Three pioneering insurance supervisors from Ghana, Pakistan and South Africa were asked to share their experience regulating inclusive insurance vis-à-vis the work of the A2ii and the IAIS, ahead of the upcoming A2ii, IAIS, CGAP Expert Symposium on proportional regulatory approaches in inclusive insurance markets. The author of this blog, Jonathan Dixon, is the Deputy Executive Officer for Insurance at the Financial Services Board, South Africa.
Insurance is a critically important tool for not only reducing poverty, but also for helping those who have emerged from poverty to manage their risk and avoid falling back into poverty. Significant technological advancements over the past decade are improving the design, selling, and servicing of insurance products. These changes provide an opportunity to give poor people more access to insurance and to improve financial inclusion, but they also present challenges and risks for supervisors. Although some of these challenges are significant, we must not lose sight of the impact we can have by addressing them.
Regulation and supervision of insurance markets are key tools to improve access to finance for poor people. Regulators need to understand how these tools can create and also overcome barriers to access for market development. Regulators, supervisors, policy makers, academia, and development agencies have been working together closely to build an enabling environment where insurance products can be tailored to the unique needs and circumstances of customers. Thus broadening access to formal insurance products while at the same time ensuring an appropriate level of policyholder protection.
For more than 10 years, the International Association of Insurance Supervisors (IAIS)—the international body of insurance supervisors—has recognized that it has an important role to play in facilitating a discussion and supporting its members as they look to implement the Insurance Core Principles in a way that can also support the development of inclusive insurance market. To date, the IAIS has recommended a proportionate approach, where Insurance Core Principles are implemented proportional to the level of risk.
The proportionality principle works two ways: it justifies simpler and less burdensome ways of meeting requirements for low risk activities; and it also justifies applying more sophisticated methods and techniques for more complex risk situations. Proportionate application of international standards puts increased pressure on policy makers and supervisors to ensure that they develop an appropriate framework for insurance and that supervisors have the capacity to implement a risk based approach.
Recognizing the challenge of translating recommendations into implementation, the IAIS in partnership with the A2ii and CGAP will host an Expert Symposium in Washington D.C. from December 2-3 on “Proportional regulatory approaches in inclusive insurance markets – Capturing what we learnt for the future.” The symposium will bring together regulatory experts, insurance regulators and supervisors and development partners to assess experiences in regulating and supervising access to insurance and advance good practices.
By supporting supervisors in this area, we can help them balance the objectives of supervision with the need for over 4 billion people worldwide to have access to the tools that can help them manage their risk.
The IAIS and A2ii
Since 2013, I have chaired the IAIS Implementation Committee and the Governing Council of the Access to Insurance Initiative (A2ii). These complementary roles provide me the opportunity to help shape how the IAIS can support insurance supervisors to support financial inclusion.
In my work at the IAIS, I have seen that building capacity among supervisors is one of the most critical challenges for developing market economies. To address this challenge, the IAIS partnered with development agencies to launch the A2ii. Over the past five years, the A2ii has established itself as the IAIS’ “implementation arm” on financial inclusion. During this time the A2ii has transitioned from a knowledge hub to increasingly providing supervisory support.
Now, for the first time, the IAIS and A2ii have undertaken a collaborative roadmap development process. In our respective work plans for 2015–2016, we have identified a number of areas where the IAIS and A2ii can support each other’s objectives and can benefit from integrated activity.
Specifically, the A2ii and IAIS will support the development of regional implementation strategies, expanded peer-to-peer learning between insurance supervisors, and develop targeted joint capacity building initiatives and learning tools for supervisors.
Photo Credit: A2ii
For example, in my region of sub-Sahara Africa, supervisors are looking at ways in which we can collaborate to improve insurance supervision and regulation. In early 2014 we held a meeting in Pretoria, South Africa, where supervisors discussed the challenges they are facing and what steps they were taking to address these challenges. What emerged from our conversation is that the opportunity to learn from each other is significant and that there are common challenges where it may make sense to consider a regional approach. Over the next year, we hope to come together again to identify specific areas that could benefit from greater collaboration under a regional implementation plan.
The IAIS is the umbrella under which these regional plans can be developed, while the A2ii can provide the learning tools, technical knowledge, and organizational support to keep this process moving.
Thanks to the generous financial support provided by the Governments of the Netherlands and Germany, as well as in kind support from its other partners, the A2ii has the resources to move forward in understanding the development needs of supervisors, facilitating knowledge exchange and helping supervisors to implement regulatory and supervisory measures in support of inclusive insurance markets.