News Middle East29 Oct 2020

Morocco:Preparations for risk based solvency system are on track

| 29 Oct 2020

The Risk-Based Solvency (SBR) project of the Insurance and Social Insurance Supervisory Authority (ACAPS) is on track, according to the agency's president, Mr Hassan Boubrik.

Composed of three pillars —quantitative, governance and information—this project will be implemented gradually to smoothen out the impact on insurance companies, reported Finances.

On the quantitative aspect, the first impact study was carried out and focused on the 2017 financial year. "The second impact study will be launched this week and will cover the 2017, 2018 and 2019 financial years", Mr Boubrik said.

This would make it possible to stabilise the methods of calculations for prudential balance sheets and to carry out calibrations. The ACAPS is set to send calculation models this week to the various insurance companies, which will prepare the data. This phase should take 2-3 months.

Once the calculations and data are ready, the Authority will proceed with the calibrations by the end of the year or early 2021. Discussions with the Ministry of Finance and market operators will then take place. At the end of these discussions, the thresholds for capital and solvency requirements and implementation deadlines will be set.

Second pillar: Governance

The Authority has prepared a circular on risk management and governance. Mr Boubrik said that this “will significantly strengthen the governance, control and risk management system of companies”. At the same time, the regulator has prepared "guidelines" covering several insurance aspects.

“These guidelines were sent to the market two months ago and discussions are underway for a final version before publication,” said the regulator.

Under this second pillar, ACAPS will ask companies to draw up an ORSA report (Own risk and solvency assessment) for which the Board is accountable. The ORSA is, in fact, an internal process for assessing risks and solvency by insurance companies. It must illustrate the company's ability to identify, measure and manage the elements likely to affect its solvency or its financial situation.

Insurers must project their balance sheets over a given period and see whether the regulatory ratios will be respected in the event of external or internal shocks, said the ACAPS.

"This system will allow companies to identify the risks they face and adapt their strategic plans," explained Mr Boubrik. The regulator is developing a prudential balance sheet projection tool, which it will make available to companies for this iterative exercise.

Pillar 3: Information

Mr Boubrik highlights too the importance of reliability and integrity of regulatory reporting. These reports must not be subject to manipulation or manual intervention, he said.

He said, “The most important thing is that the industry begins to understand the usefulness of SBR.”

IFRS 17: entry into force scheduled for 2023

IFRS 17 is also a development on which ACAPS is working. Mr Boubrik said that it would not be understandable if “an insurance market like that of Morocco, second in Africa and third in the Arab world, relatively mature, with important players, does not adopt international standards in terms of accounting".

He said, “The work done at the level of the SBR will allow companies to move more easily towards IFRS. This is the case in Europe, where work on Solvency II has enabled insurers to save time on the preparation and implementation of IFRS 17.”

IFRS 17, which governs insurance contracts, will come into force on 1 January 2023.

| Print | Share

Note that your comment may be edited or removed in the future, and that your comment may appear alongside the original article on websites other than this one.


Recent Comments

There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.