The National Treasury (NT) and the Financial Services Board (FSB) of South Africa have made a request for public comments on the draft Insurance Bill approved by the government in April 2015. Cenfri, on behalf of FinMark Trust, has provided comments on key sections of the bill that are noted as particularly relevant to microinsurance (MI).

Cenfri, on behalf of FinMark Trust, has had an extended history in assisting National Treasury and the Financial Services Board to develop the micro-insurance regulatory framework for South Africa, which culminated in the publication of the MI policy in 2011. In 2008, the National Treasury published a discussion paper outlining the future of microinsurance (MI) regulation in South Africa.

This was followed by an MI policy document published in 2011.

At the time, the intention was to establish a separate MI Act by 2013, with the key goals of enhancing financial inclusion and expanding regulatory reach to informal operators in the MI space. During 2013, the decision was made to no longer pursue standalone MI legislation. Instead, MI provisions would be incorporated under the new financial sector regulatory structure to be implemented in South Africa known as the “Twin Peaks” framework. Given this previous involvement, FinMark Trust is therefore particularly interested in the extent to which the draft Insurance Bill accommodates the provisions outlined in the MI policy document mentioned above.

From an overall perspective, the bill seems to create the required space for MI and the provisions in the bill are either aligned with the MI Policy document published in 2011 or allow sufficient space for future regulations to align with it. It is commendable that market development and financial inclusion is explicitly recognised as objectives in the proposed bill. It is further commendable that the new bill is explicit about applying proportionality in the interest of facilitating development and FI and not only to areas presenting increased risk. We recognize that this may still present challenges to implementing in practice but it is a critical step and in line with the IAIS Application Paper on Regulation and Supervision Supporting Inclusive Insurance Markets. However, we reserve the right to provide further comment based on our understanding that draft subordinate regulations, not yet released, will develop the more complete framework for MI and will have more direct implications for the development of inclusive insurance markets than the current draft insurance bill.