Instruction No. 003/2023-CSBF of October 27, 2023 on the Approval of Insurance Companies and Branches of Foreign Reinsurance Companies

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INSTRUCTION NO. 003/2023-CSBF OF OCTOBER 27, 2023 ON THE APPROVAL OF INSURANCE COMPANIES AND BRANCHES OF FOREIGN REINSURANCE COMPANIES

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TABLE OF CONTENTS

CHAPTER 1. GENERAL PROVISIONS .................................................................................... 1
Article 1. Purpose ........................................................................................................................................ 1
Article 2. Scope of Application ............................................................................................................... 1
Article 3. Definitions ............................................................................................................................... 2
CHAPTER 2. APPLICATION FOR APPROVAL ........................................................................................ 2
Article 4. Submission and Content of the Application File ............................................................. 2
Article 5. Processing of an Application for Approval ................................................................................... 3
Article 6. Approval Criteria ................................................................................................................. 3
Article 7. Accuracy and Updating of Documents ................................................................................ 4
Article 8. Dismissal of the Application for Approval ................................................................... 4
Article 9. Closure of File Processing .......................................................................................... 4
CHAPTER 3. DECISION MAKING ................................................................................................... 4
Article 10. Decision-Making Procedure by the CSBF ........................................................................ 4
Article 11. Granting of Approval .................................................................................................................. 5
Article 12. Lines of Business and Insurance Categories ..................................................................... 5
Article 13. Approval Decision .............................................................................................................. 5
Article 14. Suspensive Conditions .......................................................................................................... 5
Article 15. Monitoring of Approval Conditions ........................................................................................... 6
Article 16. Refusal of Approval ................................................................................................................... 6
CHAPTER 4. FINAL PROVISIONS ........................................................................................... 6
Article 17. Already Approved Insurance Companies .................................................................................... 6
Article 18. Files Under Processing ............................................................................................. 7
Article 19. Repealed Provisions ............................................................................................................ 7
Article 20. Entry into Force ................................................................................................................... 7
ANNEXES ............................................................................................................................................... 8

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CENTRAL BANK OF MADAGASCAR
BANKING AND FINANCIAL SUPERVISION COMMISSION

INSTRUCTION NO. 003/2023-CSBF
ON THE APPROVAL OF INSURANCE COMPANIES
AND BRANCHES OF FOREIGN REINSURANCE COMPANIES

The Banking and Financial Supervision Commission (CSBF), Having regard to Law No. 2020-005 of September 1, 2020 on insurance; Having regard to the opinion issued by the Professional Association of Insurance Companies in Madagascar; Pursuant to the provisions of Articles 229 to 233 of the aforementioned Insurance Law;

DECIDES

CHAPTER 1. GENERAL PROVISIONS

Article 1. Purpose
This instruction aims, in particular, to establish:

• the content of application files submitted to the General Secretariat of the CSBF (SG-CSBF),
• the procedures for processing these approval applications;
• the approval criteria, lines of business, and insurance categories;
• the decision-making modalities by the CSBF.

Article 2. Scope of Application
This instruction applies to applications for approval to conduct insurance and/or reinsurance activities by the following insurance service providers:

• insurance companies, abbreviated as ICs, comprising insurance companies, reinsurance companies, and insurance and/or reinsurance mutuals, in accordance with Article 192 of the Insurance Law,
• branches of foreign reinsurance companies, as defined in Article 3 below.

Pursuant to Article 192 of the Insurance Law, any insurance company may accept risks ceded by other local or foreign insurance companies or mutuals. However, it must apply for approval as a reinsurance company, in addition to its initial approval, and provide the documents required in ANNEX 1 of this instruction if the acceptance exceeds 20% of its total premiums.

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Article 3. Definitions
For the purposes of this instruction, the following terms are defined as:
3.1. Managing Director: any person who ensures the general management of an IC. They must be a natural person resident in Madagascar,
3.2. Representative:
a) Authorized Representative: any natural person who has been granted by the project promoter the power to represent them before the CSBF and to perform all acts and steps necessary to obtain approval; b) General Representative: any person who ensures the general management of a branch of a foreign reinsurance company. They must be a natural person resident in Madagascar;
3.3. Insurance Transaction: any transaction by which the IC undertakes, in exchange for remuneration called a premium or contribution, to pay a benefit stipulated in the contract in the event of a risk materializing, a loss occurring, or the attainment of the required index level;
3.4. Reinsurance Transaction:
a) Cession: any transaction by which an IC, referred to as the "ceding company", transfers all or part of its risks to another IC; b) Acceptance: any transaction by which an IC accepts to take on all or part of the risks proposed by another IC;
3.5. Systemic Risk: any risk of propagation of the effects of the failure or bankruptcy of an IC on the stability of the country's financial system;
3.6. Branch of a Foreign Reinsurance Company: any subdivision of a reinsurance company whose headquarters are located abroad. The branch does not possess independent legal personality distinct from that of the foreign reinsurance company. It enjoys a certain degree of management and operational autonomy relative to the reinsurance company to which it belongs;
3.7. CSBF: Banking and Financial Supervision Commission;
3.8. SG-CSBF: General Secretariat of the Banking and Financial Supervision Commission.

CHAPTER 2. APPLICATION FOR APPROVAL

Article 4. Submission and Content of the Application File Any applicant is required to submit to the SG-CSBF an application file for approval including the information and documents specified in:

• ANNEX 1 for any insurance company, reinsurance company, and branch of a foreign reinsurance company,
• ANNEX 2 for any insurance and/or reinsurance mutual.

To this end, the applicant must be represented by an authorized representative.

The application file for approval must be submitted in both paper and electronic formats. It must be drafted or translated into French and signed by the authorized representative. The paper version must be produced in duplicate.

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Article 5. Processing of an Application for Approval Upon receipt of the application file, the SG-CSBF issues an acknowledgment of receipt and notifies the authorized representative of the opening of the file processing.

The SG-CSBF has a period of six (6) months to process the application file for approval. This period runs from the date of the acknowledgment of receipt.

During the processing of the file, the SG-CSBF may:

• request any additional information necessary, without extending the aforementioned six (6) month period,
• invite the authorized representative, the promoter(s), the future Managing Directors or general representative to present the project and answer any potential questions.

The authorized representative has a period of thirty (30) days from the SG-CSBF's request to provide the required additional documents and information.

Correspondence exchanges with the authorized representative are conducted by any means leaving a written record.

Article 6. Approval Criteria
In the context of processing the approval application, the SG-CSBF verifies, in particular, the following approval criteria:

1. governance and control

• members of governance and control structures meet the conditions required by current regulations,
• the governance, control, and risk management system complies with current regulatory provisions;

2. financial and technical resources

• the share capital or establishment fund structure guarantees sound and prudent management of the entity;
• the origin of financial resources is justified in accordance with anti-money laundering and counter-terrorism financing regulations;
• technical and financial resources are sufficient and adequate for the program of activities;
• the information and management system is reliable and efficient, meeting the control requirements of the CSBF;

3. the business plan is developed based on justified and realistic parameters and is certified by an independent actuary who guarantees the viability, solidity, and sustainability of the establishment;
4. the preventive recovery plan ensures the recovery of the entity in case of difficulty;
5. the proposed pricing plan for insurance transactions is certified by an independent actuary;

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6. for the branch of a foreign reinsurance company:

• the regulation of the country of origin does not hinder the supervision of the branch;
• the authority of the country of origin issues a favorable opinion by any means leaving a written record and states the compliance of the reinsurance company with the regulations governing it;
• the foreign company has at least three (3) years of experience in managing the line of business and insurance categories for which the approval application is submitted;
• the general representative meets the conditions required by the instruction on IC governance.

Article 7. Accuracy and Updating of Documents All information and details specified in Article 4 of this instruction, communicated by the authorized representative, must be up-to-date and accurate at the time of the approval application.

The authorized representative is required to promptly notify the SG-CSBF of any change or modification to the communicated data or any information likely to impact the company's activities.

Article 8. Dismissal of the Application for Approval When the authorized representative fails to respond to requests for additional information within the deadline set by the SG-CSBF, the latter may proceed to dismiss the file.

In the event that the authorized representative intends to maintain the project, they must submit a new application with all elements required by this instruction. When this new file contains the same gaps or inconsistencies observed in the initial application file, it will no longer be possible to submit a new approval application.

Article 9. Closure of File Processing
The SG-CSBF closes the file processing no later than six (6) months after the issuance of the deposit receipt for the file as provided in Article 5 of this instruction. The closure of the file processing is notified to the authorized representative.

CHAPTER 3. DECISION MAKING

Article 10. Decision-Making Procedure by the CSBF After the closure of processing, the SG-CSBF submits the project for the creation of an IC or the establishment of a branch of a foreign reinsurance company to the CSBF for decision.

The CSBF takes a decision within a period of one (1) month from the closure of the file processing, based on the results of the SG-CSBF's file processing and taking into account any presentation possibly made by the aforementioned persons.

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Article 11. Granting of Approval
When the applicant meets the conditions provided by current regulations, the CSBF decides to grant approval:

• to ICs as insurance companies, reinsurance companies, or insurance and/or reinsurance mutuals,
• to branches of foreign reinsurance companies.

Article 12. Lines of Business and Insurance Categories

1. ICs and branches of foreign reinsurance companies are approved to conduct insurance and/or reinsurance transactions related to the life and/or non-life lines of business specified in ANNEX 3 of this instruction, according to the approval application.

2. The approval covers the entire line of business, unless the entity only wishes to guarantee one or more insurance categories within that line.

Article 13. Approval Decision
The approval decision is notified by the President of the CSBF to the authorized representative within a period of five (5) days from the CSBF's decision. It is published on the website of the Central Bank of Madagascar and that of the concerned entity.

The approval decision specifies the name of the IC or branch of a foreign reinsurance company, the authorized line(s) of business and insurance categories, the suspensive conditions for approval set by the CSBF, and the deadline for fulfilling said conditions.

Article 14. Suspensive Conditions
The CSBF grants approval subject to the fulfillment of certain suspensive conditions stipulated in the approval decision, which may include required information, documents, or formalities.

The authorized representative transmits to the SG-CSBF the required documents and information for lifting the suspensive conditions before the expiration of the deadline set in the approval decision.

Failing fulfillment of the suspensive conditions within the deadline set in the approval decision, the applicant may request an extension no later than one (1) month before the expiration of said deadline. The President of the CSBF may grant a new deadline not exceeding six (6) months for the fulfillment of the suspensive conditions.

If no extension request is made, or if the suspensive conditions are not fulfilled, or if no measures have been taken by the authorized representative, particularly the transmission of required elements within the new deadline, the President of the CSBF declares the decision null and void.

In the event that the authorized representative intends to maintain the project, they must submit a new application with all elements required by this instruction.

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The President of the CSBF notifies the authorized representative of the lifting of the suspensive conditions after verifying the implementation of the measures taken, their effective fulfillment based on received documents, or, where applicable, through prior control within the entity. The IC or branch of a foreign reinsurance company is then registered in the register maintained by the CSBF and may commence its operations.

All commercial documents, publications, and correspondence of the IC or branch of a foreign reinsurance company must contain the reference of the approval decision and the registration number issued by the CSBF.

Article 15. Post-Approval Monitoring
During the first three (3) years of operations, the approved entity must submit to the SG-CSBF a semi-annual report on the implementation of the activity program outlined in the application file. If said report demonstrates that the situation of the IC or branch of a foreign reinsurance company no longer provides sufficient guarantees to meet its commitments or risks no longer operating in compliance with current regulations, the CSBF is authorized to take one or more preventive, recovery, or disciplinary sanction measures provided by the Insurance Law.

The CSBF may withdraw approval without going through recovery and resolution phases when the dissolution of the distressed IC does not entail a systemic risk as defined in Article 3 of this instruction.

Article 16. Refusal of Approval
The CSBF may decide to refuse approval when:

• one or more approval criteria stipulated in Article 6 of this instruction are not met;
• the approval file contains forged documents, inaccurate information, gaps, or inconsistencies indicating a lack of professionalism;
• the interest of policyholders and/or the general public is in danger.

The refusal decision is taken by the CSBF within a period of fifteen (15) days after receipt of the formal notice letter remaining ineffective in complying with directives and prescriptions addressed to the authorized representative.

The refusal of approval must be reasoned and notified to the applicant.

CHAPTER 4. FINAL PROVISIONS

Article 17. Already Approved Insurance Companies ICs already approved prior to the entry into force of this instruction retain their approval. For their registration in the register maintained by the CSBF, they are required to send a request letter specified in ANNEX 11 of this instruction within a period of six (6) months from the date of entry into force of this instruction. As an update, they must attach to said request the information and documents required in ANNEX 12.

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This deadline may be extended by the President of the CSBF upon a justified request by the Managing Director.

Article 18. Files Under Processing
Any applicant who submitted an application file for approval prior to the entry into force of this instruction must update and complete said file in accordance with the provisions of this instruction, within a period of six (6) months from the date of entry into force of this instruction.

The six (6) month processing deadline for the application file provided in Article 5 of this instruction runs from the date of acknowledgment of receipt of the updated documents and information.

Article 19. Repealed Provisions
All prior provisions contrary to this instruction are repealed.

Article 20. Entry into Force
This instruction and its annexes, which form an integral part thereof, enter into force upon its notification to the profession through the Professional Association of Insurance Companies in Madagascar (APEAM) and its publication on the website of the Central Bank of Madagascar.

Done in Antananarivo, on 27 OCT 2023
For the Banking and Financial Supervision Commission,

[Signature and seal]
THE PRESIDENT,
Aivo H. ANDRIANARIVELO

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ANNEXES

ANNEX 1 List of documents and information required for insurance companies, reinsurance companies, and branches of foreign reinsurance companies ...................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................
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