Directive No. RI01-07/FRRG: Financial Reporting Requirements for General Insurance Business

RESERVE BANK OF MALAWI DIRECTIVE NO.RI01-07/FRRG FINANCIAL REPORTING REQUIREMENTS FOR GENERAL INSURANCE 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

1. Effective Date

DIRECTIVE NO.RI01-07/FRRG FINANCIAL REPORTING REQUIREMENTS FOR GENERAL INSURANCE 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 general insurance 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 months of the end of the financial year of a registered insurer duly endorsed by both the management and external auditor of the reporting institution as required;

2. "general insurance business" means the business of assuming the obligations of an insurer in any class of insurance business which excludes life insurance business;

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 insurance companies authorised to conduct general insurance business or any portion thereof; PART II: STATEMENT OF POLICY Sec. 1: Objectives

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

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

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

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

9. 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;

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

11. 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 Statement of Financial Position (Form G1) b) Income Statement or Profit and Loss Account (Form G2) c) Consolidated Revenue Statement (Form G3) d) Revenue Statement by Class of Business (Form G3a) e) Specification of Other Assets (Form G4) f) Specification of Other Liabilities (Form G5) g) Specification of Management Expenses (Form G6) h) Specification of Reinsurance Business i) Inward Reinsurance Premium (Form G7) ii) Outward Reinsurance Premium (Form G8) i) Aging of Mortgage Portfolio (Form G9) j) Details of Stocks and Shares i) Common Stocks of Related Companies (Form G10) ii) Common Stocks of Other Companies (Form G11) iii) Preference Stocks of Related Companies (Form G12) iv) Preference Stocks of Other Companies (Form G13) k) Valuation of Investment in Real Property (Form G14) l) Solvency Certificate (Form G15) 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 G15. 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 G1 to G15 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 15 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 to it as given above in Part V, Section 1, the Registrar of Insurance 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. RI01-07/FRRG supersedes all existing financial returns prescribed under the Insurance Act (cap 47:01) and shall take effect 1st July 2007. Questions relating to this directive should be addressed to the Director, Supervision of Non-Bank Financial Insitutions Department of the Reserve Bank of Malawi. REGISTRAR OF INSURANCE