Africa-Press – Eswatini. Unlicensed reinsurance businesses will now face a hefty fine amounting to E2 million or imprisonment for a term not exceeding 10 years or both.
This comes after the passing of the Reinsurance Bill of 2022 into an Act by the House of Assembly on Monday.
This was disclosed during the adoption of the ministry of finance portfolio committee report on the Reinsurance Bill moved by Committee Chairperson Lobamba Lomdzala MP Marwick Khumalo who was seconded by the Deputy Chairperson Mpolonjeni MP Jacob Siwela.
According to the act, a person shall not carry-on reinsurance business in the country unless that person is licensed as a reinsurer under this Act.
“A person who contravenes the provisions of this Act commits an offence and is liable, on conviction, to a fine not exceeding E2 000 000 or to imprisonment for a term not exceeding 10 years or both,” read the act.
The Act further provided that the authority being the Financial Services Regulatory Authority (FSRA) may, if satisfied that no licensed local reinsurer is able, in any particular case, provide policy benefits under a policy on equitable terms, grant an exemption to any reinsurer and reinsurance broker licensed in terms of this Act to source reinsurance outside Eswatini.
The Minister of Finance Neal Rijkenberg in his preamble said currently Eswatini had two pieces of legislation relating to the insurance industry, being the Swaziland Royal Insurance Corporation Act, 1973 and the Insurance Act, 2005 and both legislation did not precisely establish the reinsurance industry in the country.
He mentioned that the reinsurance provides for that an insurance company wishing to spread the risk or share the insured risk with other insurance companies can cede some of the burden or obligations to another company.
“Further, the reinsurance company may in turn reinsure the risk with another insurance or reinsurance company and this is known as retrocession in the insurance industry. These elements are lacking in the current Insurance Act of 2005 as they are only mentioned but not given in depth detail. Hence, the design of this Bill,” he explained.
mandatory
Rijkenberg mentioned that the objectives of the act included the introduction of reinsurance industry in the country, regulation of reinsurance industry in the country and making it mandatory for any person wishing to take re-insurance cover to take it with local reinsurance companies or provide for proportional reinsurance where at least a certain percentage of the cover is to be taken locally.
“This will impact the assets invested in the country as currently insurance industry subscribe to foreign reinsurance companies,” he said.
The minister stated that the ministry throughout the whole process had been in consultation with the FSRA to tackle specific clauses and advise thereon.
“When developing the Reinsurance Bill research was made regionally and beyond to see what the standard is and practice of the other African countries and from there adopted what was suitable for the Kingdom of Eswatini. Therefore, the contents of the Reinsurance Bill are in compliance with Regional and International laws. It is in this regard I humbly request that this August House pass the Reinsurance Bill into law,” he said.
Chairman of the portfolio committee MP Khumalo said this act was long overdue in the insurance industry of the country as insurance companies in the country would rely on reinsuring outside of the country.
He explained that the only acts that the country had that were concerned with this industry were the SRIC act of 1973 and the insurance act of 2005.
“This will help the insurance companies to be able to get reinsurance which is called seeding the risk,” he said.
He added that the act would be managed by FSRA through the ministry of finance.
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