The FSCA recently published two exemption notices FSCA INS Notice 19 of 2020 and FSCA INS Notice 20 of 2020 that affect premium collections by independent intermediaries. The two notices prescribe the extent and conditions of exemptions from certain sections of the Long-term and Short-term Insurance Acts and their respective Regulations. A Consolidated Report of comments received during the consultation process was published together with the two notices.
Background
In April 2019, the FSCA published a position paper that set out proposals on the future regulatory framework for the collection of insurance premiums. The position paper confirmed that the FSCA strongly encourages a shift towards direct collections becoming the default rather than the exception. The position paper’s proposals focused on the following:
- identification and classification of premium collection related activities and the determination of appropriate remuneration for such activities;
- criteria for qualifying intermediaries who wish to collect premiums on behalf of insurers;
- treatment of premiums as trust monies;
- reduction in the allowable period for the remittance of premiums by third parties; and
- interim remuneration arrangements for intermediaries who perform premium collection related activities in direct collection models.
In April 2020, the FSCA published FSCA Communication 22 of 2020 together with draft versions of the exemption notices for direct collection of premiums. The Communication stated that the FSCA’s intention remains to change the regulatory framework as alluded to in the 2019 position paper but as this will take time, the exemptions for direct collection of premiums by certain independent intermediaries would be an interim measure until the regulations are amended.
Exemption Notices
The exemption notices that came into force on 30 October 2020, introduce the term “accounting for premium” which is described as activities performed by an independent intermediary in support of the collection of premiums directly into the account of the insurer which includes technological systems of the independent intermediary that enable the direct collection method.
The Consultation Report clarifies that the scope of the exemption has been revisited since the draft versions were published and consultation phase completed. It clarifies that only intermediaries and binder holders that perform all the activities as referred to in the definition of “accounting for premium” and that meet all the conditions in the exemption will be so exempted.
The exemptions contain strict conditions for insurers and independent intermediaries that rely on the exemptions. These conditions include requirements around pre-agreement procedures, that the consideration accepted or offered for performing direct collection of premium must meet specified criteria, governance requirements applicable to the technological systems that enable the direct collection method, record-keeping infrastructures and oversight requirements.
To read the notices and documents relating to exemptions for the direct collection of premiums, click on the links below:
- FSCA INS Notice 19 of 2020
- FSCA INS Notice 20 of 2020
- Consolidated Consultation Report
- FSCA Communication 22 of 2020 (INS)