IIG News

IIG Insights: Market Conduct Regulatory Reforms

The delightful Tshepiso Chocho who currently moonlights as our IIG Deputy President whilst representing SASRIA by day, welcomed all in attendance on a warm spring day. Tshepiso reminded everyone that this is a CPD accredited session which can be accessed via our IIG CPD Vault. She thanked Santam for generously sponsoring the session.

A brief introduction was given of our two speakers representing the FSCA who were tasked with unpacking and providing guidance around the regulatory changes in South Africa.

Our speakers were Lezanne Botha and Johann Van Der Lith who presented interchangeably. Lezanne is a senior manager in the Regulatory Framework Department in the Regulatory Policy Division of the Financial Sector Conduct Authority (FSCA). She is part of the team responsible for the development, maintenance and implementation of an effective and appropriate conduct of business regulatory framework that is consistent with international standards and within the South African context.

Johann is a regulatory specialist in the Regulatory Framework Department in the Regulatory Policy Division of the Financial Sector Conduct Authority (FSCA). He is part of the team responsible for the development, maintenance and implementation of an effective and appropriate conduct of business regulatory framework that is consistent with international standards and within the South African context.

Lezaane thanked the IIG for the opportunity and expressed how impressed she was at the high levels of professionalism with which the IIG Insights webinars were being run. Over the past 5 years the Insurance Industry has undergone the most significant changes. Some of the topics that formed part of the presentations were:

  • Twin peaks
  • prudential framework
  • Demarcation regulations
  • STIA regulations and new Policyholder Protection Rules, Phase 1 and Phase 2
  • FAIS Act amendments to GCOC and short-term deposit code.
  • Draft conduct std relating to 3rd party cell captive insurance business
  • Some RDR developments
  • 2020 planned amendments to the STIA Regulations & PPR
  • Conduct of Financial Institutions (COFI) Bill

Lezanne shared a quote reflective of these regulatory changes:

“The only time one should ever look back is to see how far you’ve come”

 Twin Peaks

It’s a distinct model of regulation by objective, whereby there is a distinct separation between regulatory functions and the safety and soundness of financial institutions and conduct of business. The FSCA replaced the FSB concentrating on the efficiency and integrity of financial markets promoting fair treatment of financial customers by financial institutions. The Prudential Authority promotes and enhances the safety and soundness of financial institutions.

End goal: the intention is to replace all existing sectoral laws governing conduct of business into one consolidated financial sector act: Conduct of Financial Institutions Act (COFI Act)

The Prudential framework became effective July 2018. It provides a legal framework for the prudential regulations and supervision of insurance business. It also introduces a legal framework for microinsurance to promote financial inclusion. The PA is responsible for supervising the Insurance Act, with certain functions still be delegated to the FSCA.

The Insurance Act from a legal perspective has introduced various terminologies and Acts. The concept of indemnification with non-life as well as completely new classes of business which includes 17 new classes of non-life insurance business.

Prudential Standards include governance and operational standards and financial soundness standards.

Demarcation regulations were developed over a long consultative period and became effective

1st April 2017. The consultation was between the Department of Health, National Treasury and the Council for Medical Schemes. It was to ensure that health insurance products do not undermine the medical scheme environment. Any product that meets the definition of a medical scheme must be regulated.

Lezanne then handed over to Johann who unpacked the amendments to the Regulations and PPR’s.

  • Purpose of amendments:
  • improve market conduct in the sector
  • ensure fair treatment of customers
  • appropriative incentives and remuneration
  • align terminology and concepts with the Insurance Act, 2017
  • provide for various requirements that have been repealed from the STIA and LTIA
  • Provide for microinsurance product standard


Phase 1 amendments touched on the current existing framework, outsourcing and binder regulations and to improve provisions to provide clarity on intents and purposes.

Johann used the example of Saxum Insurance who was liquidated as there were clear issues around the fair treatment of customers or lack thereof.

Binder regulations concentrate on binder caps, reporting requirements, operational requirements and governance and oversight.

Binder regulation remuneration for binder functions apply to all entities, reasonable and commensurate. Payment of binder fees must not result in the person being remunerated more than once for performing a similar function on behalf of the insurer and/ policyholder. Outsourcing must not lead to unfair outcomes to customers. Johann broke down the remuneration and maximum fee payable.

Binder Regulations – Governance:

The binder agreement must be intended to promote delivery of fair outcomes to customers. Not result in duplication of admin efforts or costs to insurers. Not impede insurer’s ability to identify, manage and report on risks of poor customer outcomes.

The binder holder’s operational ability is also important as to ensure integration between its IT system and that of the insurer.

Binder arrangements must adhere to the strict 30-day notification before entering into a binder arrangement and 60 days prior to termination of a binder arrangement. This must be clearly communicated to the policyholder.

As part of the PPR the Insurer remains responsible for compliance irrespective of outsourcing.



Purpose of Tranche 2 Amendments to Regulations and PPR’s:

  • Align terminology and concepts with the Insurance Act, 2017
  • Amend the binder regulations to provide for certain procurement and transformation requirement
  • Provide for microinsurance product standards

Microinsurer means an insurer licensed only to conduct microinsurance business.

Other matters in the products standards:

  • Structure of policy benefits
  • Variation and renewal requirements and limitations
  • Specific requirements on excesses
  • Limitation on exclusion and waiting periods
  • Claims handling requirements
  • Reinstatement requirements
  • New product reporting to FSCA.

FAIS Act – Amendments to General Code of Conduct and the short-term Deposit Code:

Some of these amendments include alignment to PPR’s, requirement to act honestly at all times and include alignment to the provisions relating to advertising, marketing and complaints management to the requirements in the General Code.

Draft Cell Captive Conduct Standard

  • Risks Identified:
  • Conflict of interest
  • Regulatory arbitrage
  • Lack of appropriate governance
  • Lack of oversight over new product development
  • Unnecessarily complex complaints, processes and escalation procedures within cell owners

Some RDR developments

A number of papers were published under RDR, over a number of years. Speaks to specific and varied topics such as savings & investments, investment matters discussion document, advisor categorisation discussion doc. intermediary activity segmentation doc. and equivalence of reward position paper.


Some of the aims of the COFI Bill are to significantly streamline legal landscape for conduct regulation in the financial sector, give legislative effect to the market conduct policy approach and strengthen customer protection. It also aims to provide more flexibility and better tools to the FSCA to support financial inclusion, transformation, innovation and competition.

Lezanne and Johanne ended their presentation, thanking the IIG for the platform once again and a short Q&A was entertained.

Tshepiso closed the session by thanking our speakers again as well as our sponsor, Santam.

By: Asiya Swaleh