Insurance and Pension Regulation & Supervision in Lesotho

Project Development Objective (PDO)

This project aims to strengthen the legal, regulatory, and supervisory frameworks for Lesotho’s insurance and private pensions sectors.


The insurance sector in Lesotho is small but growing rapidly. Insurance penetration is well above the average for Sub-Saharan Africa. The new Insurance Act, approved by parliament in mid-May of 2014, replaced the Insurance Act of 1975. Although the insurance sector is growing compared to the rest of the economy, its regulatory framework and supervision are still weak and still have some gaps. 

Lesotho’s pension sector is small and underdeveloped. There is a need to develop an overall policy framework for the pension sector in Lesotho to specify the roles of public (statutory) and private pension schemes. Moreover, pension fund members are vulnerable to fraud and mismanagement because there is no regulation of occupational and private pension funds. This lack of regulation is a potential problem for pension fund members because their accumulated pension entitlements are their single, largest financial asset and source of savings. 


This project includes the following key activities:
1.  Strengthening the legal, regulatory, and supervisory framework for insurance 
The project team is assessing the Central Bank of Lesotho’s (CBL) approach to insurance supervision and reviewing the Insurance Act of 2014. On the basis of this review, the team will draft amendments to the Insurance Act relating to (a) corporate governance, (b) solvency, (c) risk management, (d) consumer protection, (e) inclusion of annuities as a class of long-term insurance and microinsurance, and (f) the introduction of a crisis management regime. The project is also developing a regulatory model for insurance intermediaries and a regulatory framework for microinsurance. 

2.  Strengthening the legal, regulatory, and supervisory framework for voluntary occupational and private pension funds
The project team is (a) reviewing the current policy framework for voluntary occupational and private pension funds to identify any potential issues relating to the mandatory comprehensive social security scheme, (b) reviewing the current draft bill, (c) drafting regulations for voluntary occupational and private pensions, and (d) developing a supervisory manual that includes a framework for risk-based supervision.

Expected Outcomes

The expected short-term outcomes (directly attributed by the project) include the following:

1.  Aligning the insurance supervision framework with the International Association of Insurance
    Supervisors insurance core principles
2.  Developing a legal and regulatory framework for voluntary occupational and private pensions

3.  Improving the insurance and pension supervision capacity of CBL staff 


The expected long-term outcomes (contributed by the project but dependent on other factors) include the following: 

1.  Expanding risk coverage and long-term savings provided by insurance products

2.  Securing and sustaining a pension system that includes an increase in the coverage of private

3.  Mobilizing long-term savings for the productive investment and development of the capital

Ultimately, the project’s results will contribute to the improved stability, deepening, and inclusiveness of the financial sector in Lesotho.