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9/20 W01/March 2017 Award in General Insurance

Key points

The main ideas covered by this chapter can be summarised as follows:
Role of the insurance regulator
• The insurance regulator typically performs five distinct oversight functions to achieve its objectives: regulation,
authorisation, supervision, surveillance and enforcement.
• The types of regulatory approaches used by regulators are prescriptive-based, principles-based and risk-based
regulation.
• Prudential and market conduct regulation typically involves the principles of integrity, skill, care and diligence,
prudence, information about customers, conflicts of interest, relationship with regulators, complaints and
management and control.
• Tools used by regulators to supervise the industry include diagnostic tools and remedial tools.
International Association of Insurance Supervisors (IAIS)
• The IAIS promotes cooperation amongst insurance supervisors and other financial sector supervisors and issues
global insurance core principles.
Capital adequacy of insurers
• The purpose of capital is to ensure that an insurer’s obligations to policyholders can continue to be met as they fall
due.
• Capital adequacy requirements may be determined using the standard formula and/or internal models.
• The solvency control levels provide triggers for action by the insurer and regulator.
Anti-money laundering and combating the financing of terrorism
• The goal of a large number of criminal acts is to generate a profit for the individual or group that carries out the act.
Money laundering is the processing of these criminal proceeds to disguise their illegal origin.
• There are serious social and political costs of money laundering if left unchecked or dealt with ineffectively.
• The Financial Action Task Force (FATF) is an inter-governmental policy-making body whose purpose is to establish
international standards, and develop and promote policies, both at national and international levels, to combat Reference copy for CII Face to Face Training
money laundering, terrorist financing and other related threats to the global financial system.
• Customer due diligence (CDD) is a business practice suitable not just for commercial risk assessment and fraud
prevention but also to prevent money laundering and the financing of terrorism.
• There are various CDD measures that should be taken by insurers.
Fraud
• Fraud may be classified as internal fraud, policyholder fraud and claims fraud, and intermediary fraud.
• Insurers should have a proper fraud risk management component in their risk management framework to manage
the various types of fraud.

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Chapter