Consultation on Application Paper on the Regulation and Supervision of Mutuals, Cooperatives and Community-Based Organisations in Increasing Access to Insurance Markets

Public Consultation

Consultation: comments due by 19 July 2016 midnight Basel time

Background:

The Financial Inclusion Working Group (FIWG) has - through a drafting group – developed a draft Application Paper on Mutuals, Cooperatives and Community-based Organisations (MCCOs).

The objective of this draft Paper is to raise awareness of policymakers, regulators and supervisors of the role the MCCOs can play in enhancing access to insurance. At the same time, the purpose of this paper is to provide application guidance on the way the ICPs could be applied in a proportionate manner which should contribute to removing unnecessary barriers by disproportionate regulation and supervision. Therefore, this paper and in particular the application guidance included in section 4 is applicable to MCCOs operating as insurers regardless of the size of its business or organisation.

A diverse range of institutions are commonly described as MCCOs, including mutuals, mutual benefit organisations, cooperatives, friendly societies, burial societies, fraternal societies, community-based organisations, risk pooling organisations and self-insuring schemes.

MCCOs have distinguishing features that set them apart from commercial insurers, such as the fact that they are member-owned and apply principles of democracy. Their ability to operate independently as stand-alone entities in remote and rural areas without long distribution lines makes them a suitable business model for improving access to insurance. In addition, since MCCOs are member-owned they can rely on the trust of their members, are willing to meet the needs of their members and are therefore can fill a gap for those who are un- or underserved both in rural and suburban areas. MCCOs can overcome geographic, cultural, service and product design challenges which other more commercial insurers might not be able or willing to address in order to provide insurance to low income populations.

As an Application Paper this paper provides additional material related to one or more ICPs, including actual examples or case studies that help practical application of supervisory material. Application Papers could be provided in circumstances where the practical application of principles and standards may vary or where their interpretation and implementation may pose challenges Application Papers can provide further advice, illustrations, recommendations or examples of good practice to supervisors on how supervisory material may be implemented.

This Paper is structured as follows:

Section 2 provides a description of the main features and background of the MCCO sector. This should assist in providing an adequate understanding of the context in which the ICPs need to be applied in a proportionate manner. For that purpose this section provides a definition of MCCOs and describes the key defining characteristics and the range of organisational forms. Also, Federations, Associations, Groups and Apex organisations that are sometimes used are discussed as these might affect the application of some ICPs and call for specific guidance. Finally in this section details on the quantitative size of the MCCO sector are provided.

Section 3 discusses the role of MCCOs in creating improved access to insurance markets.

Section 4 deals with relevant ICPs and contains the application guidance. After a general section on proportionality, the ICPs are for this purpose clustered into: Formalisation and Licensing; Corporate Governance; Capital Requirements and Capital Resources; Portfolio-transfers, mergers, demutualisation and winding-up; Supervision general, Supervisory Review & Reporting.

The draft was prepared by a drafting group of the FIWG.

How to provide comments

Feedback on this draft paper is invited by 19 July. Please use the Consultation Tool available at the consultation page of the public section (accessed below) to provide your comments. Instructions for use are available when you access the Tool. Please note that only comments submitted through the tool will be considered. All comments will be published on the IAIS website.

Please note that some formatting (e.g. bullet points) may not be preserved when copying and pasting your comments into the Consultation Tool from other software such as Microsoft Word. ​