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.
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