ARTICLE
23 January 2015

Governance And Risk Management Framework For Insurers

CC
Clyde & Co

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Clyde & Co is a leading, sector-focused global law firm with 415 partners, 2200 legal professionals and 3800 staff in over 50 offices and associated offices on six continents. The firm specialises in the sectors that move, build and power our connected world and the insurance that underpins it, namely: transport, infrastructure, energy, trade & commodities and insurance. With a strong focus on developed and emerging markets, the firm is one of the fastest growing law firms in the world with ambitious plans for further growth.
The Registrar of Insurance recently published the Governance and Risk Management Framework for Insurers which is intended to provide for enhanced requirements for the South African insurance industry.
South Africa Insurance

The Registrar of Insurance recently published the Governance and Risk Management Framework for Insurers which is intended to provide for enhanced requirements for the South African insurance industry

The Registrar of Insurance recently published the Governance and Risk Management Framework for Insurers ("GRMF").  The GRMF is intended to provide for enhanced governance and risk management framework requirements for the South African insurance industry and takes effect on 1 April 2015.  More particularly, the GRMF is intended to ensure that South African insurers implement effective governance and risk management frameworks that provide for the prudent management and oversight of their businesses and adequately protects the interests of its policyholders.

The GRMF, inter alia, requires insurers to develop a holistic or overall risk management policy consisting of several distinct component policies. These policies must provide for all material risks reasonably foreseeable and must be adequate in relation to the nature, scale and complexity of the insurer's business and risks.  In particular, the risk management policy must include an underwriting risk management policy which must set out, inter alia, the criteria to be used for underwriting risk assessments.

In addition, the GRMF requires insurers to establish, maintain and operate within an adequate internal control system that is appropriate to the nature, scale and complexity of the insurer's business and risks and must include, inter alia, an internal audit function designed to review and evaluate the adequacy and effectiveness of the insurer's risk management policies and its internal control system.

Although the GRMF is administrative in nature, we foresee that a diligent plaintiff may seek discovery of these policies and internal audits particularly, where a misrepresentation or non-disclosure is raised and the criteria used for the relevant risk assessment thus becomes important.  Accordingly, it is advisable for insurers to design and implement measures that allow for easy access to this information when it is called for in litigation.

To read the full GRMF, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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