SAM Timeout
There are currently a number of important SAM deadlines looming. SAM activity is currently rather boisterous and we thought it prudent to pause for a moment to highlight a few of the important aspects within the SAM process that we believe insurers should be concentrating on at this stage.
Discussion Documents
There are currently 13 Discussion Documents that have been approved for public comment by the FSB SAM Steering Committee. The submission deadline for public comment regarding these Discussion Documents has been set for the end of July 2011. These Discussion Documents are, in essence, technical papers to be used in the design of the Secondary Legislation. Further Discussion Documents are expected to be submitted to the FSB SAM Steering Committee for approval for public comment within the next couple of weeks.
First draft of Primary Legislation
All the task groups operating under the SAM Governance Structure have been asked to provide comments on the first draft of the Primary Legislation. It is expected that the Primary Legislation will undergo a number of changes before the final draft is sent to Parliament for approval. Currently, this draft of the Primary Legislation does not address group supervision. The second draft of Primary Legislation is expected to be released by September 2011.
First draft of Secondary Legislation
According to the FSB, the first draft of the Secondary Legislation should be available to industry for comment in September 2011. The Discussion Documents produced by the various task groups will have a significant influence on the design of the Secondary Legislation.
South African Quantitative Impact Study (SA QIS1)
The deadline for submission of the SA QIS 1 is 16 September 2011. We are less than two months away from this extremely important deadline which will not be extended or delayed. Insurers who intend to use an Internal Model to calculate their Solvency Capital Requirement (SCR) are reminded that completion of the SA QIS is a mandatory requirement.
Board Notice (Interim Measures)
Short-term Insurance Board Notice: Prescribed requirements for the calculation of the value of the assets, liabilities and capital adequacy requirement of short-term insurers, was sent out on 19 July 2011 to all short-term insurance companies Public Officers. This Board Notice is based on Position Paper 6: Interim Measures relating to Technical Provisions and Capital Requirements for short-term insurers. Members are requested to provide their comments regarding this Board Notice by the 16 September 2011. This Board Notice forms part of the Interim Measures intended for implementation in 2012.
IMAP and PAQC
The Internal Model Approval Process guide along with the Pre-Application Qualifying Criteria template was issued to the insurance industry on 20 April 2011. The IMAP guide provides a detailed summary of the internal model approval process as well as the important criteria and requirements with which insurers will need to comply, in order to apply for the use of an internal model to calculate the solvency capital requirement. Further documentation is expected to be issued in due course.
Solvency II proposed new implementation date
The European Union has recently proposed that the implementation date for Solvency II be extended by a further year to 1 January 2014. Due to the number of jurisdictions comprising the EU, various legislative and supervisory issues had facilitated the requirement to push back the Solvency II implementation date by another year. Subsequently, the FSB has received a number of enquiries regarding the possibility of delaying the implementation date for SAM. This topic has been discussed and debated within the internal structures of the FSB and at the SAM Steering Committee. The general consensus reached is that the SAM implementation date of 1 January 2014 is to remain. Thus, the momentum generated in the SAM project should be maintained.
Where should the focus be
Participation in the Discussion Document process by as many insurers as possible is crucial as Secondary Legislation will be drafted based on the input received from these Discussion Documents. For those intending to use an internal model to calculate their solvency capital requirement, completion of the SA QIS 1 and the PAQC Template should be a high priority now in their SAM preparations. The results of the SA QIS 1 will provide important input into the Economic Impact Study, hence the urgency of participation from as many insurers as possible to capture and include the various diversified business models. Further attention should be directed to the new Board Notice that will repeal Board Notice 27 of 2010 and comments should be submitted urgently, as this Board Notice will take effect from 1 January 2012, as part of the Interim Measures process.
Conclusion
The proposed new SAM legislation is an unavoidable certainty that must be taken seriously as the FSB has signalled its intention to continue driving the process with vigour. It is important to be cognisant of where we find ourselves in the SAM project at this stage. Particular consideration should be given to some of the areas as mentioned, as these require immediate attention and positioning by insurers in order to avoid falling significantly behind within the SAM process.
For more information, contact Gareth van Deventer: gareth@saia.co.za
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