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REGULATING THE INSURANCE INDUSTRY

REGULATING THE INSURANCE INDUSTRY. General comments Effective regulation a necessary prerequisite for economic growth Risks and other issues that insurers face Regulatory responses Conclusion. Regulating the insurance industry. Prerequisite for economic growth

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REGULATING THE INSURANCE INDUSTRY

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  1. REGULATING THE INSURANCE INDUSTRY • General comments • Effective regulation a necessary prerequisite for economic growth • Risks and other issues that insurers face • Regulatory responses • Conclusion

  2. Regulating the insurance industry • Prerequisite for economic growth • Insurance aids economic development *Insurance promotes financial stability and reduces anxiety * A substitute for government security programs *Facilitates trade and commerce *Insurance mobilizes national savings. *Enables effective risk management *Insurers help to reduce losses *Foster an efficient allocation of capital

  3. Regulating the insurance industry • Goals of regulation *Promote efficient and effective markets *Maintain confidence in stability of system *Promote public understanding and protect consumers *Reduce scope for financial crime

  4. Risks that insurers face • External and internal risks • External *Economic, competition, taxes, legislation, political pressure, disillusionment of consumers, natural disasters. ₕ Internal –business and operational *Asset (market,credit, concentration, liquidity) *Liability (mortality,morbidity,lapse) *Business (systems,fraud,expenses,compliance failure)

  5. Regulatory responses • A few general remarks • Prudential rules *capital and solvency, asset spread, liquidity, fair value, values of subs; • Fit and proper,internal controls, risk management systems, corporate governance, transparency, auditors and actuaries • Supervise through desk top and on-site visits; risk based capital and risk based supervision • Ombudsman schemes, guarantee funds, policyholder protection rules,consumer education.

  6. Conclusion • IAIS Principles and standards • World Bank assistance with training • World Bank and IMF FSAP’s • Role in CISNA and AAISA • Own responsibility to train staff • Communication between regulators

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