Expectations are high that safety and soundness of insurance companies, protection of insurance policy holders and stability of the insurance market will be enhanced following the launch of the risk-based supervision (RBS) framework by the registrar of financial institutions.
The framework was launched on Monday in Blantyre at an event that was highly patronised by players in the insurance sector.
Registrar of Financial Institutions Wilson Banda said the RBS serves as a beacon of prudent management and oversight, and a forward-thinking approach that aligns supervisory efforts with the actual risks faced by insurance companies.
He said it prioritises the identification, assessment, and mitigation of risks, ensuring that companies remain solvent and can fulfil their promises to policyholders.
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“The insurance risk-based supervision framework has been tailored to bring more awareness to insurers on how to measure key risks, including insurance, strategic, operational, and market risks, and more prominently in our insurance sector, credit risk arising from high levels of insurance receivables.
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“The framework also assigns responsibility for effective mitigation against identified risks to oversight functions. The role of governance structures and the importance of internal controls in ensuring the going concern of businesses are emphasized, holding not only Management but also the Board of Directors accountable for mitigating key risks of the companies. We, therefore, are confident that, with this framework in place, insurers will become more risk-conscious and proactive in dealing with matters affecting their risk profiles,” Banda said.
President of the Insurance Association of Malawi (IAM) Abdul Majeed Dyton said the insurance industry welcomes the framework in the sense that there was a misalignment where the supervisor was only looking at compliance and insurers were busy concentrating on complying with what the regulator is looking for, not necessarily caring for the customer or assessing their own risk for the insurance that they are underwriting.
“It may not necessarily directly lead to the increase in insurance premiums but that customers get real value for the money they are paying for. So, if you are paying for insurance, you should know that you are going to get the service that is commissioned with the service that you have bought from the insurance company. A lot of people have been complaining that they buy insurance, but when it comes to compensation, either the insurance companies are erosive or they simply don’t want to compensate at all.
“The insurance companies were only concentrating on compliance and people were wondering to say, why is it that insurance companies are not being closed because they are not paying claims? So, in this way, through the risk -based provision framework, insurance companies will be exposed in the sense that even the consumers, will be able to know the kind of service they should expect from the insurance company,” Dyton said. The project commenced in 2020, and was immediately beset by the Covid pandemic – a time of immense uncertainty and disruption.
