Uganda Insurance Firms Told to Pay One-Off Licence Fee Under New System
In what is being seen as a radical shift, Uganda's insurance regulator is considering perpetual licences for insurers from 2020, instead of the annual ones they pay for currently.
The move is expected to save insurance firms millions of shillings in annual licence fees, and cut the cost of doing business.
It will also help the regulator focus on the bigger job of deepening regulatory efforts towards risk-based supervision.
The long-term licences under the new regime may be suspended or cancelled by the Insurance Regulatory Authority of Uganda (IRAU) in case of a breach of regulations.
Besides being in line with global best practices, the development is also a step towards aligning with the East African Community insurance policy.
The regional integration tool was passed by the Council of Ministers and launched about three years ago.
It provides for the issuance of perpetual licences to insurance companies across the region, and periodic licences for intermediaries like loss assessors, surveyors and valuers.
So far, only Kenya and Tanzania have complied with this policy.
"Industry players will be charged a compliance fees instead of annual licence fee," said Bernard Obel, the assistant director for operations at IRAU.
However, the regulations governed implementation of the new licensing regime are yet to be finalised.
The switch to a perpetual licensing regime promises increased focus on digital surveillance of industry players' activities, rigorous assessment of quarterly performance reports and full scale risk-based supervision -- a regulatory model that monitors real-time risks faced by market players such as liquidity problems and fraud instead of just changes in capital levels, experts say.
"Under the perpetual licensing regime, the Authority will focus more on on-site inspections, risk-based supervision and submission of real time digital performance reports," said Mr Obel.
Perpetual licensing is among sector reforms introduced under the Insurance Act 2017.
Others are the strengthening of risk management and internal control measures; the introduction of measures to boost liquidity and ease cash flow of insurance companies; a shift to risk-based supervision in order to protect the interests of policyholders; the shift from a private to a public tertiary college; guidelines for management takeover in the event a licence is revoked; and a public sensitisation drive to ensure consumers and prospective clients are better served. Read more on All Africa.
Source: All Africa