Prudential Communication 1 of 2021 | Directive 135 transfers
Transfer of a compulsory linked annuity policy issued by one insurer to a compulsory linked annuity policy or compulsory conventional annuity policy issued by another insurer
Prudential Communication 1 of 2021 dated 17 February 2021 (PC 1) confirms that transfers contemplated in terms of the standing approval in Directive 135 must now be approved by the Prudential Authority (PA) in terms of section 50(1) of the Insurance Act.
In terms of PC 1 the PA confirms that it grants a standing approval in terms of section 50 (1) in respect of the replacement of
- A compulsory linked annuity policy issued by one insurer with a compulsory linked annuity policy issued by another insurer; and
- A compulsory linked annuity policy issued by one insurer with a compulsory conventional annuity policy issued by another insurer.
The standing approval applies retrospectively to a) and b) above that were executed on or after 1 July 2018 and the date of this PC on the proviso that the replacements in a) or b) have satisfied the conditions specified in Appendix 1 read with Appendix 2 (the Appendices) of this PC 1. The replacements effected without compliance with the conditions specified in the Appendices will be deemed void. The conditions are as follows:
- a written agreement must be entered into between the affected insurers;
- the policyholder of the compulsory annuity must consent to the replacement of the policy by another insurer;
- the initial policy and replacement policy must have conditions which are essentially the same;
- the chief executive officers of both insurers must report annually to the PA. The format of the annual report by the CEO has been outlined in PC 1 and is due by Just together with its annual statutory return at the end of April each year.
PC 1 requires insurers that have effected replacements contemplated in a) or b) to enable regulatory compliance with the respective provisos1 within 6 months from the date of the issue of this PC, being 17 February 2021. The Head of the Compliance Control Function will be required to provide confirmation to the PA of regulatory compliance in a format to be prescribed by the PA.
The Insurance Act and transfers of insurance business to pension funds
In terms of PC 1, the Prudential Authority acknowledges that section 50 of the Insurance Act in its current format does not specifically deal or require the approval of the PA for the transfer of assets and liabilities associated with insurance business from insurers to pension funds. To deal with this, the PA intends to propose amendments to the Insurance Act to specify “that transfers of assets and liabilities associated with insurance business from an insurer to a pension fund or any other persons or entities will require the approval of the PA in accordance with section 50 of the Insurance Act.”
1. Satisfaction of the conditions specified in Appendix 1 read with Appendix 2 of PC 1