Reinsurance: CIMA zone is getting endowed with a regulatory framework
It is in Bamako (Mali) that the ministers in charge of insurance in the CIMA zone approved the introduction into the insurance Code of a new book dedicated to this activity.
New book VIII of the insurance code
New book VIII of the insurance Code dedicates 44 articles to reinsurance, with reference to general provisions, rules of formation and operation, cooperation agreements and exchange of information, financial arrangements and accounting rules.
All reinsurance companies including subsidiaries, representation or liaison offices, based on the territory of a CIMA member state, shall be subject to these provisions.
Legal form
Article 802 of the new law stipulates that any reinsurance company based in a member State shall be established as a limited company. Multilateral reinsurance companies, pan-African and mutual companies mentioned in article 330-41 of the code shall be exempted from such rule.
Share capital
The minimum share capital required for a reinsurance company is set at 10 billion FCFA (16.55 million USD), excluding contributions in kind. Half of this capital at least must be paid by the shareholders before final incorporation. A reinsurance company is granted a period of three years from the date of its registration in the registry of companies, to complete this capital.
Reinsurance subsidiaries, representation or liaison offices of companies whose headquarters are located outside one of the member States of the CIMA Zone shall be subject to a minimum financial guarantee equal to 1 billion FCFA (1.65 million USD).
Reinsurance enterprises belonging to a group or a network of insurance companies which reinsure only the group's subsidiaries or the members of this group, captive and reinsurance pools are required to have a capital equal at least to one third of the minimum share capital required, that is, a third of 10 billion FCFA. If they do not retain risks, however, there is no capital requirement for these entities.
Supervisory authority
The regional commission for insurance control (CRCA) is the supervisory authority. It shall be in charge of issuing licenses to reinsurance companies and of managing the business in the CIMA zone.
License
Article 804 stipulates that license shall be granted on the company's request either for non life reinsurance business, or for life operations, or for all of these operations.
Criteria for granting license
In order to grant license as per article 804, CRCA shall verify that the following conditions are fulfilled:
- the technical and financial resources whose implementation has been proposed are sufficient and in line with the company's program of activities,
- officers and directors of the company shall meet the requirements of good repute, in addition to possessing, individually and collectively, the competence and professional experience necessary for the conduct of their duties,
- the allocation of capital and shareholding quality shall guarantee a good and sound management,
- the company shall be endowed with the human and technical resources necessary for the establishment of an adequate information system in line with the operations,
In addition, the regional commission takes into account the general organization of the markets.
Reinsurance companies based in a member State of the CIMA
For the reinsurers settled in a member State of the CIMA zone, the establishment of a subsidiary, an underwriting, representation or liaison office, in another member State other than the head office shall require the agreement of the country concerned.
Reinsurance companies established outside the CIMA zone
For companies, subsidiaries, representation or liaison offices of a reinsurance company with head offices outside the CIMA zone, license shall be granted by the CRCA. The latter is required, however, to inform the minister in charge of insurance of the country concerned. The authorization delivered shall be valid throughout the CIMA zone.
Top managers’ eligibility
To be eligible for the general manager positions, applicants are required to hold at least a diploma of higher education with a minimum of 10 years experience in high-level management positions in administration or in an enterprise.
This experience is reduced to 5 years for those with an advanced degree in insurance or actuarial science. The 5-year period applies only to applicants who have held senior management in an insurance company, an insurance brokerage firm or in an administration of insurance control.
Leadership and management of companies
Apart from the eligibility criteria set for accession to the post of general manager of a reinsurance company, CRCA requires from candidates due to sit in the board of directors to be endowed with "experience and various skills." Their areas of expertise should include, among others, insurance, reinsurance, management, accounting, finance and law.
Any change in the functions of chairman or general manager of a reinsurance company is henceforth subject to the prior approval of CRCA.
External auditor
The Commission reserves the right to grant, renew or deny accreditation to the auditor of the company within three months after the submission of candidacy.
The auditors must, necessarily, appear on a list of certified experts.
Financial control
It is up to the CRCA to supervise reinsurance companies and to monitor their financial statements. It shall ensure, among others:
- level of technical provisions which must be adequate,
- the mastery of financial risks,
- the application of a diversified investment policy,
- maintaining of asset investments at levels consistent with prudential standards,
- compliance with the solvency margin.
Sanctions
Any regulatory infringement detected by the Commission shall be subject to disciplinary actions ranging from a reprimand to revocation of license. Other sanctions such as fines whose amount varies depending on the severity of the offense (0.1% to 2% of the premiums or contributions) or imprisonment of leaders (sentence of up to 5 years in prison) are also provided for by the legislator.
If need be, CRCA shall be in charge of the appointment of an interim administrator whose task consists in ensuring the enforcement of the sanctions imposed.
Liquidation
The liquidation of a reinsurance company subject to supervision by the CRCA shall be governed by Articles 325 to 325-13 of the insurance code. The closing of the liquidation shall be pronounced by the court.
The entire book VIII of the insurance code is available on Atlas Magazine’s website.