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REGULATING THE INSURANCE INDUSTRY

Effective regulation of the insurance industry is crucial for fostering economic growth. Insurance plays a vital role in economic development by promoting financial stability and enabling effective risk management. It acts as a substitute for government security programs, facilitates trade, and mobilizes national savings. Insurers also help reduce losses and allocate capital efficiently. Regulation aims to maintain market efficiency, uphold consumer trust, and mitigate risks. Addressing both external and internal challenges, regulatory responses are essential for safeguarding the industry's integrity and ensuring consumer protection.

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REGULATING THE INSURANCE INDUSTRY

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  1. REGULATING THE INSURANCE INDUSTRY • General comments • Effective regulation a necessary prerequisite for economic growth • Risks and other issues that insurers face • Regulatory responses • Conclusion

  2. Regulating the insurance industry • Prerequisite for economic growth • Insurance aids economic development *Insurance promotes financial stability and reduces anxiety * A substitute for government security programs *Facilitates trade and commerce *Insurance mobilizes national savings. *Enables effective risk management *Insurers help to reduce losses *Foster an efficient allocation of capital

  3. Regulating the insurance industry • Goals of regulation *Promote efficient and effective markets *Maintain confidence in stability of system *Promote public understanding and protect consumers *Reduce scope for financial crime

  4. Risks that insurers face • External and internal risks • External *Economic, competition, taxes, legislation, political pressure, disillusionment of consumers, natural disasters. ₕ Internal –business and operational *Asset (market,credit, concentration, liquidity) *Liability (mortality,morbidity,lapse) *Business (systems,fraud,expenses,compliance failure)

  5. Regulatory responses • A few general remarks • Prudential rules *capital and solvency, asset spread, liquidity, fair value, values of subs; • Fit and proper,internal controls, risk management systems, corporate governance, transparency, auditors and actuaries • Supervise through desk top and on-site visits; risk based capital and risk based supervision • Ombudsman schemes, guarantee funds, policyholder protection rules,consumer education.

  6. Conclusion • IAIS Principles and standards • World Bank assistance with training • World Bank and IMF FSAP’s • Role in CISNA and AAISA • Own responsibility to train staff • Communication between regulators

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