Regulatory environment

During 2011, the main area of focus was on the requirement for all affected employees to complete the compulsory Regulatory (RE) examinations in terms of the Financial Advisory and Intermediary Services Act. We took this matter very seriously and endeavoured to ensure that our employees were provided with adequate support in terms of both preparation for and the successful completion of these examinations. Extremely good progress has been made in this regard and we are confident that regulatory expectations will be exceeded.

Although the rollout of the Treating Customers Fairly (TCF) initiative has been somewhat staggered, this initiative has picked up pace and we are on top of ensuring that the requirements of this piece of legislation are met. For South Africa, TCF heralds a major cultural paradigm shift in how the financial services industry operates, and it will be a significant focal point moving forward into 2012 and beyond. The principles cover and impact a wide scope of business activities, and organisations will need to start revisiting their approach to areas such as employee training, complaint handling and product awareness and understanding if they are to stay ahead of the game.

Going forward, companies will have to revise governance requirements and practices as a result of the new Companies Act, 2008. Our compliance risks are managed through internal policies and processes which include legal, regulatory and other technical requirements relevant to the business. As always, we seek to bring the highest standard of compliance and best practices to all its operations. For 2011, this included a robust internal and external audit programme – supported by a well-established compliance function – which ensured that the governance and compliance framework was fully implemented.

The draft binder regulations published in terms of the Short Term Insurance Act also necessitated that we consider the impact on our day-to-day business activities. Amongst others, these regulations will require a review of business operating models and binder activities related to non-mandated intermediaries and underwriting managers.

The FSB plans to introduce a new risk-based regulatory regime, referred to as Solvency Assessment and Management (SAM). This approach will require insurers to either use an internal model or the FSB's standard model to calculate the required Solvency Capital Ratio (SCR). It will also look at the quality of risk management practices, including control, and will require additional risk disclosure to shareholders and the regulator. We have, for a number of years, been using an internal model to manage our insurance operations and have already embedded most of the requirements. In addition, as a subsidiary of the global Zurich Group, we are working with our European peers to implement relevant aspects of Solvency II in South Africa. This places us in a position to be ready for SAM by January 2014.

With respect to Black Economic Empowerment (BEE), as mentioned here of this report, we achieved a Level 3 BEE Rating in terms of the DTI Codes of Good Practice for the 2011 financial year and, in 2012, we will continue to drive initiatives that will help us attain our vision of becoming the leading empowered insurer in our chosen markets.