Dear Member

Please find attached the eleventh and last edition of FIA Inform for the year, for your perusal and distribution within your company as appropriate. At this time, the FIA Secretariat would like to wish all of our members, everything of the best over the holiday season and a safe journey should you be travelling.

GENERAL

1. Fais Ombud says too many Ombuds are bad for the industry

In a ruling in which he criticised the way in which the Ombud for Short Term Insurance (OSTI) changed his stance on a complaint, the FAIS Ombud has said it is clearly not in the interests of the consumer and the financial services industry to have a glut of Ombuds. More

2. Fit and Proper requirements – 31 December 2008

Attention is particularly drawn to the FIA Express No. 112/2008 which provides a detailed overview of the new fit and proper requirements with effect from 31 December 2008.

3. FIA EXPRESS items

The FIA Xpress is used when needed to convey information to members regarding legislation and determinations regarding the industry which will have an effect on intermediaries. Follows are quick links to items published over the last month:

106/2008 SASRIA NEWSLETTER 444

107/2008 SASRIA NEWSLETTER 445

108/2008 FINANCIAL SERVICES LAWS GENERAL AMENDMENT ACT, 2008

109/2008 ROAD ACCIDENT FUND

110/2008 ANNUAL REPORTS

111/2008 PERSONAL SERVICE COMPANIES, CLOSE CORPORATIONS AND TRUSTS

112/2008 FIT AND PROPER REQUIREMENTS 2008

113/2008 FAIS OMBUD DETERMINATION

114/2008 2008 COMPLIANCE REPORT

115/2008 CONVERSIONS OF LEGAL ENTITIES

116/2008 FAIS OMBUD DETERMINATION

117/2008 UPDATE ON SALE OF M & F

118/2008 FIA HEALTCARE INTERMEDIARIES

SHORT-TERM

1. The role of investment optimisation within the insurance cycle

When it comes to investment optimisation, three factors namely risk, return and time period play a major role within the insurance cycle. How these factors affect optimisation will all depend on the liability duration of the insurance company. More

2. South African Insurance Crime Bureau launched

The South African Insurance Crime Bureau (SAICB) was officially launched at a breakfast at the Johannesburg Country Club – Auckland Park, on 30 October 2008. The SAICB has been established to address the ever escalating problem of insurance fraud and crime in the short term industry, and especially organized insurance fraud. More

3. Getting your client’s sums insured right

Rampant inflation in the building and other sectors makes it difficult for companies to insure their buildings, plant and machinery adequately. Consider alone the increase in the cost of steel over the last year. Things like this obviously have a significant impact on buildings, and plant and machinery sums insured. In instances where the plant and machinery is imported from countries like the USA, Germany, Japan, the UK and other countries with strong currencies, the gyrating Rand makes it even harder to insure properly. This article takes a quick look at the trending requirements, in so far as inflation and currency fluctuations are concerned. More

4. Leading trade and investment insurers reaffirm commitment to global economy

The global credit crisis dominated discussions at the recent Annual General Meeting of the Berne Union, the world’s leading association of export credit and investment insurers. In the prevailing climate of market uncertainty, with finance options being squeezed, members reaffirmed their commitment to support their exporters. Seeing the early warning signs, Berne Union members actively positioned their risk profiles, so that they continue to provide insurance and play a vital role in sustaining international channels of commerce. More

5. AIG in South Africa grows profits 63%; operating as normal

Despite American International Group Inc.’s (“AIG Inc.”) New York announcement today of a third quarter loss of US$24.47 billion, the results show that the group’s separately capitalised American International Underwriters (AIU), which include AIG South Africa Limited and AIG Life South Africa Limited (AIG South Africa Companies), continue to be highly profitable and are operating as normal. More

6. Standard & Poor’s awards an A rating to Hannover Re Africa

Standard & Poor’s has upgraded the rating of non-life reinsurance company, Hannover Reinsurance Africa (Ltd) from BBB+ to A with a stable outlook. Standard & Poor’s indicated that the upgrade was resultant from several key factors. Hannover Re Africa has become a strategically important member of the Hannover Re Group. More

FINANCIAL PLANNING

1. Groundbreaking life cover for Diabetics

Being diagnosed with diabetes is a life changing event, with radical changes required in diet, exercise regime, and potentially the use of prescribed drugs and/or insulin.  As a diabetic, accessing life insurance – which is often a prerequisite for home or business loans, or just to provide peace of mind with regards to the financial security of one’s family – may also become exceptionally difficult, not to mention unaffordable. More

2. Metropolitan in operational ascendancy despite inexorable declines on world investment markets

From an operational perspective, Metropolitan’s performance for the nine months to 30 September 2008 was very good, with results in all areas exceeding expectations. Metropolitan Retail’s new business achievements were particularly commendable given the tough economic environment. More

3. ASISA/Intermediary Associations’ meeting: feedback

Discussions between product houses and intermediary body representatives take place at regular intervals. We share hereunder some of the issues discussed at the most recent meeting…more.

4. Long-term diversification still not a priority for local investors

After maintaining extreme caution for the first half of this year, South African investors ventured back into offshore investments during the third quarter, resulting in net inflows for the first time this year for foreign currency denominated funds registered with the Financial Services Board (FSB). More

5. FSB: Dealstream update

The provisional curatorship of Dealstream has been extended until 20 February 2009. The intervention by RMB was also postponed to the same date. More

6. Long Term Ombudsman cautions on life policies with cancellation clauses

In their recent newsletter the Long Term Ombudsman details a case study regarding cancellation clauses in Life policies and the outcome is likely to have an impact on future regulation particularly in so far as funeral and micro-insurance is concerned. More

EMPLOYEE BENEFITS

1. Deductions from pension fund proceeds

What requirements must be met before a deduction from pension proceeds are allowed, particularly in a case of fraud by the employee? The answer to this was provided in the latest determination by the Pension Fund Adjudicator. Despite what appears to be clear evidence that a member had defrauded his employer, the paperwork was not done properly, and the deduction had to be reversed. More

2. Undisclosed Profits: The Pension Fund Adjudicator's views

The Pension Funds Adjudicator has released two determinations dealing with the obligation of trustees to recover secret profits retained by fund administrators, and the necessity for them to take a decision as to the application of such recovered monies. More

3. FSB to serve on world pension body

The Financial Services Board (FSB) has been elected to serve on the executive committee of the International Organisation of Pension Supervisors at the organisation’s annual meeting in Mombasa, Kenya recently. More

HEALTHCARE

1. Medshield announces low rate increase and self-administration for 2009

Medshield, one of the largest medical schemes in South Africa has announced a flat rate increase of just 10.9% across all options. As one of the lowest increases in the industry – and against a backdrop of rising interest rates, exploding healthcare inflation and a global financial crisis – this news will be welcomed by Medshield members. More

2. Statement from Gen-Health curator re NPA asset seizure

Responding to a statement issued earlier today by the NPA re the R47 million  seizure of assets belonging to previous Gen-Health managers, the current curator of the scheme, Boysie Phehlukwayo, reassured members that the seizure in no way impacted the health or status of the current Gen-Health Scheme. More

We hope you have found this edition of Inform useful and would welcome any feedback you may have. We would also welcome any input with regard to topics you would like covered.

Yours sincerely

FIA Secretariat