Financial Reporting Requirements for Reinsurance Business

RESERVE BANK OF MALAWI DIRECTIVE NO.RI04-07/FRRR FINANCIAL REPORTING REQUIREMENTS FOR REINSURANCE BUSINESS Arrangement of Sections PART I Preliminary SECTION

1. Short Title
2. Authorization
3. Application
4. Interpretations PART II Statement of Policy SECTION
5. Objectives
6. Rationale PART III Submission of Annual Return SECTION
7. Format of Annual Return 2 Submission of Certificate of Solvency .
8. Preparation of Return
9. Endorsement of Annual Return
10. Deadline for Submitting Annual Return PART IV Submission of a Quarterly Return SECTION
11. Format of Quarterly Return
12. Endorsement.
13. Deadline for Submitting Return PART V Remedial Measures and Administrative Sanctions SECTION
14. Remedial Measures
15. Administrative Sanctions PART VI Effective Date SECTION
16. Effective Date

DIRECTIVE NO. RI04-07/FRRR FINANCIAL REPORTING REQUIREMENTS FOR REINSURANCE BUSINESS PART I: SHORT TITLE, AUTHORIZATION, APPLICATION, AND INTERPRETATION Sec. 1: Short Title - Financial Reporting Requirements Sec. 2: Authorization - being applied by the Registrar of Insurance under delegated authority in terms of the order published in the Malawi Government Gazette Notice No. 23 of 22 February 1991 which transferred all the regulatory and supervisory responsibilities of the Minister of Finance as provided for under Sections 17 and 82 of the Insurance Act of 1957 to the Governor of the Reserve Bank of Malawi. Sec. 3: Application - All registered institutions transacting in reinsurance business in Malawi. Sec. 4: Interpretation - In this Directive unless the context otherwise requires

1. "Annual return" means a set of financial reports in a prescribed format to be filed by all registered institutions to the Office of the Registrar within four (4) months of the end of the financial year of a registered reinsurer duly endorsed by both the management and external auditor of the reporting institution as required;
2. "Reinsurance business" means the business of undertaking liability to pay money to insurers in respect of contractual liabilities or insurance business incurred by insurers or reinsurers and includes retrocession;
3. "Quarterly return" means a set of financial reports in a prescribed format to be filed by all registered institutions to the Office of the Registrar on a quarterly basis duly endorsed by the Principal Officer and the Finance Manager of the reporting institution;
4. "Registered institutions" are reinsurance companies authorised to conduct reinsurance business or any portion thereof;
5. “Retrocession” means the reinsurance of reinsurance business accepted by a reinsurer.
6. “Registrar” means Registrar of Insurance PART II: STATEMENT OF POLICY Sec. 1: Objectives

1. To enhance off-site surveillance of registered institutions in Malawi;

2. To ensure that all registered institutions maintain a well developed accounting function and management information system;

3. To monitor on a continuous basis the underwriting practices of registered institutions;

4. To monitor on an on-going basis the attainability of the statutory solvency margin by registered institutions. Sec. 2: Rationale

5. Returns are used for surveillance of the reporting institutions to monitor condition and performance of operations of both individual firms and the industry as a whole;

6. Timely submission of returns will help the Registrar to identify any lapses and weaknesses in the operations of reporting reinsurers, upon which corrective measures can be taken in a timely manner;

7. Timely submission of accurate returns is an indication of the existence of a well developed accounting function and management information system within the reporting registered institutions;

PART III: SUBMISSION OF ANNUAL RETURNS (SECTION 17) Sec.1: Format of Annual Returns All registered institutions shall submit to the Registrar annual returns as required under Section 17(1) of the Insurance Act 1957 in the format prescribed below: a) Statement of assets and liabilities or Balance Sheet (Form R 1) b) Profit and Loss Account (Form R 2) c) Consolidated Revenue Statement (Form R 3) d) Revenue Statement by Class of Business (Form G R a) e) Specification of Other Assets (Form R 4) f) Specification of Other Liabilities (Form R 5) g) Specification of Management Expenses (Form R 6) h) Specification of Reinsurance Business

1. Inward Reinsurance Premiums (Form R 7)
2. Outward Reinsurance Premiums (Form R 8) j) Aging of Mortgage Portfolio (Form R 9) k) Details of Stocks and Shares - Common Stocks of Related Companies (Form R 10) l) Details of Stocks and Shares - Common Stocks of Other Companies (Form R 11) m) Details of Stocks and Shares - Preference Stocks of Related Companies (Form R 12) m) Details of Stocks and Shares - Preference Stocks of Other Companies (Form R 13) n) Valuation of Interest in Real Property (Form R 14) o) Capital Adequacy and Solvency Report (Form R 15) Sec.2: Submission of Certificate of Solvency All registered institutions shall submit a certificate of the margin of solvency which shall constitute part of the Annual Return and shall be prepared in the manner prescribed under Form R 15 a. Sec.3: Preparation of Returns Reporting institutions shall be guided by the enclosed notes on each Form when compiling the Returns Sec.4: Endorsement Each report forming part of the Annual Return shall be endorsed by the Chairman of the Board, the Principal Officer and the External Auditor of the reporting registered institution.

Sec.5: Deadline for Submission of Annual Returns

All reports forming part of the Annual Return shall be submitted to the Office of the Registrar within four (4) months of the end of each financial year in accordance with Section 17(1) of the Insurance Act 1957. Failure to meet this shall attract a penalty of K20,000 for each default and 20% thereof for each additional day that the insurer remains in default. PART IV: SUBMISSION OF A QUARTERLY RETURN (SECTION 82) Sec.1: Format of Quarterly returns All registered institutions shall submit to the Registrar quarterly returns as required under section 82 of the Insurance Act 1957, Forms R 1 to R 9 and R 15 in the format prescribed under Part III of this Directive. Sec.2: Endorsement Each report forming part of the Quarterly Return shall be endorsed only by the Principal Officer and the Finance Manager of the registered reporting institution. Sec3: Deadline for Submission of Quarterly Returns All reports forming part of the Quarterly Return shall be submitted to the Office of the Registrar of Insurance (the Governor of the Reserve Bank of Malawi) within 45 days after the last day of every quarter. Failure to meet this shall attract a penalty of K10,000 for each default and 20% thereof for each additional day that the insurer remains in default. PART V: REMEDIAL MEASURES AND ADMINISTRATIVE SANCTIONS Sec. 1: Remedial Measures If the Registrar establishes that a registered institution is not in compliance with this directive and that there is an inherent or deliberate tendency of non compliance, remedial measures outlined under Section 66 of the Insurance Act of 1957 may be imposed. Sec. 2: Administrative Sanctions In addition to the remedial measures available as given above in Part V, Section 1, the Registrar may impose any or all of the following administrative sanctions on an institution or its board of directors or managing officers for non-compliance with this directive: a) Prohibition from declaring and/or paying dividends; b) Suspension from establishing new branches; c) Suspension from engaging in new products or activities or from expanding existing services or activities; d) Suspension from acquisition of additional fixed assets; e) Suspension from declaring and/or paying salary incentives, severance packages, management fees, or other discretionary compensation schemes to directors or managing officers. PART VI: EFFECTIVE DATE The Directive No. RI04-07/FRRR supersedes all existing financial returns prescribed under the Insurance Act (cap 47:01) and shall take effect immediately.

Questions relating to this directive should be addressed to the Director, Supervision of Non-Bank Financial Insitutions Department of the Reserve Bank of Malawi. Victor Mbewe REGISTRAR OF INSURANCE