EXEMPTION OF INSURERS THAT OFFER INVESTMENT POLICIES TO MEDICAL SCHEMES, SOUTH AFRICA

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The Financial Sector Conduct Authority (FSCA) published FSCA Communication 17 of 2020 and Draft FSCA INS Notice X of 2020 (Communication and Notice respectively) inviting interested parties to submit comments on the draft exemption notice proposing the exemption of certain insurers from Regulation 4.2(1) (limitation on policies) of the Regulations under the Long-term Insurance Act, 1998 (LTIA).

The background to the draft exemption is explained in the Communication.

The definition of a ‘fund’ in the LTIA included a medical scheme as defined in section 1 of the Medical Schemes Act, 1998. However, the definition of a ‘fund’ in Schedule 2 of the Insurance Act, 2017 (Insurance Act) which came into operation on 1 July 2018, does not include a medical scheme in the context of life insurance.

The effect is that a medical scheme that qualified as a fund for the purposes of a registered insurer under the LTIA, no longer qualifies as a fund for the purposes of a licenced insurer under the Insurance Act (sections 2.2 and 2.3).

A licensed insurer is therefore prevented from offering policies underwritten under the fund risk or fund investment class of life insurance business as set out in Schedule 2 of the Insurance Act to a medical scheme. As a medical scheme no longer qualifies as a fund, the limitations under Regulation 4.2(1) apply. This created unintended consequences (sections 2.6 to 2.8).

The draft exemption seeks to exclude long-term insurers who offer investment policies and any person that acts as an intermediary between an insurer and a medical scheme in respect of an investment policy or proposal for an investment policy, from Regulation 4.2(1) of the LTIA.

Interested parties are invited to submit comments on the draft exemption in writing on or before 12 May 2020, to FSCA.RFDStandards@fsca.co.za.