Guidance Manual

Guidance Manual:

Completion of the

SHORT-TERM INSURANCE

Statutory Return (ST2015)

Table of contents

INTRODUCTION

INFORMATION REGARDING THE RETURN

EXCEL FUNCTIONALITY

Statement A1 - REGISTRATION INFORMATION

Statement A2 - ADDRESSES AND PARTICULARS OF KEY PERSONS

Statement A3 - DIRECTORS, MANAGEMENT EXECUTIVES AND MEMBERS OF AUDIT COMMITEE

B STATEMENTS

Statement B1 - GROSS UNDERWRITING RESULTS

Statement B2 - REINSURANCE UNDERWRITING RESULTS

Statement B4 - GROSS AND REINSURANCE PREMIUM ANALYSIS

Statement B5 - NET UNDERWRITING RESULTS

Statement B6 - SUMMARY OF BUSINESS COMPOSITION

Statement B7 - INFORMATION RELATING TO CLAIMS, CREDIT INSURANCE AND DISTRIBUTION CHANNELS

Statement C1 and C2 - STATEMENT OF COMPREHENSIVE INCOME AND STATEMENT OF FINANCIAL POSITION

Statement C3 - COMPARISON OF STATUTORY UNDERWRITING RESULTS AND PUBLISHED UNDERWRITING ACCOUNT

Statement C3.1 - BUDGETED UNDERWRITNG RESULT PROJECTIONS FOR THE NEXT FINANCIAL YEAR

Statement C4 - ANALYSIS OF ISSUED PREFERENCE SHARES & DEBENTURES

Statement C5 - CASH FLOW STATEMENT

Statement D1 - RESERVING DEVELOPMENT (Including Statements D1.1 to D1.8)

Statement D2 - UNEARNED PREMIUM PROVISIONS (“UPP”)

Statement D3 - SUMMARY OF TECHINCAL PROVISIONS (including Statement D3.1)

Statement D3.2 – INCURRED BUT NOT YET REPORTED RESERVE

Statement E1 - CASH & BALANCES & DEPOSITS

Statement E2 - SECURITIES & LOANS

Statement E3 - DEBENTURES, LOAN STOCK & OTHER SECURITIES

Statement E4 - DEBTORS (CLAIMS AGAINST PERSONS AND ENTITIES)

Statement E4.2 - DEBTORS (Claims against persons & entities)

Statement E5 - SHARES, UNITS & DEPOSITORY RECEIPTS

Statement E6 - LAND AND BUILDINGS – FREEHOLD ONLY

Statement E7 - FIXED ASSETS & SUMMARIES OF OTHER ASSETS

Statement E8 – DERIVATIVES

Statement E9 (total) - ASSETS AND LIABILITIES: COMPARISON OF STATUTORY TO SHAREHOLDERS’ VALUES

Statement E11 - BANKING INSTITUTION EXPOSURE

Statement E12 - OTHER INSTITUTION EXPOSURE

Statement F1 – CAPITAL ADEQUACY REQUIREMENT, SURPLUS ASSETS, NET ASSET RATIO AND SOLVENCY

Statement F1.1 – ASSETS BACKING TOTAL LIABILITIES

Statement F1.2 – MARKET RISK CAPITAL CHARGE

Statement F1.3 – CREDIT RISK CAPITAL CHARGE

Statement F1.4 – INSURANCE RISK CAPITAL CHARGE

Statement F1.5 – BASIC SOLVENCY CAPITAL REQUIREMENT AND OPERATIONAL RISK CAPITAL CHARGE

Statement F2 - SPREAD OF DOMESTIC ASSETS

Statement H - ASSURANCE REPORT BY THE INDEPENDENT AUDITOR

Statement I - CELL CAPTIVE INSURERS

Statement J 1 – SHORT-TERM REINSURANCE SUPERVISION QUESTIONNAIRE

Statement J2 – SPREAD OF REINSURERS

Statement J3 – CATASTROPHE REINSURANCE

Statement J4 to J11

Statement K1 - SINGLE FACTOR STRESS TEST ON STATUTORY SURPLUS – INSURANCE RISK

Statement K2 - SINGLE FACTOR STRESS TEST ON STATUTORY SURPLUS – SCENARIO & MARKET RISK

Statement G1 – GENERAL INFORMATION

Statement G2- RISK REPORT BY DIRECTORS

Statement G3- GOVERNANCE AND RISK MANAGEMENT

Statement G4 - Cross Border Insurance operations

DEFINITIONS

INTRODUCTION

These notes have been compiled by the Financial Services Board (“FSB”) to provide assistance to those responsible for completing the annual short –term insurance statutory return (ST2015).

It is important to note that every statement that is applicable to the insurer in question must be completed. The majority of FSB’s queries relate to statements that have not been fully completed. All information, however inconsequential it may appear, is relevant for a full assessment from the Regulators' point of view.

The return can be downloaded from the FSB official website, – Insurance –Forms: Applications, Notifications, Returns and Complaints – 2015 Short-Term Returns– ST2015).The printout made of your final return will be regarded as the official return to the FSB after being signed by the responsible parties. The signed return should be submitted in duplicate (only one need to be signed as an original) together with an electronic version of the completed return and two sets of the published annual financial statement.It will be appreciated if the certified copy contains only public statements withany supporting documents.

Statutory return, short-term return, statutory short-term return and return all refer to the official statutory return for all short-term insurers.

The ST2015is split into two returns, namely quantitative and qualitative returns. The split was necessary due to the size of the statutory returnsbecame unmanageable for certain insurers due to the different formatting requirements as well as the different versions of Excel being used..

INFORMATION REGARDING THE RETURN

This return will be completed using audited figures.

Some of the statements are available for public scrutiny. Those statements that are not available to the public are clearly marked in the right hand top corner "CONFIDENTIAL STATEMENT NOT AVAILABLE TO PUBLIC".

Two indices are available:

Index 1: Statements available to the public, and

Index 2: Statements not available to the public.

Validation tool

The statutory return includes a worksheet entitled “Validation”. This is not a worksheet that needs completion;the validation tool draws values from the completed short-term statutory return and performs some basic data validity checks (see column I). Section 1 is a “General Checks” section and aims to verify the completeness of important fields in Statement A1. Section 2 up to Section 9 contains checks pertaining to the rest of the return and each block in column I will return either an “OK” or an “Error” message. The “Error” message will be returned if the relevant totals within the block do not tie up. The “Error” message will also be returned where rounding errors occur.

Completion of the Statements

The insurer should only start to complete the electronic workbook from Statement A onwards. The return covers the latest financial period. Value added tax (VAT) should be treated in the same manner as in the published annual financial statements.

Only shaded areas require figures or information to be entered where applicable.

All other areas (non shaded) are protected cells and contain automatic calculations, information or data or must remain blank or reflected as zero. No changes may be done to these protected areas (cells). No structural changes can be made to the return as each worksheet is protected.

Supporting statements

Each statement is designed on a separate worksheet. Where additional detail is required but the statement does not have adequate space (e.g. statement E), a supporting statement is provided in the same format (i.e. statement E.1).

The supporting statement will not be protected which means that the user will be able to customise the supporting statement, e.g.E1.1 add and delete rows as required. Please note that the values from the supporting statement will not automatically be transferred to the principle statement.

The supporting statement will be treated as part of the main statement for signature purposes.

Additional documentation

Any other documents, submitted to the registrar, must if it is:

an original, be accompanied by one copy; and
a copy, be accompanied by one copy, one of which has been certified as correct by an officer of the insurer.

The additional documents will be treated as part of the return for signature purposes.

Consistency & Completeness

All figures must be rounded off to the nearest thousand rand.

For the sake of consistency and completeness of statistical information compiled from the return and the statements, it is essential that the insurer complete all items that should or can be completed. With the exception of the "supporting statements", no item may be deleted or inserted.

Submission of the Return

The statutory return is requested in terms of section 35 of the Act in respect of the medium and form, containing the information and by the date or within the period prescribed by the Registrar. If the return is incomplete or incorrect the return can be rejected in terms of section 35(2) of the Act. Further to this, if a statement submitted as part of the statutory return requires further investigation a request to the short-term insurer in terms of section 35(3) of the Act to provide more information can be made. The return must be printed and submitted even if nil.

Submission time & extension

The return must be submitted within 4 months of the end of the financial period to which it relates. Extension for the completion of the return can be applied for under Section 4(1) of the Act.

Where the auditors submitted any other report or statement to the shareholders and/or policyholders concerning the financial position of the short-term insurer, a copy must be submitted to the Registrar without any delay. Please refer to section 28(3) of the Act.

Submission procedure & address

The 2015 returns should be uploaded via the Insurance Upload facility and no emailed returns will be accepted.

2015 – Quantitative Return

Only 1 return should be uploaded – if an uploaded version needs to be replaced, this can be done by deleting the uploaded document and uploading a new one.
In the case of composite reinsurers you will be required and allowed to submit a total of 2 returns.
If any changes are made to a return the previous return should be deleted. When changing a specific sheet in a return the entire electronic return needs to be resubmitted
If more than the required number of returns is uploaded, the submission will be deemed to be invalid.
Any annexures or additional documentation to the returns should be uploaded under the “Other Documents” section

2015 – Qualitative Return

Only 1 return should be uploaded – if an uploaded version needs to be replaced, this can be done by deleting the uploaded document and uploading a new one.
In the case of composite reinsurers you will be required and allowed to submit a total of 2 returns.
If any changes are made to a return the previous return should be deleted. When changing a specific sheet in a return the entire electronic return needs to be resubmitted
If more than the required number of returns is uploaded, the submission will be deemed to be invalid.
Any annexures or additional documentation to the returns should be uploaded under the “Other Documents” section

2015 – Other Documentation

This includes all documentation submitted with the hard copy return. Any annexures submitted in hard copy should also be uploaded here electronically.

Things to consider when completing and submitting the return:

No external links should remain in the submitted return.
Do not override/change any of the standard protections or formulae’s.
If you encounter any “Errors” on the validation sheet please contact the responsible analyst before submitting the returns in order to resolve the issue before submission.
The electronic documents submitted should be a “mirrored” copy of the hard copies submitted.

The original signed copy of the statutory return must be sent to:

The Registrar of Short-term Insurance

Insurance Prudential Department

PO Box 35655

Menlo Park

Pretoria

0102

The return can also be delivered to:

The Registrar of Short-term Insurance

Insurance Prudential Department

Riverwalk Office Park, Block B

41 Matroosberg Road (Corner Garsfontein and Matroosberg Roads)

Ashlea Gardens, Extension 6

Menlo Park

Pretoria

0081

Version Control

Each new version issued by the FSB will be available on the official website:

General

Declaration by the Auditor(s)

The declaration by the auditor appears in the bottom right-hand corner of each statement.

If appears, the auditor only needs to initial the statement to confirm that this is the final statement that forms part of the submitted statutory return.

If appears, the auditor has to sign-off certain aspects of or the whole of the specific statement. In this regard, please refer to the declaration by the Auditors in Statement H.

Additional information

The Registrar may direct an insurer to furnish the Registrar with such additional information and documents as may be necessary for purposes of the Act. (Refer to section 4(2) of the Act.)

EXCEL FUNCTIONALITY

Page Numbering

Each statement is numbered in the top right-hand corner.

Page set-up

Even though the various worksheets are “protected”, one is still able to change the page set-up for printing purposes:

Page orientation, scaling, size and print quality can be changed,
Margins can be changed,
Page breaks can be added and deleted, and
Printing colour can be changed (default setting: black & white).

QUANTITATIVE STATEMENTS

Statement A1 - REGISTRATION INFORMATION

Description

Registrar of Short-term Insurance Reference number

This number refers to the unique number that is allocated to each insurer at registration and used by the FSB in all correspondence with the insurer. This number will be displayed as 10/10/1/xxxx/8.

The name of the insurer can be chosen from the drop-down box (the reference number will be inserted automatically) or the name of the insurer can be typed in, in which case the reference number will also need to be typed in. The dropdown box will be updated annually with each version of the return.

The types of policies listed are defined in the Act as short-term insurance policies, i.e. property, transportation, motor, accident and health, guarantee, liability, engineering and miscellaneous. Tick the appropriate boxes to indicate which types of policies the insurer is authorised to underwrite.

Registration conditions

Conditions imposed on an insurer are shown on the reverse side of the registration certificate, which the Registrar issued when the company was registered under the Short-term Insurance Act, 1998.

Although all insurers are registered to do short-term insurance business, a condition of registration may include types of policies that an insurer may issue and can include other specific conditions provided for in section 10 of the Act.

If any other person, company or legal entity requires a copy of the conditions of registration imposed on an insurer, they can contact the Registrar.

Certificate number

The number on the certificate (that the Registrar issued) will change if the conditions imposed on the insurer's registration are changed. Conditions of registration may vary or new conditions can be imposed by the Registrar or on request from the insurer in terms of section 11 of the Act. Please note that the reference number mentioned above will remain unchanged.

Names of contact persons

Refer to sections 16 and 18 to 21 of the Act.

The public officer and auditor(s)’ details and where applicable the details of the statutory actuary must be provided. The Act requires that the Registrar be informed of the appointment/change in appointment of the public officer. The Registrar also needs to approve the appointment of the auditor(s) and where applicable the appointment of the statutory actuary. All these people have to complete and submit a personal questionnaire to the Registrar. The questionnaires are available on the FSB website:

In addition, it is requested that any change in the persons' contact details or change to appointments, are forwarded to the Registrar.

Public Officer

A public officer must be appointed in terms of section 16 of the Act. Where the public officer has changed, the insurer must notify the Registrar within 30 days.

Auditor

Where only one firm of auditors is employed, please insert “N/A” under each of the headings provided for the second firm of auditors.

Statutory Actuary

Where insurer appoints a statutory actuary(ies),and or alternate statutory actuary, his/her details must be provided. The Act specifies that the Registrar approves the appointment of the statutory actuary(ies) andthat person will have to complete and submit a personal questionnaire to the Registrar.

If the insurer does not have an alternate statutory actuary, “N/A” should be filled in under each of the lines related to the alternate statutory actuary.

Shareholders

Refer to sections 25 and 26 of the Act.

Statement A2 - ADDRESSES AND PARTICULARS OF KEY PERSONS

If a key person does not have an e-mail address, please insert “N/A”.

Head Office and Public Officer

Refer to section 16 of the Act. In terms of section 16(1)(d) of the Act, insurers must notify the Registrar of any changes to the head office or public officer within 30 days of the change.

Auditors

Furnish particulars of the Responsible Partner.

Where only one firm of auditors is employed, please insert “N/A” under each of the headings provided for the second firm of auditors.

STATUTORY Actuary

An insurer is not required to appoint a statutory actuary or an alternate statutory actuary but in certain cases, the Registrar may direct an insurer to appoint a statutory actuary or alternate statutory actuary.. If the insurer does not have a statutory or an alternate statutory actuary, “N/A” should be filled in under each of the lines related to the statutory actuary and alternate statutory actuary.

Consumer Complaints Person

The Registrar regularly receives complaints from policyholders regarding poor service or claims repudiations. The Registrar usually refers these complaints to the insurer for comment. To simplify matters the Registrar needs the contact details of the responsible person within the insurance company dealing with consumer related complaints. The insurer should notify the Registrar of any changes.

Statement A3 - DIRECTORS, MANAGEMENT EXECUTIVES AND MEMBERS OF AUDIT COMMITEE

Directors

It is important in relation to each and every director to complete the full requirements of the statement.

Appointment & resignations

If a director resigned during the year, details should still be included on the statement. The date of resignation should be stated. Notification of appointments and terminations must be done within 30 days after the appointment or termination, together with a reason for the termination in terms of section 18 of the Act.

Managing Executive – As indicated under the definitions

Managing Executive

The Act defines managing executive under section 1 as meaning the chief executive officer of a short-term insurer and every manager of the short-term insurer who reports directly to that chief executive officer.

Audit Committee

Refer to Section 22 of the Act.

Position held

Examples include Chairman, Vice-chairman, Non-executive, Managing Director, etc.

Appointment & resignations

If a member of the audit committee resigned during the year, details should still be included on the statement. The date of resignation should be stated.

B STATEMENTS