Insurance Regulation
Licensing and classes of business
The Financial Services Commission licenses insurers, brokers, agents and loss adjusters under the insurance legislation. Insurers are licensed by class of business - long-term (life) and general (non-life) business are separated, and an insurer may not carry on both within a single legal entity without specific authorisation. Intermediaries must be registered, act only within the scope of their registration, disclose commissions and avoid conflicts of interest.
Prudential requirements
Candidates must know the core solvency framework: minimum capital and solvency margin requirements scaled to the insurer's liabilities and risk profile, technical provisions for outstanding claims and unexpired risks, valuation of assets and liabilities on a prudent basis, restrictions on admissible assets, and reinsurance arrangements that genuinely transfer risk. Insurers must maintain adequate corporate governance, appoint an actuary where required, and file periodic returns.
Market conduct and policyholder protection
Conduct rules cover product disclosure, fair treatment of policyholders, timely claims handling, complaints resolution and the duties of intermediaries. Insurers must not misrepresent policy terms, and utmost good faith obligations run both ways: the applicant must disclose material facts, and the insurer must honour the contract.
Traps and worked example
Examiners test whether a question concerns solvency (can the insurer pay claims?) or conduct (was the customer treated fairly?). Another trap is forgetting that reinsurance does not extinguish the insurer's liability to the policyholder - the original insured still claims against the ceding insurer.
Worked example: An insurer cedes 60% of a risk to a reinsurer. The policyholder suffers a total loss. The policyholder is paid by the ceding insurer, which then recovers the ceded share from the reinsurer. A candidate who answers that the policyholder must claim against the reinsurer has fallen into the privity trap.
Rule of thumb
Licensed by class, solvent by margin, fair in conduct, liable to the policyholder regardless of reinsurance.