Transcript Diapositive 1

UNLOCKING GROWTH
THROUGH THE
INSURANCE REGULATORY
FRAMEWORK : THE
EXPERIENCE OF CIMA
By Jean Claude Ngbwa,
Secretary General of the Inter-African Conference of
Insurance Markets - CIMA
Victoria Falls, May 24, 2011
2
THE CIMA: INTRODUCTION
The Inter-African Conference on Insurance Markets (CIMA) with headquarters in
Libreville, Gabon is composed of the following:
the Council of Insurance Ministers, the governing body;
the Regional Commission of Insurance Control (CRCA), the regulatory body;
the General Secretariat of the Conference, the executive body responsible for
implementing the decisions of the Council of Ministers of Insurance. It fulfills
the Secretariat of the Commission;
the National Insurance Departments, liaising with the CIMA within the various
members States.
CIMA also includes two specialized agencies: the International Institute of
Insurance (IIA) and the Joint Reinsurance Company of members states of the
CICA (Compagnie Commune de Réassurance des Etats membres de la CICA CICA-RE).
Fifteen countries mainly French-speaking West Africa and Central Africa are
members of the CIMA
145 companies operate within CIMA, of which:
98 general insurance companies with a turnover of CFA 466.6 billion francs in
2009
and 47 life insurance companies with a turnover of CFA 161.2 billions francs in
2009
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THE CIMA : INTRODUCTION
With the exception of oil producing countries, the GDP per capita in member
countries of CIMA remains low.
The insurance penetration rate (turnover/GDP) in the CIMA Area is 1%. This
weakness is an indication of progress to be made for the insurance industry
which contributes more significantly to the GDP and the economic growth of our
countries.
Sources : www.izf.net - CIMA
Wording
*Prévisions
Growth Rate of the GDP
2009
2010*
Population 2009
GD/per Capita
en millions
In CFA Franc
Insurance Turnover in
Billion CFA Franc
Insurance
Penetraion Rate
Benin
2.5%
3.0%
9.1
344,600
31.3
1.00%
Burkina
3.1%
4.2%
15
257,100
29.65
0.77%
Cameroun
2.0%
3.3%
19
594,300
117.79
1.04%
Centrafique
2.0%
3.5%
4.5
220,400
2.96
0.30%
Congo
6.8%
15.0%
3.75
1,104,600
36.65
0.88%
Côte D'ivoire
3.7%
4.0%
20.8
510,100
174.91
1.65%
-1.1%
6.3%
1.73
3,184,300
75.5
1.37%
Guinée Equatoriale
4.6%
-1.4%
1.566
3,005,600
6.93
Guinée Bissau
2.9%
3.3%
1.4
156,300
Mali
4.2%
4.6%
12.4
338,500
20.69
0.49%
Niger
1.0%
5.1%
14.3
177,300
17.18
0.68%
Sénégal
2.1%
4.1%
11.7
393,200
80.69
1.75%
Tchad
1.9%
3.9%
8.8
367,273
8.73
0.27%
Togo
2.5%
2.6%
5.7
268,500
24.77
1.62%
129.746
466,745
627.75
1.04%
Gabon
CIMA
nd
0.15%
nd
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OBJECTIVES ASSIGNED TO CIMA
Objectives assigned to CIMA have been defined in Article 1 of the Treaty
establishing the integrated organization of the insurance industry in the African
countries. They are eigth of them.
Two of the assigned objectives are:
The strengthening and consolidation of a close co-operation in the field of
insurance, so that markets are able to cover, by appropriate coverages that
meet African realities and taking into account their contributing potentials, the
risks of the agricultural and rural sector,
The creation of conditions for a healthy and balanced development of
insurance companies.
There is the concern of our senior authorities to provide the African populations,
with an insurance coverage tailored to African realities and taking into account
the contributing capacities of agricultural and rural populations, in particular.
This policy meets the definition adopted by the International Association of
Insurance Supervisors for microinsurance, that is to say an insurance accessible
to low income people.
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OBJECTIVES ASSIGNED TO CIMA: MITIGATED RESULTS
Out of the eight objectives of CIMA, one relating to the establishment of
insurance covers tailored to African realities and taking into account the
contributing capacities of agricultural and rural populations is so far the least
matured.
Various experiences in agricultural insurances in the CIMA’s member
countries have not been particularly successful over the long term.
Agricultural and rural populations remain largely excluded from the traditional
insurance system. Insurers’ offer cater mainly for the urban population and
are absent in rural areas
The ratio of the GDP per capita allocated to the purchase of insurance
coverage in the CIMA Area remains low and is around 1%. This weakness is
an opportunity in terms of scope of growth of the insurance in our countries.
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INSURANCE AND MICROINSURANCE: DEVELOPING
FACTORS
Any investment involves a degree of risk. Investors are more inclined to
undertake when the risk is mitigated by an insurance cover providing/which
provides compensation for the damage that may be suffered.
A little time ago, nothing had been thingking about within the CIMA Zone about
agricultural insurance, the coverage of livestock mortality and no insurer offered
covers of this nature.
Most players in the informal sector do not also benefit from coverage that may
help to renew their production facilities in the event of a disaster.
Accessibility to health care through an insurance coverage for the less
underprivileged will reduce the mortality rate, the poverty index and will enhance
the well-being of the population: a healthy population is an available labor force.
The outcome of current discussions will provide coverage appropriate to the
agricultural and rural sector and thus encourage risk taking and investment.
These investments will help to gradually achieve food self-sufficiency much
needed in our countries.
The mass of premiums raised will help to strengthen the financing of the
economy.
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INITIATIVES TO DEVELOP/SET UP A REGULATORY
FRAMEWORK
In view of the mitigated results and the virtual lack of initiative of traditional
insurers, new ideas are being brought up to provide insurance covarages
tailored towards the most disadvantaged populations.
The CIMA was instructed by its Council of Ministers to put in place a legal
framework aimed at regulating microinsurance operations.
In this context, several works and studies are underway to achieve as soon
as possible to a regulation. These functions are carried out by a monitoring
committee which organizes the microinsurance convention issues. These
functions are based essentially on a « discussion document » prepared by
the International Association of Insurance Supervisors (IAIS) and the
Working Group of CGAP (Consultative Group to Assist the Poor) on the
microinsurance. This document is available on the IAIS’s website
(www.iaisweb.org).
The Economic and Monetary Commission of West Africa (EMCOWA) has
eight (8) countries within the CIMA. This organization has carried out work
and adopted a draft regulation on mutual assistance association. Proposed
regulations for implementation have also been drafted.
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EMCWA AND SOCIAL MUTUAL SYSTEM
In order to fight against poverty and in view of the low impact of traditional system
of social protection, EMCWA (Economic and Monetary Commission for West
Africa) has established a legal framework to ensure a healthy promotion of social
mutuality in its member states.
A social mutual company is « a group which, mainly through its members’
subscriptions, proposes to undertake in the interests of them and their
dependents, an action of foresight, support and solidarity for the prevention ».
The process of implementing the regulations on social insurance funds was
conducted from 2004 to 2009 under the auspices of ILO and EMCWA.
Various actors involved in this process: the Inter-African of Social Welfare
(CIPRES), the Ministries in charge of Mutual systems, the elected officials and
managers, mutual care providers, support structures.
4 texts were worked out, of which a regulation (adopted on June 26, 2009) and 3
implementing regulations.
Mutual companies can have but only one major objective: prevention of social
risks related to the person and the compensation for their consequences.
By social risks, it is meant: short risks related to an individual such as prevention
and well-being of the individual and his/her family, health benefits, benefits for
temporaty disability and death benefits (in the form of allowance).
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PROCEEDINGS OF THE COMMITTEE IN CHARGE OF
FINALIZING A REGULATION ON MICROINSURANCE
As of part of reflections that should lead to an establishment of a regulation
on the microinsurance, four working groups have been set up to think about
on the following topics:
Regulation,
Products and distribution,
Taxation,
Social mutual system.
The proceedings of these committees are powered by studies conducted by
a consulting firm. Studies of the firm, financed by the World Bank, are mainly
aimed at making an inventory of practices in microinsurance within the CIMA
Area.
It appeared necessary to address issues relating to the social mutual system
in order to consider normatives conflicts that could exist with the texts
adopted on the subject by the EMCOWA and fill the legal vacuum in this
within CEMAC Area (Economic and Monetary Community of Central Africa).
All member states of EMCOWA and CEMAC are also members of the CIMA.
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PROCEEDINGS OF THE SUB-COMMITTEE IN CHARGE OF
REGULATION (1)
As part of the implementation of a regulation on the microinsurance, there
are two options:
establish a new set of rules to govern the microinsurance operations,
or adapt the rules applicable to the traditional insurance so that they also
cover microinsurance.
In a first phase and before choosing an option, the sub-committee in charge
of regulation conducted an assessment of Insurance Code in force in the
member countries of the CIMA according to the IAIS Insurance Basic
Principles (IBP) and specificities of microinsurance.
This assessment indicates that the existing legal environment could, for few
adjustments, enable to cover the microinsurance operations. The
assessment therefore favor the second option.
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PROCEEDING OF THE SUB-COMMITTEE IN
CHARGE OF REGULATION (2)
These adjustments will include discussions about:
Identification from qualitative and quantative criteria of microinsurance
entities to be subjected to the prudential supervision of the CIMA and
NDA ;
A demarcation of spheres of activity between CIMA and NDAs in the
supervision of microinsurance agencies;
Consolidating NDAs’ terms and reference as regards the analysis of the
insurance market, in particular as regards the informal aspects with a
reporting requirement to CIMA;
Defining the legal status of microinsurance entities, their level of
accumulation, stockholders’ equity and licensing requirements to practice
and solvency;
Adoption of new distribution channels and new forms of intermediation;
Consolidating internal supervising mechanisms already in place to
prevent, detect and fight efficiently against insurance fraud.
These adjustments will reflect the risk of regulatory arbitrage, particularly as
regards the requirements in terms of capital and solvency.
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PROCEEDINGS OF THE SUB-COMMITTEE IN CHARGE OF
THE SOCIAL MUTUAL SYSTEM
Regulations of the EMCOWA have the advantage to fill the legal gap that
existed on the social mutual system. They however show important
inadequacies compared to PBA.
These inadequacies result from the fact that the designing of these
regulations did not associate specialists of various insurance trade
association, particularly the National Insurance Departments.
CIMA has the ability to legislate in the matter of social insurance fund, in
particular to fill the legal gap within the CEMAC Area. This ability to legislate
should be carried out by taking into account potential conflicts of standards
with the EMCOWA’s regulations on Mutual Assistance system.
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PROCEEDINGS OF THE SUB-COMMITTEE IN CHARGE OF
TAXATION
The proceedings of this sub-committee reveal significant differences in tax
policies applied to insurance operations in member countries of CIMA. Taxes on
insurance classes are substantially variable among countries.
Several problems identified must be thought and be addressed parcularly
Assessing the impact of microinsurance on the development of the economy
(savings mobilization, improving agricultural production…) and the
improvement of living conditions of the target population (low income
individuals) in terms of health and life expectancy. This study could facilitate
the decision of tax authorities to reduce or exempt of tax microinsurance
operations.
Taxation of composite insurance products (NON-LIFE and LIFE) if it was
allowed to microinsurance companies to market this type of product.
The sub-committee in charge of taxation recommends to obtain tax incentive
measures for traditional insurance products, especially agricultural insurance.
These tax incentive measures will extend automatically to microinsurance
The sub-committee intends to submit in the long run, the type of accompagnying
tax regulations of the microinsurance on insurance contracts on one hand, and
on microinsurance companies as legal entities on the other hand.
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PROCEEDING OF THE SUB-COMMITTEE IN CHARGE OF
PRODUCTS AND DISTRIBUTION
Preliminary reflections had been proposed:
Taking into account specificities related to contracts and the presentation
of microinsurance operations;
Integrating features of simplicity, accessibility, adaptability and flexibility in
the contracts;
the design of products that meet the specific needs and adapted to lowincome people.
The sub-committee in charge of products and distribution additionally offers:
Broadening and innovations through distribution channels;
Better information for the target audience;
Reducing administratives costs;
Capacity building to develop, sell and manage higher quality products.
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COMPULSORY INSURANCES (1)
The Insurance Code of the CIMA’s member countries devotes a book to
compulsory insurance. Book II entitled « Compulsory Insurance » at first
induces a number of compulsory insurances.
However, compulsory
insurances provided by the Code are Motor Third Party Insurance and Import
Cargo Insurance.
Apart from the Insurance Code of the CIMA’s member countries, in Côte
d’Ivoire, there are insurance obligations, in particular Professional Indemnity
Insurance of Auctionneers, Professional Indemnity Inssurance for bailiffs,
Third Party insurance for importers of oil products, but in practice, entities
that ensure the respect of these compulsory insurances are almost nonexistent or ineffective.
Given this fact, it should be noted that inadequate legislation and laxism on
enforcement of the laws favor the phenomenon of non insurance.
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COMPULSORY INSURANCES (2)
Because of its compulsory nature, the Motor insurance is prominent in
corporates’ activity in the Area. It represents about 38% of turnover achieved
by non-life companies in the CIMA market.
The compulsory nature of import cargo insurance is for the sovereignty of
each State member of CIMA. According to Article 278: « The import cargo
insurance is mandatory insofar as national legislation provide it. It is then
governed by specific provisions of those laws ». In several CIMA Member
States, national laws do not however allow for any compulsory insurance for
import cargo insurance.
Measures are taken in different countries to set up compulsory health
insurance, complementary and compulsolry pension insurance and
compulsory third party insurance for certains professionals.
These measures could be considered as a violation of the principle of
contractual freedom. However, they have the advantage to promote an
insurance culture within our people and sometimes to protect third parties
against the harmful consequences of acts from certain professionals.
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CONCLUSION
The rate of insurance penetration remains low in the CIMA zone.
Innovations in microinsurance are an opportunity to provide rural, agricultural
and disadvantaged populations with coverages that meet their needs. They
will reach the main objectives assigned to the CIMA by Member States.
As a part of the implementation of regulations on microinsurance, CIMA is
conducting a study that covers several aspects. Beyond the regulatory
aspects, the study covers other aspects such as taxation, products, and
distribution channels.
The study that we hope to finalize as soon as possible, is conducted in
conjunction with institutions like the World Bank, the Fédération des Société
d’Assurances de Droit National Africaines (FANAF) and other partners to
whom we extend our thanks/appreciations.
Thank you for your attention.