The Reserve Bank of Malawi (RBM) has said it is in the process of migrating from the current compliance-based supervisory approach to a risk-based approach in order to align with international best practices.
RBM Director of Pensions and Insurance Supervision Paul Nyirenda disclosed this in Lilongwe on Monday when CIC Insurance Group opened new and spacious offices.
According to Nyirenda, the migration also follows guidance provided by the International Association of Insurance Supervisors (IAIS) under Insurance Core Principle 9 (ICP 9).
He said the risk-based supervision is a dynamic, forward-looking and judgement-based process where emphasis is on understanding and anticipating the possible risks the insurer will face when implementing its business plan.
Nyirenda said risk-based supervision goes beyond historical or current financial performance and condition.
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“It emphasises the relationship between risk and capital. The higher the risk profile of an insurer, the higher the capital the insurer must hold – thus the insurer is compelled to either raise capital or improve its risk management practices in order to avoid additional capital requirement.
“It focuses on what matters. It assesses all material risks facing the insurer and how the insurer controls those risks. The compliance-based approach focuses on limited number of risks that are the subject of the rules, normally credit, liquidity, market and insurance risk,” Nyirenda said.
He added that risk-based supervision creates an early warning system for the Registrar of Financial Services to anticipate and deal with emerging issues through a continuous process of risk assessment.
“It enhances supervisors’ knowledge of the insurance companies, the operating environment and the entire insurance industry as supervisors should be able to create a risk profile of an insurer – i.e. its activities, inherent risks, quality of risk management (day-to-day management and oversight), and capital required to support operations.
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“It gives the Registrar a formal framework to allocate scarce supervisory resources,” Nyirenda said.
He further said RBM is also nearing the end of a project to create mortality tables for the life insurance industry’s annuity, individual life and group life business.
“Based on actual mortality experience of consumers, we anticipate that the mortality tables will improve pricing and reserving methods for our industry.
“The mortality tables will serve as a foundation for improving the pension pay-out phase while also attempting to promote income drawdowns as a market option to annuities,” Nyirenda said.
According to Nyirenda, in addition to these key developments which will surely transform the modus operandi for insurers in Malawi, the Registrar will continue to review existing laws and regulations in order to make them more relevant and level the playing field for all market players.
CIC Insurance Group Board Chairperson Alfred Nkhono said the firm decided to open the modern and spacious offices to serve its customers better.
Nkhono said customers should expect improved service delivery from the firm following the move to the magnificent offices.
“It is now exciting that we have opened very beautiful and spacious offices. Ever since we started the business of CIC Malawi in 2015 it has been slow growth but now we have taken off. As we are speaking, we are probably one of the best insurance companies in the country.
“The customers have had their loyalty and trust in us and moving into the new offices only brings us a new milestone in the business of CIC Africa in Malawi,” Nkhono said.
