state as defined in section 239 of the Constitution of the Republic of South Africa, 1996; (Source: Draft Twin Peaks Bill)
ORSA - The ORSA is defined as the entirety of the processes and procedures employed to identify, assess, monitor, manage, and report the short and long term risks an insurance undertaking (and insurance group) faces or may face and to determine the own funds necessary to ensure that insurers (and groups) overall solvency needs are met at all times and are sufficient to achieve its business strategy. The ORSA is deemed to be a confidential document and is to be reported to the Regulator as part of the ―private‖ disclosure requirements. (Source: Final Position Paper 34)
Other contingent payment provisions: The total technical provisions per line of business for any other contingent payments or benefits payable to a policyholder in terms of an insurance policy.e.g. experience account balances offered on contingency policies or similar policyholder or third-party profit-sharing structures such as those contained in UMA (Underwriting Manager Agent) binder agreements. (Source: SA QIS3 Technical Specifications)
Other financial regulator means an organ of state referred to in paragraph (a) of the definition of ―financial organ of state‖, other than a regulatory authority as defined in terms of this Act, which has powers or duties relating to, or materially affecting, a financial institution or a financial service; (Source: Draft Twin Peaks Bill)
Outsourced has the meaning set out in Directive 159.A.i (LT&ST): Compliance with sections 9(3)(b)(i) read with sections 12(1)(c) of the Long-term Insurance Act and Short-term Insurance Act, respectively: Outsourcing, 12 April 2012, and "outsource" and "outsourcing" has a corresponding meaning; (Source: Board Notice 158 of 2014)
Outsourced has the meaning set out in Directive 159.A.i: Compliance with sections 9(3)(b)(i) read with sections 12(1)(c) of the Long-term Insurance Act and Short-term Insurance Act, respectively: Outsourcing, 12 April 2012, and "outsource" and "outsourcing" has the a corresponding meaning; (Source: Draft Board Notice 114 of 2014)
Outsourcing means an arrangement of any form between a financial institution and another person, whether or not that person is a regulated person or is supervised in terms of any law, in terms of which that person performs a function or activity related to any aspect of the business of providing a financial service or a financial product, including any function or activity that enables the financial institution to provide a service or product, whether directly or indirectly, which would otherwise be performed by the financial institution itself, and includes– (a) an arrangement with a related party or inter-related party of the financial institution, and irrespective of that other person being located outside of the Republic; or (b) an arrangement with a person in terms of which that person (irrespective of the capacity in which that person acts) provides a financial product or financial service to a financial customer on behalf of a financial institution; (Source: Draft Twin Peaks Bill version 2)
Outsourcing means an arrangement of any form between a long-term insurer and another person, whether that person is supervised under any law or not, in terms of which that person performs a function or activity related to any aspect of the long-term insurance business of the insurer, whether directly or by sub-outsourcing, which would otherwise be performed by the long-term insurer itself;‘‘; (Source: Draft ILAB version 2 - Life)
Outsourcing means an arrangement of any form between a short term insurer and another person, whether that person is supervised under any law or not, in terms of which that person performs a function or activity related to any aspect of the short-term insurance business of the insurer, whether directly or by sub-outsourcing, which would otherwise be performed by the short-term insurer itself;‘‘; (Source: Draft ILAB version 2 - Non-Life)
Outsourcing means an arrangement of any form between an insurer, a branch of an insurer located outside of the Republic, a subsidiary of an insurer in or outside of the Republic or the controlling company of an insurer and another person, whether that person is supervised under any law or not, in terms of which that person performs a function or activity related to any aspect of the insurance
Page | 42
business of that insurer (including any function or activity that enable the insurer to provide policy benefits such as information technology systems, asset management and records / database administration), whether directly or indirectly, which would otherwise be performed by the insurer itself, and includes –(a) an arrangement where a function or activity is performed by an individual / natural person employed by more than one insurer within an insurance group;(b) an arrangement with a related party or inter-related party of the insurer, and irrespective of that other person being located
outside of the Republic; (c) a function or activity (such as pricing and actuarial services) performed by
an insurer or reinsurer for a reinsurer or an insurer, whether under a reinsurance contract or not, but does not apply to the actual insurance provided under a reinsurance contract (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Outsourcing means an arrangement of any form between an insurer, a branch of an insurer or the controlling company of an insurer and another person, whether that person is supervised under any law or not, in terms of which that person performs a function or activity related to any aspect of the insurance business of that insurer (including any function or activity that enables the insurer to meet its insurance obligations), whether directly or indirectly, which would otherwise be performed by the insurer itself, and includes— (a) an arrangement with a related party or an inter-related party of the insurer, irrespective of that other person being located outside of the Republic; (b) a function or activity (such as pricing and actuarial services) performed by an insurer or a reinsurer for another insurer or reinsurer, whether under a reinsurance policy or not, but does not apply to the actual insurance provided under a reinsurance contract; but excludes— (i) the insourcing of a function or activity by another person to an insurer; and (ii) the rendering of a financial service as defined in the Financial Advisory and Intermediary Services Act, 2002 (Act No. 37 of 2002) (Source: Draft Insurance Bill issued May 2015)
Oversight Committee means the Committee established in terms of section 36; (Source: Draft Twin Peaks Bill version 2)
Oversight Committee member means the Governor or a Deputy Governor, including the Chief Executive Officer, acting as a member of the Oversight Committee; (Source: Draft Twin Peaks Bill version 2)
Own funds is the sum of "BOF" and "ancillary own funds‖. (Source: SA QIS3 Technical Specifications)
Parent undertaking means a parent undertaking within the meaning of Directive 83/349/EEC29. [ A company that control subsidiaries through partial or full stock ownership or some other financial or legal connection, or that in the opinion of the competent authorities, effectively exercises a dominant influence over another undertaking. (Source: Final Position Paper 27 - SII Group solvency definition)
Partially guaranteed means where the insurance obligations under a policy at the end date of the policy or, in respect of an annuity, at each annuity instalment, are at the start of the policy – (a) stated in the policy to be no less than an amount in Rand terms; or (b) stated in or ascertainable from the policy to be no less than an amount calculated with reference to a growth rate used in calculating the policy‘s investment value or, in the case of an annuity, each annuity instalment, which growth rate is stated in the policy as a fixed rate of return or stated return linked to inflation over the full term of the policy; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Participant, in relation to a scheme, means– (a) a financial institution which is a member of or takes part in a recognised scheme or its funding, and submits to the authority of the relevant ombud; or (b) a financial institution which is subject to the authority of a statutory scheme; (Source: Draft Twin Peaks Bill version 2)
Participating undertaking means a
relationship as set out in Directive 83/349/EEC. (Source: Final Position Paper 27 - SII Group solvency definition)
Payment system has the meaning defined in section 1 of the National Payment System Act; (Source: Draft Twin Peaks Bill version 2)
Page | 43
Payment system operator means an operator of a payment system as defined in the National Payment System Act, excluding the Reserve Bank; (Source: Draft Twin Peaks Bill version 2)
Payment system participant means an entity that has been authorised, recognised, designated and granted access by the Reserve Bank or payment system operator to participate in a payment system; (Source: Draft Twin Peaks Bill version 2)
Pension Funds Act means the Pension Funds Act, 1956 (Act No. 24 of 1956); (Source: Draft Twin Peaks Bill version 2)
Person means– (a) a natural person; (b) a partnership; (c) a trust; (d) an organ of state; (e) any company incorporated or registered in terms of any law; (f) any body of persons incorporated or unincorporated; (Source: Draft Twin Peaks Bill version 2)
Person means any natural person, legal person, partnership, joint venture or trust, and any other
body or association of persons corporate or unincorporate; (Source: Draft Insurance Bill issued
May 2015)
Person means any natural person, partnership or trust, and includes -(a) any organ of state as defined in section 239 of the Constitution of the Republic of South Africa, 1996;(b) any company incorporated or registered as such under any law;(c) any body or association of persons corporate or unincorporate; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Personal lines means non-life insurance business where the policyholder is a natural person; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Policy means a contract of insurance; (Source: Draft Primary Legislation - Financial Soundness)
Policy means any contract concluded by an insurer to meet specified insurance obligations; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Policyholder means a party to whom the contract of insurance is issued by the insurer, and includes, depending on the circumstances, the party entitled to the policy benefits provided for in the contract of insurance; (Source: Draft Primary Legislation - Financial Soundness)
Policyholder means the person with whom or with which an insurer concludes a non-life insurance policy or a life insurance policy (Source: Draft Insurance Bill issued May 2015)
Pooled fund means a collective investment undertaking, including investment compartments of a collective investment undertaking, constituted in any legal form, including in terms of a contract, by means of a trust, or in terms of statute, which– (a) raises capital from one or more investors, to facilitate the participation or interest in, subscription, contribution or commitment to a fund or portfolio, with a view to investing it in accordance with a defined investment policy for the benefit of the investors; and (b) does not require approval as a collective investment scheme in terms of the Collective Investment Schemes Control Act, 2002 (Act No. 45 of 2002); (Source: Draft Twin Peaks Bill version 2)
Premium means any direct or indirect, or partially or fully subsidised, payment of any consideration; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Premium means any direct or indirect, or partially or fully subsidised payment of any consideration (Source: Draft Insurance Bill issued May 2015)
Prescribed means prescribed by the Registrar by Rule; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Prescribed means prescribed by the Registrar by Standard (Source: Draft Insurance Bill issued
May 2015)
Probability distribution forecast CP56, Paragraph 5.10: ―The term ―probability distribution forecast‖ is defined in Article 13(38) as ―a mathematical function that assigns to an exhaustive set of mutually exclusive future events a probability of realisation (Source: Final Position Paper 55)
Page | 44
Promotion of Administrative Justice Act means the Promotion of Administrative Justice Act, 2000 (Act No. 3 of 2000); (Source: Draft Twin Peaks Bill version 2)
Property Plant and Equipment: Tangible items that:(a) are held for use in the production or supply of goods or services; and (b) are expected to be used during more than one period. Recognised if, and only if:(a) it is probable that future economic benefits associated with the item will flow to the entity; and (b) the cost of the item can be measured reliably (Source: SA QIS3 Technical Specifications)
Property risk arises as a result of sensitivity of assets, liabilities and financial investments to the level or volatility of market prices of property. (Source: SA QIS3 Technical Specifications)
Protection of Personal Information Act (POPI) means the Protection of Personal Information Act, 2013 (Act No. 4 of 2013); (Source: Draft Twin Peaks Bill version 2)
Provisions - A provision is a liability of uncertain timing or amount. A provision should be recognised when, and only when: (a) an entity has a present obligation (legal or constructive) as a result of a past event;(b) it is probable (i.e. more likely than not) that an outflow of resources will be required to settle the obligation; and(c) a reliable estimate can be made of the amount of the obligation. (Source: SA QIS3 Technical Specifications)
Prudential Authority means the authority established in terms of section 27; (Source: Draft Twin Peaks Bill version 2)
Prudential standard means a standard made in terms of section 94; (Source: Draft Twin Peaks Bill version 2)
Public company has the meaning set out in section 1 of the Companies Act and includes a state-owned company as defined in section 1 of the Companies Act; (Source: Draft Primary Legislation – Solo and Group requirements)
Public company has the meaning set out in section 1 of the Companies Act, and includes a state-
owned company as defined in section 1 of the Companies Act (Source: Draft Insurance Bill issued
May 2015)
Public Finance Management Act means the Public Finance Management Act, 1999 (Act No. 1 of 1999); (Source: Draft Twin Peaks Bill version 2)
Pure discretionary benefit: This represents the liability based on the declaration of future benefits which are at the discretion of the management. ―Discretionary participation features‖ are defined as additional benefits whose amount or timing is contractually at the discretion of the issuer (Source: Final Position Paper 32)
Recognised scheme means a scheme that has been granted recognition in terms of section 188; (Source: Draft Twin Peaks Bill version 2)
Register means the Financial Sector Information Register referred to in Part 4 of Chapter 17; (Source: Draft Twin Peaks Bill version 2)
Registrar means the Registrar of Insurance referred to in section 60 (Source: Draft Insurance Bill issued May 2015)
Regulated activity means any activity or a part of that activity regulated in terms of a financial sector law; (Source: Draft Twin Peaks Bill version 2)
Regulated financial institution means – (a) A financial institution as defined in paragraph (a) of the definition of ―financial institution‖ in section 1 of the Financial Services Board Act, 1990 (Act No. 97 of 1990); (b) A bank as defined in section 1(1) of the Banks Act 1990 (Act No. 94 of 1990), a mutual bank as defined in section 1(1) of the Mutual Banks Act, 1993 (Act No. 124 of 1993) or a co-operative bank defined in section 1(1) of the Co-operative Banks Act, 2007 (Act 40 of 2007); and (c) A person authorised by a regulatory authority to perform one or more of the functions of a financial institution a bank or mutual bank referred to under paragraphs (a) and (b) and which is subject to the laws of a country other than the Republic, which laws – (i) establish a regulatory framework equivalent to that established by the Act; and (ii) are supervised by a regulatory authority; (Source: Board Notice 169 of 2011)
Page | 45
Regulated person means– (a) a person who is licensed, appointed, or otherwise approved to perform an activity regulated in terms of a financial sector law; (b) any person who is part of a financial conglomerate; (c) a key person of a person referred to in paragraphs (a)or (b); (d) a financial institution representative; (e) a person to whom a person referred to in paragraphs (a) and (b) has outsourced the performance of a regulated activity or a part of a regulated activity; (Source: Draft Twin Peaks Bill version 2)
Regulated person means any of the persons referred to under section 6 of this Act, and for purposes of the insurance group supervisory framework includes any person referred to in paragraph (b) of the definition of ―financial conglomerate‖; (Source: Draft Primary Legislation – Solo and Group requirements)
Regulation means a regulation made by the Minister in terms of section 92; (Source: Draft Twin Peaks Bill)
Regulator’s directive means a directive issued in terms of sections 132 to 135; (Source: Draft Twin Peaks Bill version 2)
Regulatory action means the exercise of any power or function, or the taking of any action by the Registrar under this Act or another Act of Parliament (Source: Draft Insurance Bill issued May 2015)
Regulatory action means the exercise of any powers or function, or taking of any action by the Registrar under this Act; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Regulatory action means the exercise of any powers or function, or taking of any action by the Registrar under this Act; (Source: Draft Primary Legislation – Solo and Group requirements)
Regulatory action means the exercise of any powers or function, or taking of any action by the Registrar under this Act; (Source: Draft Primary Legislation - Insurance Groups Supervisory Framework)
Regulatory action means the exercise of any powers or function, or taking of any action by the Registrar under this Act; (Source: Draft Primary Legislation - Financial Soundness)
Regulatory authority has the meaning set out in section 1 of the Financial Services Board Act; (Source: Draft Board Notice 114 of 2014 and Board Notice 113 of 2015)
Regulatory authority has the meaning set out in section 1 of the Financial Services Board Act (Source: Draft Insurance Bill issued May 2015)
Regulatory authority means – (a) any organ of state as defined in section 239 of the Constitution of the Republic of South Africa, 1996, responsible for the supervision or enforcement of legislation (other than the Registrar); or (b) a similar body designated in the laws of a country other than the Republic to supervise or enforce legislation of that country; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Regulatory authority means – (a) any organ of state as defined in section 239 of the Constitution of the Republic of South Africa, 1996, responsible for the supervision or enforcement of legislation (other than the Registrar); or (b) a similar body designated in the laws of a country other than the Republic to supervise or enforce legislation of that country; (Source: Draft Primary Legislation - Insurance Groups Supervisory Framework)
Regulatory authority means – (a) any organ of state as defined in section 239 of the Constitution of the Republic of South Africa, 1996, responsible for the supervision or enforcement of legislation (other than the Registrar); or (b) a similar body designated in the laws of a country other than the Republic to supervise or enforce legislation of that country; (Source: Draft Primary Legislation - Financial Soundness)
Regulatory authority means a body designated in a national law to supervise or enforce legislation or a similar body designated in the laws of a country other than the Republic of supervise or enforce legislation of that country; (Source: Board Notice 169 of 2011)
Page | 46
Regulatory authority means any organ of state as defined in section 239 of the Constitution of the Republic of South Africa, 1996, responsible for the supervision or enforcement of legislation; (Source: Final Position Paper 27)
Regulatory authority means—(a) any organ of state as defined in section 239 of the Constitution of the Republic of South Africa, 1996, responsible for the supervision or enforcement of legislation; or (b) a similar body designated in the laws of a country other than the Republic to supervise or enforce legislation of that country;‘‘; (Source: Draft ILAB version 2 - Life)
Regulatory authority means—(a) any organ of state as defined in section 239 of the Constitution of the Republic of South Africa, 1996, responsible for the supervision or enforcement of legislation; or (b) a similar body designated in the laws of a country other than the Republic to supervise or enforce legislation of that country;‘‘; (Source: Draft ILAB version 2 - Non-Life)
Regulatory authority or authorities means—(a) the Market Conduct Authority; or (b) the Prudential Authority; (Source: Draft Twin Peaks Bill)
Regulatory law means a law listed in Schedule 1; (Source: Draft Twin Peaks Bill)
Regulatory strategy means the strategy of a regulatory authority referred to in section 15; (Source: Draft Twin Peaks Bill)
Reinsurance business means any— (a) non-life insurance business or life insurance business conducted by an insurer with a another insurer; or (b) business similar to insurance business conducted by an insurer with a person that is authorised by a regulatory authority to perform business similar to that referred to as insurance business under the laws of a country other than the Republic (Source: Draft Insurance Bill issued May 2015)
Reinsurer means a person licensed or deemed to be licensed to conduct insurance business only in the reinsurance class and sub-classes set out in Schedule 2, and includes a branch of a foreign reinsurer so licensed, unless specifically provided for otherwise in this Act (Source: Draft Insurance Bill issued May 2015)
Related has the meaning assigned in the Companies Act;‘‘; (Source: Draft ILAB version 2 - Non-Life)
Related has the meaning assigned to it in the Companies Act;‘‘; (Source: Draft ILAB version 2 - Life)
Related has the meaning defined in section 1 of the Companies Act; (Source: Draft Twin Peaks Bill version 2)
Related has the meaning set out in section 1 of the Companies Act; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Related has the meaning set out in section 1 of the Companies Act; (Source: Draft Primary Legislation – Solo and Group requirements)
Related has the meaning set out in section 1 of the Companies Act; (Source: Draft Primary Legislation - Insurance Groups Supervisory Framework)
Related has the meaning set out in section 1 of the Companies Act (Source: Draft Insurance Bill issued May 2015)
Related party, of a person, means an individual who, or a juristic person that, is related to the person, as described in section 2 of the Companies Act;4 (Source: Draft Twin Peaks Bill version 2)
Related person has the meaning assigned in the Companies Act; (Source: Draft ILAB version 2 - Life)
Related person has the meaning assigned in the Companies Act; (Source: Draft ILAB version 2 - Non-Life)
Related person has the meaning assigned in the Companies Act; (Source: Final Position Paper 27)
Page | 47
Related undertaking
in Directive 83/349/EEC (Source: Final Position Paper 27 - SII Group solvency definition)
Remuneration has the meaning as defined in section 30(6) of the Companies Act. "control function" means - (a) the risk management function;(b) the compliance function;(c) the actuarial function;(d) internal audit function; or(e) all of these functions; (Source: Draft Board Notice 114 of 2014)
Reserve Bank Act means the South African Reserve Bank Act, 1989 (Act No. 90 of 1989); (Source: Draft Twin Peaks Bill version 2)
Reserve Bank means the South African Reserve Bank as referred to in section 223 of the Constitution, read with the Reserve Bank Act; (Source: Draft Twin Peaks Bill version 2)
Resolution power, in relation to a financial institution, means any power in a regulatory law, or any other law, which provides for the winding up, business rescue, closure or recovery of a financial institution in financial distress; (Source: Draft Twin Peaks Bill)
Respondent, in relation to a decision referred to the Financial Services Tribunal, means the regulatory authority which took the decision referred to the Financial Services Tribunal; (Source: Draft Twin Peaks Bill)
Retrenchment risk is the risk of loss, or of adverse changes in the value of insurance liabilities, resulting from changes in the level, trend or volatility of retrenchment inception rates. (Source: SA QIS3 Technical Specifications)
Return means the returns prescribed by the Registrar under section 35 of the Act; (Source: Board Notice 169 of 2011)
Reverse Stress A reverse stress test is by definition a stress that tests the business plan to failure (Source: Final Position Paper 88)
Rider benefit means an additional insurance obligation under a non-life insurance policy or a life insurance policy, which obligation is ancillary to, and immaterial in relation to, the primary insurance obligations assumed under that policy (Source: Draft Insurance Bill issued May 2015)
Ring-fenced funds - The general principle of ring-fenced funds is required to be applied where there are restricted own funds that have a reduced capacity to fully absorb losses on a going concern basis due to their lack of transferability within the insurer. This lack of transferability may arise because the restricted own funds can only be used to cover losses (a) on a defined portion of the insurer‘s (re)insurance contracts; (b) or in respect to particular policyholders or beneficiaries; (c) or in relation to particular risks. (Source: SA QIS3 Technical Specifications)
Risk concentration means any risk exposure that has a loss potential large enough to threaten the financially sound condition of an insurer that is part of an insurance group; (Source: Draft Primary Legislation – Solo and Group requirements)
Risk concentration means any risk exposure that has a loss potential large enough to threaten the financially sound condition of a long-term insurer that is part of an insurance group; (Source: Draft ILAB version 2 - Life)
Risk concentration means any risk exposure that has a loss potential large enough to threaten the financially sound condition of a short-term insurer that is part of an insurance group; (Source: Draft ILAB version 2 - Non-Life)
Risk concentration means any risk exposure that has a loss potential large enough to threaten the financially sound condition of a short/long-term insurer that is part of an insurance group; (Source: Final Position Paper 27)
Risk management system is defined in the draft Insurance Laws Amendment Bill as the totality of strategies, policies and procedures for identifying, measuring, monitoring, managing, and reporting of all material risks to which the insurer may be exposed (Source: Draft ILAB version 2)
Risk Margin - Usually, technical provisions consist of the best estimate and the risk margin. (For the calculation of technical provisions as a whole see subsection TP.28) The risk margin is a part of technical provisions in order to ensure that the value of technical provisions is equivalent to the
Page | 48
amount that insurers and reinsurers would be expected to require in order to take over and meet the insurance and reinsurance obligations. The risk margin should be calculated by determining the cost of providing an amount of eligible own funds equal to the SCR necessary to support the insurance and reinsurance obligations over the lifetime thereof. The rate used in the determination of the cost of providing that amount of eligible own funds is called Cost-of-Capital rate (Source: SA QIS3 Technical Specifications)
Risk mitigating action or management action is a mechanism that would reduce an undertaking ‟s liability in response to future circumstances arising. If a mechanism needs Board or Statutory Actuary sign-off to be put into practice or exercised, then it should be classified as a management action. If no such sign-off is required, and the mechanism is already in place then it is classified as a risk mitigating action. If a mechanism doesn‘t require Board or Statutory Actuary sign-off but it is not in place, then undertakings may not use that mechanism to reduce liabilities in response to a change in circumstances. All risk mitigations and management actions should be listed, and management actions should be quantified at least at individual risk level, or if quantification is impractical or unnecessary then qualitatively justified. To prove that the loss absorbency of discretionary benefits is not being double counted across risks may be extremely onerous, but should be considered. (Source: Final Position Paper 55)
Rule means —(a) any subordinate legislative instrument, such as a notice, board notice or rule made by a regulatory authority in terms of a power granted in a regulatory law; or(b) a rule made by a regulatory authority in terms of section 104; (Source: Draft Twin Peaks Bill)
Rule means a Rule prescribed by the Registrar under section 109 of this Act; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Scenario testing Scenario testing uses a hypothetical future or relevant historical state of the world to define changes in risk factors affecting an insurer. This will normally involve changes in a number of risk factors, as well as the ripple effects and other impacts that follow logically from these changes and related management actions. Scenario testing is typically conducted over the time horizon appropriate for the business and risks being tested. (Source: Final Position Paper 96)
Scheme means– (a) any scheme or arrangement established by or for a financial institution, or a group of financial institutions, in order to resolve financial customer complaints by an ombud– (i) and includes any arrangement in terms of which the resolution of the complaint is effected by mediation, conciliation, recommendation, determination or arbitration; (ii) but does not include any internal complaint resolution arrangement established by a financial institution, either with or without any affiliate or subsidiary of the institution; and (b) a statutory scheme; (Source: Draft Twin Peaks Bill version 2)
SCR standard formula includes two modules for underwriting risk: the life and the non-life underwriting risk module. The scope of the modules is defined as follows: (a) The life underwriting risk module captures the risk of life (re)insurance obligations (including health (re)insurance obligations). (b) The non-life underwriting risk module captures the risk of non-life (re)insurance obligations (other than health (re)insurance obligations). (Source: SA QIS3 Technical Specifications)
Section 25 memoranda of understanding means the memoranda of understanding referred to in section 25; (Source: Draft Twin Peaks Bill version 2)
Section 77 memoranda of understanding means the memoranda of understanding referred to in section 77; (Source: Draft Twin Peaks Bill version 2)
Securities has the meaning set out in section 1 of the Companies Act and section 1(1) of the
Financial Markets Act, 2012 (Act No. 19 of 2012) (Source: Draft Insurance Bill issued May 2015)
Securities has the meaning set out in section 1 of the Financial Markets Act, 2012 (Act No. 19 of 2012); (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Securities mean securities and shares as defined in item 1 of Schedule 1 of the Act. (Source: Board Notice 169 of 2011)
Securities means– (a) shares, depository receipts and other equivalent equities; (b) debentures, bonds and securitised debt; (c) money-market instruments; (d) derivative instruments; (e) notes; (f)
Page | 49
instruments based on an index; (g) any warrant, certificate, and other instrument acknowledging, conferring or creating rights to subscribe to, acquire, dispose of, or convert securities and instruments referred to in subparagraphs (a), (b) and (c); (Source: Draft Twin Peaks Bill version 2)
Senior management means the chief executive officer or person in charge of a long-term insurer and any manager with decision-making powers who is directly accountable to or directly reports to the chief executive officer or person in charge of that long-term insurer;‘‘: (Source: Draft ILAB version 2 - Life) The Companies Act applies to an association of persons formed under another Act of Parliament that is licensed under this Act to the extent that the Companies Act—(a) can apply to it; and(b) applies to a public company registered under this Act.‘‘
Senior management means the chief executive officer or person in charge of an insurer and any manager with decision-making powers who is directly accountable to or directly reports to the chief executive officer or person in charge of that insurer, and senior manager has a corresponding meaning; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Senior management means the chief executive officer or person in charge of a short-term insurer and any manager with decision-making powers who is directly accountable to or directly reports to the chief executive officer or person in charge of that short-term insurer; (Source: Draft ILAB version 2 - Non-Life)
Senior Management The chief executive officer or person in charge of a short-term insurer and any manager with decision-making powers who is directly accountable to or directly reports to the chief executive officer or person in charge of that short-term insurer. (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Senior manager means— (a) the chief executive officer or the person who is in charge of an insurer or a controlling company; (b) a person who is directly accountable to the chief executive officer or the person who is in charge of an insurer or a controlling company; and (c) in respect of an insurer or a controlling company— (i) a person, other than a director or a head of a control function, who makes or participates in making decisions that— (aa) affect the whole or a substantial part of the business of an insurer or a controlling company; or (bb) have the capacity to significantly affect the financial standing of an insurer or a controlling company; or (ii) a person, other than a director or a head of a control function, who oversees the enforcement of policies and the implementation of strategies approved by the board of directors, and senior management has a corresponding meaning (Source: Draft Insurance Bill issued May 2015)
Senior manager means–(a) the Chief Executive Officer or the person who is in charge of a financial institution; (b) a person who is directly accountable to the Chief Executive Officer or the person who is in charge of a financial institution; (c) a person other than a director who makes or participates in making decisions that– (i) affect the whole or a substantial part of the business of a financial institution; or (ii) have the capacity to significantly affect the financial institution‘s financial standing; or (d) a person other than a director who oversees the enforcement of policies and the implementation of strategies approved by the governing body; (Source: Draft Twin Peaks Bill version 2)
Sensitivity testing Sensitivity testing typically involves a change in a single risk factor (or a limited number of risk factors). It is typically conducted over a shorter time horizon, for example an instantaneous shock. Sensitivity testing requires fewer resources than scenario testing and can be used as a simpler technique for assessing the impact of a change in risks when a quick response or when more frequent results is needed. The magnitude of the change considered is often relatively small, and is often used to estimate the impact of a change in assumption or the effect of parameter errors in a model. More severe magnitudes may also be considered to evaluate the impact of a large change in a single risk factor on the insurer (Source: Final Position Paper 96)
Settlement system has the meaning defined in section 1 of the National Payment System Act (Source: Draft Twin Peaks Bill version 2)
Shareholder value is defined as any future transfers attributable to shareholders in respect of profit participation arrangements where benefits to policyholders are reflected in technical provisions (Source: SA QIS3 Technical Specifications)
Short-term Insurance Act means the Short-term Insurance Act, 1998 (Act No. 53 of 1998); (Source: Draft Twin Peaks Bill version 2)
Page | 50
Significant influence has the meaning prescribed by the Registrar with reference to, amongst others, (i) A related or inter-related person;(ii) Inter-connectedness;(iii) Risk exposure;(iv) Risk concentration;(v) Risk transfer;(vi) Inter-group transactions;(vii) Other transactions;(viii) Contractual obligation; or(vix) of any combination of subparagraphs (i) to (viii). (Source: Final Position Paper 27)
Significant influence means the influence or potential influence that another person or persons may have on the financial soundness of an insurance group determined with reference to one or more of the following:(a) related or inter-related persons;(b) inter-connectedness;(c) risk exposure;(d) risk concentration;(e) risk transfer;(f) intra-group transactions;(g) other transactions; or (h) contractual obligations; (Source: Draft Primary Legislation – Solo and Group requirements)
Significant influence means the influence or potential influence that another person or persons may have on the financial soundness of an insurance group determined with reference to one or more of the following:(a) related or inter-related persons;(b) inter-connectedness;(c) risk exposure;(d) risk concentration;(e) risk transfer;(f) intra-group transactions;(g) other transactions; or(h) contractual obligations; ―significant owner‖ means any person that –(a) directly or indirectly, alone or with a related party, exercises control over that insurer;(b) directly or indirectly, alone or with a related party, holds or increases voting rights or capital in an insurer that constitutes or exceeds 10, 20, 30 or 50 percent of the voting rights or capital of the insurer, as the case may be; or(c) is the holding company of an insurer; (Source: Draft Primary Legislation - Insurance Groups Supervisory Framework)
Significant influence means, amongst others— (a) a related or inter-related person;(b) inter-connectedness;(c) risk exposure;(d) risk concentration;(e) risk transfer;(f) inter-group transactions;(g) other transactions;(h) contractual obligation; or(i) of any combination of subparagraphs (a) to (h). (Source: Draft ILAB version 2 - Life)
Significant influence means, amongst others—(a) a related or inter-related person;(b) inter-connectedness;(c) risk exposure;(d) risk concentration;(e) risk transfer;(f) inter-group transactions;(g) other transactions;(h) contractual obligation; or(i) of any combination of subparagraphs (a) to (h). (Source: Draft ILAB version 2 - Non-Life)
Significant owner means a person that acquired or holds shares or any other financial interest in an insurer within the meaning of section 26 of the Long-term Insurance Act, 1998 or section 25 of the Short-term Act, 1998, as the case may be; (Source: Draft Board Notice 114 of 2014)
Significant owner means a person that acquires or holds shares or any other financial interest in an insurer within the meaning of section 26 of the Long-term Insurance Act, 1998 or section 25 of the Short-term Insurance Act, 1998, as the case may be; (Source: Board Notice 158 of 2014)
Significant owner has the meaning set out in section 1 of Board Notice 158 of 2014 (Source: Board Notice 113 of 2015)
Significant owner means a significant owner as described in section 119; (Source: Draft Twin Peaks Bill version 2)
Significant owner means any person other than the Registrar that, directly or indirectly, alone or together with a related or an inter-related person— (a) has the power to appoint a person to be a director of the board of directors of an insurer or a controlling company; (b) must consent to the appointment of a person as a director of the board of directors of an insurer or a controlling company; (c) in the case of an insurer or a controlling company that is a company— (i) holds 15% or more of the issued shares of the insurer or controlling company, or a lower percentage as prescribed; (ii) is able to exercise or control the exercise of 15% or more of the voting rights associated with securities of that insurer or controlling company, or a lower percentage prescribed, whether pursuant to a shareholder agreement or otherwise; or (iii) holds rights in relation to the insurer or controlling company that, if exercised, would result in that person— (aa) holding 15% or more of the securities of that insurer or controlling company, or a lower percentage prescribed; (bb) having the ability to exercise or control 15% or more of the voting rights attached to shares or other securities of the insurer or controlling company, or a lower percentage prescribed; or (cc) having the ability to dispose or direct the disposing of 15% or more of the securities of the insurer or controlling company, or a lower percentage prescribed; or (d) has the ability to materially influence the strategy of the insurer or controlling company in a manner comparable to a person who, in ordinary commercial practice, would be able to exercise a form of control referred to in paragraphs (a) to (c) (Source: Draft Insurance Bill issued May 2015)
Page | 51
Significant owner means any person that –(a) directly or indirectly, alone or with a related party, exercises control over that insurer;(b) directly or indirectly, alone or with a related party, holds or increases voting rights or capital in an insurer that constitutes or exceeds 10, 20, 30 or 50 percent of the voting rights or capital of the insurer, as the case may be; or(c) is the holding company of an insurer; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Special levy means a levy imposed as a special levy in terms of the Levies Act; (Source: Draft Twin Peaks Bill version 2)
Spread risk results from the sensitivity of the value of assets, liabilities and financial instruments to changes in the level or in the volatility of credit spreads over the risk-free interest rate term structure. Credit default risk results from potential losses due to credit default events. The two components cover mutually exclusive sets of assets. (Source: SA QIS3 Technical Specifications)
Standard means a Standard prescribed by the Registrar under section 62 (Source: Draft Insurance
Bill issued May 2015)
Start of the policy means when the insurer accepts or is deemed to accept insurance obligations under a policy; (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Start of the policy means when the insurer accepts or is deemed to accept insurance obligations under a policy (Source: Draft Insurance Bill issued May 2015)
State-owned insurer means a state-owned company that conducts insurance business and is— (a) established under or whose establishment is authorised under an Act of Parliament; and (b) a public entity subject to the Public Finance Management Act, 1999 (Act No. 1 of 1999) (Source: Draft Insurance Bill issued May 2015)
Statutory ombud means the ombud determined by the Council to deal with a specific complaint in the circumstances contemplated in section 191; (Source: Draft Twin Peaks Bill version 2)
Statutory scheme means the Offices referred to in section 177, and the statutory ombud contemplated in section 191; (Source: Draft Twin Peaks Bill version 2)
Strategic participations are those participations that the insurer intends to keep for a long period of time. (Source: SA QIS3 Technical Specifications)
Strategic participations in financial and credit institutions (which include banks and asset managers) should be excluded from Own Funds as set out in section SCR.14 and paragraph OF.7. For this reason, strategic participations in financial and credit institutions attract a zero capital charge in this module. (Source: SA QIS3 Technical Specifications)
Strategic participations other than those in financial and credit institutions should be included in the currency risk module, but are excluded from all other Market Risk modules (except for intra-group loans which are subject to spread/credit risk). (Source: SA QIS3 Technical Specifications)
Stress testing - Stress testing is a risk management technique used to evaluate the potentially adverse effects on an institution‘s current and future financial condition, of a set of specified changes in risk factors, corresponding to unexpected but plausible events(Source: Final Position Paper 96)
Submit, in relation to proceedings of the Financial Services Tribunal, means—(a) deliver by hand;(b) send by registered post; or(d) transmit by secure electronic means; (Source: Draft Twin Peaks Bill)
Subsidiary undertaking means any subsidiary undertaking within the meaning of Directive 83/349/EEC. (Source: Final Position Paper 27 SII - Group solvency definition)
Systemic event means an event or circumstance where– (a) a financial institution, or a group of financial institutions, cannot provide financial products or financial services that they have contractually undertaken to provide; or (b) there is a general failure in confidence of financial customers in the ability of one or more financial institutions to continue to provide financial products or services; to an extent that may reasonably be expected to have a substantial adverse effect on the financial system and economic activity in the Republic, irrespective of the event or circumstance occurring or arising inside or outside the Republic;8(Source: Draft Twin Peaks Bill version 2)
Page | 52
Systemic risk means the risk that a systemic event will occur; (Source: Draft Twin Peaks Bill version 2)
Systemic, in relation to a risk, weakness or disruption in the financial system, means a situation where the risk, weakness or disruption affects the financial system, either as a whole or in part, as opposed to a situation where the effects of the risk, weakness or disruption are confined to either a single financial institution or a small group of institutions without threatening to spread more widely, and includes a situation where the risk, weakness or disruption arises from the—(a) circumstances within or outside the Republic that threaten to dislocate or are dislocating the—(i) structural features of a financial or other market;(ii) linkages between financial institutions; or(iii) payment system;(b) financial difficulties in a financial institution, including the inability of a financial institution to meet its obligations, spreading to other institutions in the financial system;(c) unsustainable levels of leverage, debt or credit growth;(d) marketing by financial institutions of tainted or dubious financial instruments; and(e) excessive speculation on financial or other markets; (Source: Draft Twin Peaks Bill)
Systemically important financial institution (SIFI) means a financial institution or a financial conglomerate designated in terms of section 73; (Source: Draft Twin Peaks Bill version 2)
Systemically important financial institution means a financial institution which, by virtue of its size, complexity, global activity, inter-connectedness, or provision of non-substitutable services critical to the operation of the financial system, is such that a risk, weakness or disruption to the financial institution would be actually or potentially systemic, and which is designated as such in terms of section 64(2); (Source: Draft Twin Peaks Bill)
The Act means the Long-term Insurance Act, 1998 or the Short-term Insurance Act, 1998, as the case may be. (Source: Board Notice 158 of 2014)
The Basic Solvency Capital Requirement (BSCR) is the Solvency Capital Requirement before any adjustments, combining capital requirements for four major risk categories. (Source: SA QIS3 Technical Specifications)
The life catastrophe sub-module is restricted to (re)insurance obligations which are contingent on mortality or morbidity, i.e. where an increase in mortality or morbidity leads to an increase in technical provisions. (Source: SA QIS3 Technical Specifications)
The life underwriting risk module consists of eight sub-modules for mortality risk, longevity risk, disability/morbidity risk, lapse risk, expense risk, retrenchment risk, Non-SLT health underwriting risk and catastrophe risk. (Source: SA QIS3 Technical Specifications)
The value of technical provisions should be equal to the sum of a best estimate (see subsection TP.7) and a risk margin (see subsection TP.29) (Source: SA QIS3 Technical Specifications)
Third party cell: A ―third party cell‖ is a cell where the shares issued to cell owners provide the cell owners with the license to underwrite the risks of third parties. The underwriting origin of the business is usually from a captured client base e.g. a retail base. Claims in a third party cell environment are not limited to the funds available in the cell captive. (Source: SA QIS3 Technical Specifications)
Third party cell: A ―third party cell‖ is a cell where the shares issued to cell owners provide the cell owners with the ability to underwrite the risks of third parties. The source of the business underwritten is usually from a captured client base. Claims in a third party cell are not necessarily limited to the funds available in the cell captive. (Source: SA QIS3 Technical Specifications)
This Act includes any Rule; (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
This Act includes any Standard (Source: Draft Insurance Bill issued May 2015)
This Act includes the Schedules to, and the legislative instruments made in terms of, this Act; (Source: Draft Twin Peaks Bill version 2)
Transferability within the group. (Source: Final Position Paper 27 SII - Group solvency definition)
Tribunal means the Financial Services Tribunal established in terms of section 153; (Source: Draft Twin Peaks Bill version 2)
Page | 53
Underwritten on a group basis means where the risks covered under a policy are rated on the characteristics of a group of people together as opposed to that of the individual/s to whom the policy relates. The following principles apply to segmentation for authorisation purposes: An insurer that is licensed to conduct a specific sub-class of insurance business may provide the rider benefits referred to in column 4 of Tables in respect of that class or subclass of insurance business without having to be licensed for the corresponding class or sub-class of insurance business to which the rider benefit
nly group policies as per the definition of ―group policy‖ will be allowed going forward. Other policies may still be underwritten on a group basis, but will be have to be issued as individual
-life insurers will no longer be able to issue policies relating to life, disability or death events. Only life insurers will be authorised to underwrite these events because of the skills and expertise required to underwrite these types of risks. (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Universal Life policies - means policies (other than fund member policies) where insurance obligations constitute a combination of individual risk and individual investment obligations (Source: Discussion Document 29: Authorisation and Reporting Classes of Business under SAM)
Value-at-risk means the technique used to measure and quantify the level of financial risk within the basic own funds of an insurer over a specific time frame (Source: Draft Primary Legislation - Governance Risk Management and Internal control)
Value-at-risk means the technique used to measure and quantify the level of loss that can occur over a specific time frame given a specified probability; (Source: Draft Primary Legislation - Financial Soundness)
Variable payment morbidity insurance obligations where the payment of benefits is contingent on morbidity risk as well as the duration of the morbidity. The experience of these contracts is only dependent on morbidity rates, unlike disability contracts which are also influenced by moral and economic risks. Deferred periods are very short or do not exist. Definitions and conditions are reasonably subjective and subject to seasonal illness patterns, volatility would be high over the short term. An example is hospital cash. (Source: SA QIS3 Technical Specifications)
Website has the meaning set out in section 1 of the Electronic Communications and Transactions Act, 2002 (Act No. 25 of 2002) (Source: Draft Insurance Bill issued May 2015)
Winding-up means any process for dissolving a financial institution that includes the selling all assets, paying off creditors and distributing any remaining assets. (Source: Draft Twin Peaks Bill version 2)
Winding-up means any process for dissolving an insurer or insurance group that includes the selling of all assets, paying off creditors and distributing any remaining assets (Source: Draft Insurance Bill issued May 2015)
4. REFERENCES
This glossary of SAM terms has been compiled by referring to the following source documents available at the time of drafting this version:
Draft Primary Legislation Governance Risk Management and Internal Control
Draft Primary Legislation – Solo and Group requirements
Draft Primary Insurance Groups Supervisory Framework
Draft Primary Financial Soundness
Draft Financial Sector Regulation Bill (Twin Peaks Bill v1 and v2)
Insurance Laws Amendment Bill (ILAB version 2)
Final Position Papers (FPP) as listed on the FSB’s website and various Discussion Documents
The Third South African Quantitative Impact Study (SA QIS3) Technical Specifications Document
Board Notice 169 of 2011: Prescribed requirements for the calculation of the value of the assets, liabilities and the capital adequacy requirement of short-term insurers
Board Notice 114 of 2014: Proposed governance and risk management framework for insurers
Board Notice 158 of 2014: Governance and risk management framework for insurers
Discussion Document 29 (v8): Authorisation and reporting classes of business under SAM
Complementary Identification Code (CIC) table
Page | 54
Draft Insurance Bill issued in May 2015
Board Notice 113 of 2015: Proposed Fit and Proper Requirements
Related Documents
