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Group 3

Group 3. Bhaiya M. Sondawle Donilia Cuffy Martin Libinga Sarika Wattuhea Limbikani Nundwe. Our Presentation. Chapter off-site Submissions. This chapter provides the following off-site submissions by Commoninsurer Limited to its supervisory authority.

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Group 3

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  1. Group 3 Bhaiya M. Sondawle Donilia Cuffy Martin Libinga SarikaWattuhea LimbikaniNundwe

  2. Our Presentation Group 3

  3. Chapter off-site Submissions This chapter provides the following off-site submissions by Commoninsurer Limited to its supervisory authority. • Intermediary agreement between the intermediaries the insurance company • Reinsurance agreements entered into by the Company • Discretionary investment management agreement • Correspondences between Commoninsurer Limited and the supervisory authority Commonisland Insurance Regulatory Authority Group 3

  4. The Agreement was reviewed by the Regulators and the following weaknesses were highlighted: Background It is not the responsibility of the intermediary to underwrite policies; it is the function of the insurance Company. 2. General 2.2 The intermediary should not be responsibility for the promotion, marketing, distribution and management for the Company. Definitions Regulator Amend to read” Regulator” means any regulatory authority which regulates the provision of Insurance Act for the protection of Policyholders. Group 3

  5. Obligation of the intermediary • 4.1.5. Why payment by cash is not allowed? • 4.1.7. Keep accurate records......duration is not specified. • 4.1.7........... ............and to provide details and allow inspection of those add “Bank records and claims files” Group 3

  6. 5.Personal Indemnity 5.1 In that case the Broker is acting like the agent. This should not be the case; hence it appears that there is no agency agreement. 7. Premium and Credits 7.1 .................Insurer shall be deposited within two business days. Amend to read “should be deposited the next working day” 8.Claims 8.1 The intermediary shall ensure management of claims pertaining........In this case it denotes that the broker is the agent of the Company. Group 3

  7. Regulatory Requirements: 9.2 The intermediary shall be solely responsible for complying with all rules set by the Supervisory Authority..............................In this case the intermediary is deemed to be an agent of the Company and not as an independent contractor. 10.Commission 10.5 Needs to be clarified 11.Obligations of Commoninsurer • 11.1.1 To use its best endeavours “to obey the instructions” of the intermediary....................... Why should this be so? • 11.1.1, 11.1.2, 11.1.5 &11.1.8 should not be accepted; in these cases there is no agency agreement. Group 3

  8. 13. Confidentiality, Intellectual Property and Data Protection • 13.3 Again Intermediary should not be responsible for promotion or advertising • 13.7 This is not an agency contract 14. No Assignment – should consider deleting seems like the Broker’s agreement. Group 3

  9. Appendix 1. Claims Management The intermediary shall pay the claims in accordance with criteria specified by the insurer from time to time. In this case it appears that the Broker is acting like the Agent of the Company. This intermediary should not operate as an agent of the Company. Group 3

  10. Appendix 2. Commission rates: It was observed that the treaty was not signed. The treaty was not signed and should be signed by participating parties. ARTICLE IV-ULTIMATE NET LOSS All salvages, recoveries and payments recovered or received by the Company subsequent to a loss settlement under this agreement.........We noted that no cash loss settlement provision was made. ARTICLE VII-PREMIUM Settlement shall be in Sterling....................We noted that no settlement provision was given in agreement. Group 3

  11. Article XVI – INTERMEDIARY Intermediary clause is lacking pertinent information and is insufficiently stated The insolvency clause is missing from the treaty agreement. Group 3

  12. Motor Physical Damage/Bodily and Third-Party Liability Excess of Loss Reinsurance Agreement – Schedule ARTICLE II Motor (Third-Party Liability) There is a gap of 250k between the two lawyers; which falls back on the retention of the Insurance Company. ARTICLE III Reinstatements A record of 9 in both instance seems liberal and unusual, the Regulators must see the treaty agreement. The treaty is not signed by the participating reinsurer The commencement date and end date must be recorded on the agreement Group 3

  13. ARTICLE XV-ARBITRATION Again no Arbitrary Clause mentioned ARTICLE XVI-INTERMEDIARY Again there is no Intermediary Clause. There is no per risk excess of loss treaty. Therefore the company is retaining 100% Group 3

  14. There is no expiry date in the long term treaties therefore asked for validity certificate by re-insurer and insurer broker. Group 3

  15. Discretionary Investment Management Agreement • Due diligence report on service provider was not submitted • No further delegation of investment function/independent Investment Manager Group 3

  16. 4. Custodian • The custodian of the assets must be registered under the custodian/trust laws of the country. • There must be a custodian or trustee agreement between the insurance company and the custodian or trustee authorities Group 3

  17. Appendix B Duration of investment period of 4.5 yrs is too long for a general insurance. Group 3

  18. The letter of 1 December 2008 written to the company on the reinsurance program gives comfort to the company that its 2008 reinsurance program is acceptable to the Regulators which is not the case. The reinsurance program for 2008 has the following short comings: 1. There are no per risk and per policy access of loss treaties to protect the exposure arranging out of single loss or accident 2. The following clauses were not incorporated in the treaties: • Insolvency clause • Intermediary clause • There is a coverage gap between lawyer 1 and 2 in the case of motor treaty • The Compliance issued from Mr Chief has to address the short comings in the 2008 treaties Group 3

  19. Dividend distribution for Commoninsurer • Mr Chief has requested the regulators for the release of dividends to the shareholder in the amount of GBP479k within 30 days of the end of the financial year. The regulators by the letter of February 2009 conveyed their no objection of the distribution of the dividend • We hereby note that the regulators should not allow the release of the dividend of the basis of the management account on the contrary the regulator should conduct the analysis on the adequacy of technical reserve after the receipt of audited account i.e. after the six month of the financial year. Group 3

  20. Reinsurance Program for 2010 • We are surprise that the Regulators have approved the company’s reinsurance program for the year 2010 in spite of the following discrepancies. • The newly reinsurance Ltd was not authorized in the country reinsurance island. • It is a newly set up company with capital of only GBP50k • The reinsurance company has no credit rating and has no plan to apply for it up to the period of 3 yrs subsequent to operation. Group 3

  21. Dividend distribution for 2010 • The Regulators by the letter of 209 July 2010 informed the company that the company has experience d the significant lost over the first quarter of 2010. They also expect the company to take immediate and concrete steps to restore the own fund position as least to the GBP3M level. They also directed the company to submit the Board’s plan to address the short fall and outline proposals for ensuring that such losses do not reoccur. • The Company by its letter of 5th August 2010 informed the Regulators that the loss in first quarter of 2010 was the result of negative developments on claims pertaining to the year 2008 and 2009. • This clearly indicates that the Company has been unreserved to inflate the company’s profit by under reserving its technical reserves. In this circumstance the Regulators should not have been approved the dividends for the years 2008 and 2009. Group 3

  22. Commoninsurer’s own fund position The Regulators should not approve the loan of $2m repayable in 5 years time without verifying the repayment capacity in the scenario that the Company has been incurring losses in its operations. Also the provision of 5% IBNR reserves is not acceptable to the Regulators it should have been minimum 10% Group 3

  23. Thanks for your attention Group 3

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