Insurance (Placement of Business Outside Malawi) Directive, 2014

GOVERNMENT NOTICE NO. 27

INSURANCE ACT, 2009 (No. 9 of 2010)

INSURANCE (PLACEMENT OF INSURANCE BUSINESS OUTSIDE MALAWI) DIRECTIVE, 2014

ARRANGEMENT OF PARAGRAPHS

PARAGRAPH

PART I—PRELIMINARY

1. Citation
2. Application
3. Interpretation

PART II—OBJECTIVES 4. Objectives

PART III—PLACEMENT OF INSURANCE BUSINESS OUTSIDE MALAWI 5. Request for approval 6. Market consultations 7. Prohibition of insurance fronting

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PART IV—ENFORCEMENT 8. Monetary penalties 9. Administrative penalties

IN EXERCISE of the powers conferred by section 79 (3) of the Insurance Act, 2010, I, CHARLES S. R. CHUKA, Registrar of Financial Institutions, issue the following Directive—

PART I—PRELIMINARY

Citation 1. This Directive may be cited as the Insurance (Placement of Insurance Business Outside Malawi) Directive, 2014.

Application 2. This Directive shall apply to insurers and insurance brokers licensed Act No. 26 of under the Financial Services Act, 2010. 2010

Interpretation 3. Words and expressions used in this Directive, unless otherwise Act No. 26 of specified, have the same meaning as ascribed to them in the Financial 2010 Services Act 2010 and the Act.

PART II—OBJECTIVES

Objectives 4. The objectives of this Directive are to— (a) encourage insurers to build capacity to underwrite bigger and complex insurance risks arising within Malawi; and (b) minimise unnecessary loss of foreign exchange through externalisation of insurance business.

PART III—PLACEMENT OF INSURANCE BUSINESS OUTSIDE MALAWI

Requests for 5.—(1) A person shall not place insurance business, other than reinsur- approval ance business, outside Malawi without obtaining written prior approval from the Registrar.

(2) For the purposes of this paragraph, placement of insurance business outside Malawi shall only be effected through an insurance intermediary.

Market 6.—(1) An insurer or insurance intermediary seeking to place insurance consultations business outside Malawi shall— (a) exhaustively consult and seek the active participation of other insurers before seeking the Registrar’s approval to place the residual risk outside Malawi; and (b) submit a policy renewal request for approval to the Registrar at least thirty (30) days before commencement of the insurance cover in question which shall include a market consultation slip set out in the Schedule hereto, and a document detailing minimum requirements as provided in subparagraph 2.

(2) Except as otherwise provided in any other directive or regulation under the Act, in order to fulfil the requirements of subparagraph (1) above— (a) an insurer or insurance intermediary shall set minimum

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requirements to be met by other insurers seeking to participate in the residual risk; and (b) the minimum requirements shall include— (i) level of solvency margin and capital adequacy; and (ii) liquidity and claims ratio, as an option.

7.—(1) The Registrar shall not approve a request to place insurance Prohibition of business outside Malawi unless he is satisfied that there is no insurer who is insurance able to provide adequate insurance cover with respect to the risk to which the fronting request relates.

(2) Fronting by insurers or reinsurers of insurance products is prohibited.

(3) Where no domestic insurer is participating in the risk, an insurance broker shall be responsible for placing the risk outside Malawi.

(4) For purposes of this paragraph, fronting refers to the process where an insurer underwrites a particular risk for purposes only of placing that risk with another insurer.

PART IV—ENFORCEMENT

8.—(1) Contravention of this Directive shall attract the following Monetary penalties— penalties (a) 100% of commission where an insurer or insurance intermediary places insurance business outside Malawi without prior written approval of the Registrar; (b) where a natural person or body corporate places insurance business directly outside Malawi without the prior written approval of the Registrar a fine of up to one million Kwacha (K1,000,000.00) and ten million Kwacha (K10, 000, 000.00), respectively shall apply; and (c) One hundred thousand Kwacha (K100,000.00) for failure to consult other local insurers prior to seeking the Registrar’s approval to place insurance business outside Malawi.

(2) The monetary penalties in subparagraph (1) shall be paid through a bank certified cheque payable to the Reserve Bank of Malawi within ten (10) working days after being notified by the Registrar.

(3) The Registrar may publish in a newspaper of wide circulation, any enforcement action taken under this Part.

9.—(1) In addition to the monetary penalties in paragraph 8, the Administrative Registrar may impose administrative penalties as provided in the Financial penalties Services Act, 2010 and the Act. Act No. 26 of 2010

SCHEDULE (para .6(1)(b))

PLACEMENT OF INSURANCE BUSINESS OUTSIDE MALAWI MARKET CONSULTATION SLIP Date ........................................................................................................................

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Insurer .................................................................................................................... Insurance ................................................................................................................ Intermediary ...........................................................................................................

This slip is being circulated amongst all insurers in the insurance market in order to establish whether the insurance risk below or part thereof can be insured locally. It is a statutory requirement that any risk that is domiciled in Malawi should be placed with the local market. However, in the event the risk cannot be underwritten locally, or there is insufficient capacity in the market to absorb the risk, the shortfall in capacity may be placed externally with prior approval by the Registrar in line with Section 18 of the Insurance Act, 2010.

1. DETAILS OF INSURANCE RISK Name of Insured:..................................................................................................... Address of Insured:.................................................................................................. Business of the Insured:........................................................................................... Type and Extent of Cover:...................................................................................... Territorial Scope:..................................................................................................... Period of Insurance: From:.......................................To:....................................... Limit of Liability/Sum Insured:............................................................................... Premium: K.............................................................................................................. Deductible/Excess: K............................................................................................... Other details:............................................................................................................

2. LIST OF PARTICIPATING INSURERS (Please indicate the proportion of the above risk that you intend to underwrite)

Name of Insurer	Limit of Liability/ Sum Insured	Percentage (%)	Head of underwriting	Signature

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3. JUSTIFICATION FOR PLACING INSURANCE BUSINESS OUTSIDE MALAWI Briefly state the reasons why you want to place whole or part of the above insurance cover outside Malawi. (Description should be in no more than 1000 words) ................................................................................................................................ ................................................................................................................................ ................................................................................................................................ ................................................................................................................................ ................................................................................................................................

Made this 7th day of July, 2014

(FILE NO. EAD/FSDU/10/01) C. S. R. CHUKA Registrar of Financial Institutions