Financial Institutions and Markets Act (FIMA) almost in force – any day now
By Sybil Somaes, Managing Director of Compli-Serve Namibia
The recent announcement by the Ministry of Finance that the President has signed the FIM Bill into law has caused different reactions from players in the financial services industry in Namibia.
Many are still in denial, while some are eagerly awaiting the new regime. Regardless of your views, the promulgation of FIMA is now imminent and it is due to be published in the Government Gazette within the next few weeks. It’s important for the financial services industry to prepare themselves for the announcement of the effective date. This article serves as the second in a miniseries, unpacking specifics to consider within sub-sectors of the industry and will focus on insurance.
Compliance in Insurance: Know what to watch out for
The FIM Bill (or FIMA once it is official) spans some 400 pages, so it’s a big task to understand and comply with, yet just around the corner, compliance will be mandatory. Preparing properly for FIMA implementation depends on the sector you are in, and understanding your obligations as an insurer will be the focus of this article.
Unlike other industries, insurers registered under the Long-term Insurance or Short-term Insurance Acts of 1998, on the commencement date are deemed registered under FIMA subject to such adjustments as may be necessary, and any applicable Standard and the provisions of this Act that apply to insurers. Every applicant must have capital that meets the adequacy requirements provided for in the FIMA Standards.
Board composition and responsibilities
There are some changes to note here. Examples include that all directors (of which there must be at least five) must be Fit and Proper and 50% of directors need to be Namibian or have permanent residence, and a third of directors must be independent. These are just a few requirements listed among other key compliance considerations for insurers.
Make way for micro-insurance
A Regulation on micro-insurance introduces the concept of micro-insurance and provides the requirements applicable to the operation of a micro-insurance business. The global trend towards financial inclusion as well as the impact of COVID-19 show how many people are excluded from the insurance sector. It is the hope of Compli-Serve Namibia that the FIM Bill will stimulate innovation in this sector and contribute to financial inclusion of marginalised persons in the process.
Rules to follow
Every insurer and intermediary must have a code of conduct in place, which is to be binding on the insurer; its board; principal officer and other officers, as well as other employees and their clients. The Bill further provides the specific principles that need to be incorporated in the code of conduct of an insurer. Examples include a conflict- of-interest policy, workplace practices and a communication policy for stakeholders.
Compliance considers consumers
Consumer protection is at the core of governance and FIMA compliance focuses there too. Firms therefore need to be more transparent in their engagements with customers. Plain language is required in all documents presented to clients and this applies to all insurers, their Boards, directors, principal officers and employees.
Every insurer owes a fiduciary duty to its clients too that effectively states an insurer and any of its functionaries must act in the best interest of clients or investors; avoiding conflicts of interest and keeping client information confidential. There are more stringent requirements on point of sale information; it must be provided by an insurer to clients as well.
You can be fined by the Regulator if you ignore your compliance obligations, and could even lose your license altogether. FIMA comprises of 11 chapters corresponding to industry sub-sectors; chapter 2 outlines the specific requirements for insurers. An understanding of these as well as the Bill overall is your guide to compliance, and using outsourced compliance support can help to get you on track and prove to be a fruitful investment that saves both time and money overall.
Retirement funds face different requirements under FIMA, including new registration requirements. Furthermore their administrators are now required to be registered and will face their own compliance obligations. The key FIMA compliance for retirement funds considerations will be addressed in the next article in this series.