MASERU — Parliament has passed a bill geared towards the regulation and supervision of insurance institutions as well stimulating investment growth.
The Bill is intended to repeal the “outdated” Insurance Act 1976 and rescinds it with the Insurance Bill 2013, to be cited as the Insurance Act 2013 after it has been enacted.
The Insurance Bill 2013 is also aimed at consolidating the investment climate, protection and development of insurance business in Lesotho to ensure that “the insurance industry prudently meets the demands of the economy for risk management”.
According to deputy minister of finance ’Matšepo Ramakoae, the Insurance Act 1976 was obsolete and unable to regulate “some deplorable practices in the insurance sector”.
The draft law was first tabled in the august House in February by Finance Minister Leketekete Ketso, but later referred back to the Economic and Development Cluster Portfolio Committee for further deliberation.
It was tabled for the second time last week, discussed and passed on Tuesday by general consensus of all the parties in parliament.
It has now been referred to the Senate which will then pass it on to the King’s office for royal ascent once approved by the upper house.
According to its objects and reasons, the proposed law is also aimed at empowering the Central Bank of Lesotho (CBL) as the regulator for effective and efficient supervision of the finance and insurance sectors “while also protecting policy holders”.
The Bill is also targeted at insurance businesses by way of “spelling out procedures of handling accounts and unclaimed monies”.
“Insurance fulfils somewhat different economic functions than do other financial services and, in turn, requires particular conditions to flourish and make a full economic contribution,” Ramakoae said.
Compensation and pooling risk of properties of insurance, Ramakoae said, facilitates for commercial transactions and the provision of credit by “mitigating losses as well as the measurement and management” of non-diversifiable risk more generally.
Actuarial scientists say, “most fundamentally, availability of insurance enables risk averse individuals and entrepreneurs to take higher risk, higher return activities than they would do in the absence of insurance, promoting higher productivity and growth”, Ramakoae told parliament.
According to the economic and development cluster committee, the law will also allow the country to “converge itself with international standards and principles” as Lesotho is a member of international organisations such as the International Association of Insurance Supervisors (IAIS).
IAIS is aimed at promoting effective and globally consistent supervision of the insurance industry in order to develop and maintain fair, safe and stable insurance markets and for “the benefit of policy holders as well as contributing to financial stability”.
Speaking to Lesotho Times about the draft insurance law yesterday, Alliance Insurance Chief Operating Officer Keith Vennell said they could not go into the depths of setbacks and advantages of the Bill as “we have not yet gone through it”.
However, Vennell pointed out “the insurance sector is a central element to trade and development matrix as a key pillar to financial services”.
“The importance of setting in place efficient regulatory structures as a prerequisite to the efficient operation of the insurance sector and particularly in the context of insurance liberalisation and an evolving global insurance sector is essential,” Vennell said.
To substantiate Vennell’s views, Alliance’s Chief Executive Short-Term Division Mok’haphek’ha Lazaro, said the emerging trends in the global insurance market, particularly those relating to technology, newer financial products and corporate failures have “underscored the value of regulation in the insurance sector”.
The Alliance Insurance Company panel alluded the repeal of the Insurance Act 1976 was long overdue “bearing the developments in finance and business”.
Vennell further asserted that insurance is meant for the poor since the rich could always “afford to buy even after accidents”.
“It is in this light that if given a deeper light and chance, one may find that there is a positive correlation between a country’s level of development and insurance coverage,” Lazaro said.