Issues in Regulation and Supervision of Microinsurance

Publication Date: Jun 2007
Published by: International Association of Insurance Supervisors (IAIS) & CGAP Working Group on Microinsurance
Document Type: Paper

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How to ensure professional regulation and supervision of microinsurance?

This paper attempts to explain the current status in microinsurance, its importance in developing inclusive financial systems, and the need for professional regulation and supervision. In this attempt it also identifies issues and challenges in developing an enabling regulatory framework for promoting microinsurance in line with the International Association of Insurance Supervisors (IAIS) Insurance Core Principles (ICPs).

The paper draws upon the practical experience of:

• Insurance supervisors;
• Microinsurance experts.

• Microinsurance refers to "servicing specifically the low-income population";
• An effective financial market infrastructure is the weakest link in providing an enabling environment and a level playing field for microinsurance providers and customers;
• If an appropriate mix of incentives and disincentives can be provided, a well functioning and adequate supervisory system can be implemented to support the development of inclusive insurance markets.

• Supervisory review process including licensing issues;
• Financial and prudential issues including risk based supervision;
• Governance issues;
• Operational issues;
• Market conduct issues.

• Developing a microinsurance policy and promoting its implementation;
• Facilitating the availability of information;
• Promoting learning processes and dialogue among all sector stakeholders;
• Enacting clear and standard laws to encourage insurance for low-income households;
• Limiting moral hazard and fraud by promoting awareness, controls and incentive systems.