A commentary on the insurance industry act 2015 of Botswana

• Record Number: lesotho_v26_n1_a5
• DOI: 10.10520/EJC-110b32cdbc
• Published date: 01 September 2018
• Date: 01 September 2018
• Author: T.F. Khumalo
• Pages: 147-163

A COMMEN TAR Y ON THE INSURANCE I NDUSTRY ACT 2015

OF BOTSWANA

Khumalo, T. F.*

Abstract

This paper provides a commentary on the Insurance Industry

Act, 2015. This Act was promulgated with a view to

consolidate the laws pertaining to the insurance industry so

as to ensure that the industry is governed by a single Act. The

changes introduced by this Act were meant to

comprehensively regulate insurance companies and

intermediaries. This Act was also intended to increase

protection of insurance policy holders. This commentary seeks

to analyse the Act, as well as highlighting the developments it

has introduced. The paper will also discuss the strengths and

weaknesses of the Act and will come up with suggestions for

reform.

INTRODUCTION

The Insura nce Industry Act Number 10 of 2015, which came into

force in 2016, is a response to the developments that have occurred

in the insurance industry over the last 25 years.1 During this period,

the insurance industry has become more complex and more

diversified.2 The industry is now fully integrated into the broader

financial services sector.3 This Act was also necessitated by the

* LLB (Hons) (UZ); LLM (UNISA); Lecturer, University of Botswana.

1 The previous Insurance Industry Act was passed in 1990.

2 The non-bank financial services account for 57 per cent of the Financial

Services Sector see Non-Bank Financial Institutions Regulatory Authority ,

2017 Annual Report p.23 available at

http://www.nbfira.org.bw/sites/default/files/2017%20NBFIRA%20AN

NUAL%20REPORT.pdf (accessed 6 November 2017).

3See Section 6 of the Non-Bank Financial In stitutions Regulat ory Authority

Act (Chapter 46:08).

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changes that have occurred in the regulation of the financial

services sector, and in corporate governance standards. This paper

seeks to comment on the Act by discussing its main parts, after a

brief background. It will wind up by a conclusion and

recommendations.

HISTORIC AL BACKGROUND AND CONTEXT OF THE ACT

Various versions of the Insurance Industry Act have regulated the

private insurance industry in Botswana over the last 48 years. 4 The

first insurance-related statute to be passed was the Insurance Act

No. 21 of 1969, which was repealed and replaced by the Insurance

Act No. 12 of 1979. This Act was replaced by the Insurance Industry

Act No. 120 of 1990, which was also repealed and replaced by

current Act, being the Insurance Industry Act No. 10 of 2015. An

Insurance Industry Act is neces sary to add ress the specialised needs

of insurance, and provide the tools necessary for effective

regulation. The insurance industry is an integral part of Non-

Banking Financial Institutions (NBFI), which are all regulated by

one unified regulator.5 The regulator is the Non-Bank Financial

Institutions Regulatory Authority (NBFIRA), which regulates

insurance, brok ers, micro lenders and coll ective invest ment

schemes amongst others.6 NBFIRA has oversight over all NBFI’s

4 Section 3(2) of the Insurance Industry Act, 2015.

5 See Section 6 of the Non-Bank Financial Institutions Regulator y

Authority Act (Chapter 46:08).

6 In the definitions section of the Non-Bank Financial Institutions

Regulator y Authority Act (Chapter 46:08), non -bank financial i nstitutions

include the following: an asset manager; an administrator of a pension or

provident fund; a person operating a central securities depository; a

collective investment undertaking that is an in vestment com pany with

variable capital; a person operating a collective investment undertaking; a

custodian; a finance or leasing company; a friendly society; an insurance

agent; an insurance broker; an insurer; an international insurance firm; an

investment adviser; a management com pany for a collective investment