Insurance Law

South Africa introduced a new model of governance by virtue of the Financial Sector Regulation Act 9 of 2017, which came into effect on 29 March 2018. This saw the establishment of two new regulators, referred to as the “twin peaks,” namely the Prudential Authority which is housed in the South African Reserve Bank and the Financial Sector Conduct Authority.

• The Prudential Authority, which is housed in the South African Reserve Bank and is responsible for the prudential supervision of banks, insurers, financial market infrastructure and financial conglomerates;
• the Financial Sector Conduct Authority which is responsible for market conduct supervision of financial products and service providers, including insurers;
• the Ombud Council, being the ombudsman for long and short term insurance; 
• the Financial Services Tribunal; and
• the courts

The South African authorities have wide powers under the Financial Sector Regulation Act 9 of 2017 to ensure compliance with financial sector laws and directives including the right to gather information and to conduct supervisory inspections and investigations. The latter is referred to as “dawn raids.”

The following regulatory instruments, which are at the disposal of the authorities, are legally binding, namely: 

• Directives – These are aimed specifically at an institution or a key person, imposing drastic new board powers (e.g. the power not to pay a dividend or to remove a director from office).
• Interpretation rulings – Drafts of these must be published for public comment by the authority prior to coming into effect.
• Enforceable undertakings – These are offers of settlement made by an insurer to the authority which become enforceable upon the acceptance by the authority. They must be published and have the status of a court order once filed.
• Debarment orders – These orders are given against a natural person and the relevant person is permitted to make submissions prior to the order being granted.
• Leniency Agreements – In exchange for co-operation with a person the authorities have the power not to impose an administrative penalty. These agreements are published unless doing so poses a risk or may prejudice an investigation.

Guidance Notes on the other hand are not legally binding.

The primary prudential legislation, which came into effect on 1 July 2018, is the Insurance Act 18 of 2017. This legislation is accompanied by prudential standards.

In terms of market conduct, we have been expecting the enactment of a new primary piece of legislation titled the Conduct of Financial Institutions Bill (COFI) and its accompanying conduct standards.

The Short-term Insurance Act 53 of 1998 and the Long-term Insurance Act 53 of 1998 are now partially repealed and their respective policyholder protection rules, notices and regulations are still in effect.

The key objectives of the South African Insurance Act 18 of 2017 are as follows:

• The promotion and  maintenance of a fair, safe and stable insurance market for the benefit and protection of policyholders 
• The establishment of a legal framework for prudential regulation and supervision of insurers and insurance groups
• The increase of access to insurance 
• The promotion of transformation
• The creation of a legal framework for micro insurance to promote financial inclusion.