Impact Story

The Insurance State Supervision Service (ISSS) in Georgia regulates the sector (still largely non-life) as an independent agency largely funded by levies on the insurance companies.

The project arose from a World Bank request to provide technical assistance to the ISSS in strengthening its supervisory skills with emphasis on life insurance and pensions in March 2003. It became evident early on that:

• Life and pensions was still at an embryonic stage and a very small proportion (risk exposure therefore very limited) of a small insurance sector as measured by gross premiums.
• The ISSS was deficient in supervisory capacity in the more basic non-life insurance sector, basic training was lacking, and staff retention was a challenge.

As a consequence, and with the whole hearted agreement of the ISSS, the project focus was designed to assess the existing system, suggest relevant legal and regulatory changes, provide basic training to both ISSS staff and industry participants, and propose strategies for continuing development of ISSS skills and actuarial skills in both the ISSS and the sector.

It was not practical in this project to develop an in-house training capacity at the ISSS, and this therefore, presented the risk that any skills upgrade might not be sustainable.

Lessons Learned:

• The FSAP undertaken by the World Bank in 2002 had recommended the introduction of sound investment policies for pension funds and the strengthening of supervisory capacity for both the life insurance and pensions sectors (pensions provided entirely at this point through the life insurance sector). Whilst the recommendations were valid, they did not appear to take account of the existing capacity of the regulator, the ISSS, and therefore ignored that the building blocks were not in place to address the recommendations made.
• ISSS resources (staff and funding) were inadequate to retain good quality trained staff and to develop an in-house training capacity. The first issue at hand related to issues such as competitive remuneration and both issues related to overall funding of the ISSS.
• An early assessment of the ISSS and the sector was needed to revise the original terms of reference. This process required the input of the consultants recruited by FIRST to implement the project. FIRST was fortunate that the consultants did identify at an early stage the need to radically change the terms of reference to focus on more basic skills deficiencies.
• Whilst actuarial skills are needed in the insurance sector, especially important for life insurance and pensions, many countries lack a local actuarial profession or actuarial education conduits. Data such as mortality rates are also often inadequate. How to fill this gap is both difficult (training of actuaries is an intensive, long term process) and expensive. The issue needs to be addressed at a global level to determine effective and pragmatic ways to mitigate risk in such countries.
• Training capacity of both the ISSS and the sector was very low. It was not sustainable to rely on repeated external training by consultants. Linking to online and correspondence courses with attendant qualifications might be a solution: e.g. Chartered Institute of Insurers in UK offers such courses and World Bank Institute has attempted to launch seminars in IAIS core principles.

Reports:

• Seminar material. This is a fairly long Power Point presentation that summarises many issues for basic understanding and supervision of the insurance sector. It is very clear and could be of some value as an input for other early stage insurance sectors in developing countries.