Insurance license In South Africa

The new application guideline and form to apply for a licence to conduct insurance business in South Africa has just been published.

Purpose of Licensing

1. The PA carries out its functions in relation to insurers, by:

● promoting the maintenance of a sound and efficient insurance sector;

● promoting public confidence in the insurance sector;

● adequately protecting the interests of policyholders and the public; and

● ensuring that any failure, or possible failure, of an insurer does not have the potential to significantly damage the financial system or the economy of South Africa.

2. The FSCA’s objective in relation to insurers is to:

● protect financial customers by –

○ promoting fair treatment of financial customers by financial institutions; and

○ providing financial customers and potential financial customers with financial education programs, and otherwise promoting financial literacy and the ability of financial customers and potential financial customers to make sound financial decisions.

● assist in maintaining financial stability.

3. The purpose of licensing is to ensure that applicants are fit for business and in the public interest. Applicants will be required to demonstrate that there is sufficient operational, human and financial capacity available to manage the business to be undertaken, both at the time of application and as a going concern, under both normal circumstances and in stress events. Applicants need to further illustrate that frameworks are put in place to ensure the fair treatment of financial customers.

Use of Professional Advisors

Due to the complexity of the application it might be necessary for applicants to obtain assistance from professional advisors in preparing the submission.

In obtaining the assistance from a professional advisor, applicants need to bear in mind the following items:

  • The applicant must remain closely and actively involved with the application process; and
  • The PA will hold the applicant, and not the professional advisor, responsible for the accuracy and completeness of the application.

Licensing Process

The process and the applicable responsibilities when considering a license for a controlling company is prescribed by the PA.

The timelines for an application for a license for a controlling company is 120 days after a completed application was submitted to the PA for approval. Please bear in mind that this timeframe is depended on the completeness and quality of the submitted application. Please also note that where the PA need to follow-up on the application that the timeline for an application will be stopped/paused until feedback has been received from the application.

Pre-application meeting

A pre-application meeting between the applicant and the PA may be required before the PA will start assessing an application for a license for a controlling company.

This meeting will allow the PA to give initial inputs to the applicant, including aspects of the application that the PA might focus on, and will allow the application to be processed more efficiently.

Submission of application

The application must be e-mailed t Insurance.NewLicence@resbank.co.za

Concurrence with the Financial Sector Conduct Authority (“FSCA”)

As part of the process for a license for a controlling company, concurrence will be sought with FSCA in respect of its market conduct mandate. The concurrence is prescribed in terms of section 126 of the Financial Regulation Sector Act, Act 9 of 2017 (FSRA).

Subsequent to receiving a duly completed application, the PA will, in writing, advise the Head of the Licencing Division in the FSCA that an application was received together with the name of the applicant and background information as may be relevant in accordance with the Licensing Protocol entered into between the PA and FSCA

In order to ensure a single point of contact in respect of correspondence pertaining to an application, any questions and/or requests for additional information or analysis of the application will be forwarded to the PA by FSCA in order for the PA to obtain the information from the applicant.

The application of the 120 days will also include the concurrence sought with FSCA.

License approval process

The recommendation for the application for a license for a controlling company will be made by both FSCA and the PA. The recommendation will be submitted to the Licensing panel of the PA. 

If the application is successful the PA will inform the applicant that the approval is granted as well as any conditions and/or limitations that the PA imposes or may impose.

The PA will also publish a notice of the licensing on its official website.

If the license is not approved, the PA will provide the applicant with reasons for the refusal. In such a case the applicant can approach the PA for further information and discussions. The approval conditions may state that an on-site visit will be conducted at the controlling company.

Please refer to the Act, section 23(3)(a) – The PA must grant or refuse an application within 120 days of the date on which the application was submitted to the PA, or such longer period agreed between the PA and the applicant.

General License Requirements

The PA must as part of designating an insurance group also designate the holding company or juristic person that must apply for a license as a controlling company of that insurance group under Chapter 4 of the Act. The holding company of, or another juristic person that controls, an insurance group designated by the PA and which is located in the Republic must, within 30 days of the designation apply to be licensed as a controlling company of the insurance group.

Section 22(2) of the Act sets out the requirements for licensing as a controlling company. A holding company of or another juristic person that controls, an insurance group, must demonstrate that, its key persons and significant owners meet the prescribed fit and proper requirements, has a sound business plan; and it will be able to comply with the governance framework, financial soundness, reporting and public disclosure.

Further to section 22 of the Act, a holding company of or another juristic person that controls an insurance group must demonstrate that—

  • it has a plan to meet its stated commitments in terms of transformation of the insurance sector, including meeting the targets envisaged by the Financial Sector Code;
  • it has adequate operational management capabilities to meet the requirements for insurance groups under the Act and as well as the governance and operational requirement of prudential standards issued under the Act.
  • it will be able to comply with the financial soundness requirements and reporting and public disclosure requirements of the Act.

In respect of section 25(9) of the Act, the Prudential Authority may, in the case of a controlling company, impose licensing conditions necessary to achieve the objective of this Act, which may include conditions—

  • requiring the controlling company of the insurance group to limit its business to the acquiring, holding and managing of another company or companies;
  • requiring that the provisions of the Memorandum of Incorporation of a controlling company that is a company or the equivalent constitution, deed or founding instrument of a controlling company that is not a company—
    • must be suitable to enable it to be the controlling company of an insurance group; and
    • may not be amended without the approval of the PA; or

that are reasonably necessary to ensure that the insurance business is conducted in a financially sound manner or in accordance with this Act.