A2ii Insights: Emerging markets' supervisory response to Covid-19

During the month of April, the A2ii saw the launch of the exceptional A2ii-IAIS Consultation Calls webinar series on Covid-19 and its implications for supervisors.  In times of crisis, where there is a continuous flow of new information and rapidly evolving developments, the webinars have proved to be a purposeful platform for supervisors to exchange information and share best practice. 

The far-reaching impact of the pandemic has called for sustained vigilance by both insurers and supervisors.  We have subsequently seen a record number of participants attend the Covid-19 webinar series as supervisors see this as an opportunity to share their expertise and highlight some of the implications for the insurance sector and consumers. We were fortunate enough to have a supervisory dialogue with supervisors from Insurance Regulatory Authority Kenya (IRA Kenya), Financial Sector Conduct Authority South Africa (FSCA South Africa), Comisión Nacional de Seguros y Fianzas Mexico (CNSF Mexico), Autorité de Contrôle des Assurances et de la Prévoyance Sociale Morocco (ACAPS Morocco) and Superintendencia General de Seguros de Costa Rica (SUGESE Costa Rica). The sharing of best practice amongst supervisors has proven to be invaluable and has highlighted that while regional and domestic differences do exist there can still be similarities in approach. 

Operational resilience and effectiveness

Common measures introduced by supervisors has tended to focus on operational resilience and effectiveness.  Both emerging and mature markets have introduced remote working, remote supervision, regulatory relief and measures to preserve the provision of insurance services.  Supervisors have acted to provide temporary operational relief to insurers to help them redeploy resources to cope with their Covid-19 response.  Examples of regulatory relief include:

• Revising and extending regulatory reporting deadlines
• Postponing public consultations and new supervisory measures
• Lowering of the license fee
• Acceptance of electronic regulatory filings and signatures     

There's nothing like a crisis to break down silos as Caroline Da Silva from South Africa's FSCA highlighted when she indicated that at the peak of the crisis the FSCA was meeting daily with the central bank and the South African Government to discuss a coordinated response.  This approach is far from unique and if anything, this common cross regulatory and governmental response underlines how critical communicating is in a crisis. 

While there are similarities in the measures undertaken by supervisors there are also some key differences.  Along with regulatory relief, supervisors have facilitated adjustments to ensure that insurers can continue providing insurance services to individuals and businesses.  However, while this has been a common measure, approaches especially between emerging and mature markets have varied widely. 

Emerging market supervisors, in particular, have been quick to intervene directly at the product level to protect their consumers.   In Kenya and Morocco, the Supervisor has taken actions to ensure that all coronavirus-related health claims' payments would be made regardless of any pre-existing pandemic exclusion clause.   Emerging market supervisors have also come out with more stringent requirements such as introducing a ban on the payment of dividends to shareholders. Both India and Tunisia have banned dividend payments and told insurers to conserve their capital. 

Direct intervention is not the only area where we are seeing a difference in approach.  During our webinar, Siham Ramli from Morocco's ACAPS  stressed the strong collaboration they have established with the insurance sector which has ultimately culminated in clear messaging to consumers regarding their policy coverage. Monetary Authority of Singapore (MAS) also very early on collaborated with their insurance associations to announce joint measures concerning insurance products.  This included the deferrable of premium payments for up to 6 months whilst maintaining coverage during this period and allowing small and medium enterprises (SMEs) to establish payment plans with their respective insurers. 

Supervisors, however, cannot claim all the credit for these collaborative approaches because insurers across the developing world have been more willing to step up and be part of the solution not the problem in response to this crisis. 

In contrast with some insurers who have been quick to rely on exemptions,  insurers in emerging markets such as Costa Rica, have exceptionally and indefinitely eliminated the exclusions for the events of pandemic or epidemic.  While this is also probably partly due to the fact that insurers in emerging markets have a smaller customer base it shows an element of foresight that they see this crisis as an opportunity to demonstrate to consumers and governments how invaluable insurance protection is.

Call to action 

The next Consultation Call webinar for insurance supervisors is taking place on 28 May. On this 4th call of the series on the coronavirus, the OECD (Organisation for Economic Cooperation and Development) will present their work on financial consumer protection measures that may be implemented by jurisdictions in response to Covid-19. For more information about the webinar visit the Event Page.