Insurance laws Lesotho
Lesotho's insurance industry is primarily regulated by the Central Bank of Lesotho (CBL), which acts as the Commissioner of Insurance. The legal framework is predominantly governed by the Insurance Act, 2014, which replaced the outdated Insurance Act of 1976, along with various regulations issued under it.
Here's a breakdown of key aspects of insurance laws in Lesotho:
1. Regulatory Body:
Central Bank of Lesotho (CBL): The CBL is the primary regulator and supervisor of the insurance industry in Lesotho. It is responsible for licensing, supervision, and enforcement of insurance laws and regulations.
International Association of Insurance Supervisors (IAIS): While the CBL is the local regulator, the IAIS also plays a role in overseeing operations within the Lesotho insurance industry.
2. Key Legislation:
The Insurance Act, 2014 (Act 12 of 2014): This is the fundamental piece of legislation governing the insurance sector. It covers a wide range of areas, including:
Licensing and Registration: Requirements for companies to be registered as insurers or reinsurers, and for individuals/entities to be licensed as insurance intermediaries (brokers, agents). Insurers must be incorporated as public companies under the Companies Act, 2011.
Capitalization and Solvency: Specifies minimum capital requirements for different classes of insurance business (long-term, short-term, reinsurance, micro-insurance) and mandates the maintenance of a financially sound condition and solvency margins.
Financial Management: Regulations regarding reserves, valuation of assets and liabilities, and restrictions on certain financial transactions.
Governance: Responsibilities of key employees and the board of directors.
Accounts and Audit: Requirements for financial reporting and auditing.
Actuaries: Appointment and responsibilities of actuaries.
Supervision and Enforcement: Powers of the Commissioner (CBL) to inspect insurers and intermediaries, gather information, and take enforcement actions (e.g., refusal to issue/renew licenses, suspension, revocation).
Prohibitions: Non-admitted insurance (insurance placed with an insurer not licensed in Lesotho) is generally not permitted.
Insurance (Registration and Licensing Requirements for Insurers) Regulations, 2021 (and subsequent amendments): These regulations provide detailed procedures and requirements for obtaining and renewing licenses for insurers.
Insurance (Licensing of Insurance Intermediaries) Regulations: These govern the licensing and conduct of insurance brokers and agents.
3. Compulsory Insurance:
Lesotho mandates certain types of insurance, including:
Motor Third-Party Liability Insurance: Compulsory for vehicles.
Professional Indemnity Insurance: Compulsory for insurance brokers.
Aviation Liability Insurance.
Marine Liability Insurance.
Social Security Insurance.
Workman's Compensation Insurance: Compulsory for employers.
4. Key Provisions and Practices:
Composite Insurance: Permitted in Lesotho, meaning an insurer can offer both long-term (life) and short-term (general) insurance products.
Non-Admitted Insurance: Generally not allowed, meaning insurance policies must be placed with insurers registered in Lesotho.
Taxation: Insurance premium tax is generally not imposed on insurance products and services in Lesotho. Life insurers are generally not subject to income tax on income from life insurance policies (excluding group life and funeral insurance).
Intermediaries: Insurance brokers and agents must be registered and licensed. They have responsibilities regarding the collection of premiums and cannot delegate this authority. Insurance brokers are required to maintain professional indemnity insurance.
Financial Stability: The legal framework emphasizes prudential standards to ensure the financial ability of insurers to meet their obligations.
5. Recent Developments:
Lesotho has undergone reforms in its insurance sector, with the 2014 Act aiming to modernize the regulatory framework. However, there have been discussions and legal interpretations highlighting areas where further implementation and clarity are needed, particularly concerning specific insurance products like funeral insurance.
It's important to note that specific regulations can be amended, so it's always advisable to consult the latest official gazettes or the Central Bank of Lesotho's website for the most up-to-date information on insurance laws.
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