Tanzania: TIRA Circular On Conditions For Dealing With Foreign Reinsurers And Reinsurance Brokers

In this legal briefing we focus on the recent Circular on "Conditions for Dealing with Foreign Reinsurers and Reinsurance Brokers" issued by the Tanzania Insurance Regulatory Authority.

Background

On 11th December 2017, the Tanzania Insurance Regulatory Authority (TIRA) issued Circular No.055/2017 Conditions for Dealing with Foreign Reinsurers and Reinsurance Brokers (the Circular) with a view to revisiting the existing requirements relating to reinsurance arrangements for insurance companies transacting in Tanzania. The Circular took effect from 1st January 2018. The main objective of the Circular is to enhance enforcement of section 31(2) as well as Part VII of the Insurance Act, 2009 (Insurance Act) which give the Commissioner for Insurance mandate to control reinsurance arrangements. TIRA issued the Circular after observing some insurance companies breach certain reinsurance arrangements in Tanzania. TIRA chose to address key challenges in reinsurance dealings, which include:

  • excessive use of International Facultative Reinsurance Arrangements in situations that could be accommodated under Treaty Reinsurance Arrangements;
  • 100% externalization of risks which could partly be retained locally;
  • fronting of extremely low value risks which results into low premium levy payable to TIRA;
  • poor participation of local insurance companies in assuming parts of risks intended to be externalised through co-insurance arrangements;
  • tendency of insurers engaging in co-insurance arrangements with related companies based in other jurisdictions;
  • local insurers colluding amongst themselves so as not to assume certain risk which may result in unnecessary externalisation of risks that can be insured locally;
  • dealing with poorly rated or unrated foreign insurers as well as unaccredited reinsurance companies and brokers;
  • concealing the ultimate destination of reinsurance premium payments through the reinsurance brokers or a series of reinsurance brokers;
  • seeking externalization of risks whose validity period has expired or significant time has lapsed since commencement of cover; and
  • non-disclosure of reinsurance commission or fronting fees payable to local insurers.

Due to the lessons learnt when implementing the Circular in the year 2018, TIRA revised the Circular and on 31st December 2018 issued a new Circular No.055/2017 (Revised Version 01): Conditions for Dealing with Foreign Reinsurers and Reinsurance Brokers (the Revised Circular). The Revised Circular has largely retained the provisions of the Circular but has also incorporated amendments to the Circular.

Key Highlights

Provisions Retained in the Revised Circular

The following are some key requirements of the Circular that have been retained and reiterated due to their importance in the Revised Circular -

  1. Prior approval of all foreign reinsurance arrangements before implementation by insurers – insurers must submit drafts of reinsurance treaties to TIRA before 30th September each year. Further, all finalised reinsurance treaties must be submitted before 30th November for review and approval by TIRA.
  2. Restrictions on externalisation of risks – the Revised Circular maintains several restrictions on externalization of risk like: restrictions on fronting of risks, requirement to exhaust local capacity before externalization, restriction on externalisation of expired risks, restriction on externalisation of long term insurance business in Tanzania, etc.
  3. Irregular bundling and repackaging of risks – irregular bundling and repackaging of risks with the intention of complicating risk exposure and promoting unnecessary externalization is prohibited.
  4. Formation of insurance pools ¬– underwriters are required to form insurance pools or consortia for risks that will be classified by insurers' association and approved by TIRA as large and complex risks.
  5. Insurers must only use local or accredited reinsurance brokers – insurers seeking to externalize insurance risk may use services of locally registered reinsurance brokers or locally accredited reinsurance brokers.
  6. All foreign reinsurers and reinsurance brokers seeking to transact in Tanzania must be accredited by TIRA ¬– the Revised Circular highlights the conditions to be fulfilled by foreign reinsurers and reinsurance brokers in order to earn an Accreditation Certificate from TIRA.
  7. Exhaustion of local capacity before externalization – before externalising risk, the insurer must demonstrate that all local insurers have been invited in assuming parts of the risk and documents of the invitation to be submitted as evidence to TIRA.
  8. Insurers are required to disclose certain information – insurers are required to disclose to TIRA certain information such as: identities of reinsurers receiving premium from Tanzanian insurers; fees received for reinsurance commission or fronting fees; and quarterly treaty accounts.
  9. Credit rating of all Tanzania registered insurance companies ¬– all insurers registered in Tanzania must undergo periodic credit rating to establish financial soundness at least once in every three years. Further, every insurer currently operating in Tanzania must undergo its first credit rating before 31st December 2020.

New Provisions in the Revised Circular

The table below highlights some notable changes brought by the Revised Circular:

Clause Previous requirement in the Circular Current requirement in the Revised Circular
Minimum levy payable to TIRA on foreign facultative placements

3% of applicable gross premium or USD 200 whichever is greater; plus 20% of the applicable fronting fee or reinsurance commission in excess of 12%.

1.5% of applicable gross premium or USD 200 whichever is greater; plus 1.5% premium levy prescribed in the Insurance Regulations.

Non-response to an invitation to participate in insurance of risks constitutes a serious offence

Insurers invited by another insurer must respond to the invitation within 5 working days. Non responses shall attract sanctions by the Commissioner under the Insurance Act

Insurers invited by another insurer must respond to the invitation within 2 working days. Non responses shall attract sanctions by the Commissioner under the Insurance Act.

The Insurance Act provides for a general penalty of up to TZS 5 million.
Submission of quarterly treaty accounts by Tanzanian registered insurance companies Not provided.

All insurers are now required to submit Quarterly Treaty Reinsurance Statements to TIRA.

Requests for remittance of treaty reinsurance premium shall not be considered in absence of appropriate reinsurance statements.

Clyde and Co LLP accepts no responsibility for loss occasioned to any person acting or refraining from acting as a result of material contained in this summary. Further advice should be taken before relying on the contents of this summary. Clyde & Co Tanzania accepts no responsibility for loss accessioned to any person acting or refraining from acting as a result of material contained in this summary. No part of this summary may be used, reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, reading or otherwise without the prior permission of Clyde and Co Tanzania.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions