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Insurance Act, 2017 (Act No. 18 of 2017)

Chapter 6 : Financial Soundness

Part 1

Financially sound condition

37. Capital add-on

 

(1) The Prudential Authority may direct a capital add-on for an insurer or an insurance group, if the Prudential Authority reasonably believes that—
(a) the risk profile of the insurer or the insurance group deviates significantly from the assumptions underlying the solvency capital requirement calculation or the group solvency capital requirement calculation; or
(b) the governance framework of an insurer or a controlling company deviates significantly from the requirements of this Act.

 

(2)
(a) In the circumstances referred to in subsection (1)(a), the capital add-on that is imposed by the Prudential Authority must be such that the solvency capital requirement or group solvency capital requirement after the capital add-on is in line with the underlying prescribed assumptions of the solvency capital requirement or group solvency capital requirement.
(b) In the circumstances referred to in subsection (1)(b), the capital add-on that is imposed by the Prudential Authority must reflect the significance of the deviation of the governance framework from the requirements of the Act.

 

(3) The Prudential Authority, if an insurer’s minimum capital requirement exceeds its solvency capital requirement, may direct the capital add-on to be applied to the minimum capital requirement of the insurer.

 

(4) The Prudential Authority must review any capital add-on imposed at least once a year and remove the capital add-on when the Prudential Authority is satisfied that an insurer or controlling company has remedied the deficiencies that led to its imposition.