THE CAPITAL MARKETS INSURANCE AND SAVINGS DIVISION Annual Report JERUSALEM, DECEMBER 2013

Transcription

1 THE CAPITAL MARKETS INSURANCE AND SAVINGS DIVISION Annual Report 2012 JERUSALEM, DECEMBER 2013

2 Annual Report 2

3 2012 Ministry Of Finance The Capital Markets Insurance And Savings Division PREFACE Table Of Contents A. Preface 5 B. Division Activities 13 C. Long-term Savings 47 D. Insurance 69 E. Agents and Advisors 95 3

4

5 PREFACE

6 Annual Report 6

7 2012 Ministry Of Finance The Capital Markets Insurance And Savings Division PREFACE s Statement Over the years Israel has developed an extensive regulatory system for insurance and long term savings. Continuing the process that was begun in 2011, the Capital Markets, Insurance and Savings Division (CMISD), in 2012, continued to integrate separate chapters of regulations and organize them into a comprehensive codex. The CMISD published a draft of the codex chapters relating to products and corporate governance. To date, most of the chapters in the codex have been published and the goal is to complete this task by the end of One major aspect of this process has been to combine the investment rules that apply to insurance companies yield-dependent liabilities with the investment rules for pension funds and provident funds, and update them in accordance with developments over the past several years in the global capital markets. For this purpose the CMISD published new investment regulations and new investment circulars. The s enforcement and supervisory authorities are a fundamental prerequisite for regulating the capital market and insurance. August 2012 saw the introduction of the administrative sanctions framework contained in the Supervision of Financial Services (Insurance) Law, , based on a 2011 amendment to the law. The new framework expands enforcement powers, according to which the is authorized to request documents and information from anyone with regard to a matter under investigation and not just from supervised bodies, and has the authority to enter institutional entities and ask for a court order to search for and retrieve documents. This additional authority is aimed, inter alia, at preventing supervised bodies from breaking the law. Concomitantly, in recent years the CMISD has augmented its enforcement activity. Among other things, the CMISD is conducting numerous and more intensive investigations and imposing fines on those who violate the laws, as outlined in this report. In 2012 the CMISD handled a variety of topics relating to long term savings, the most essential of which were: Limiting management fees, updating Annuity Factors that represent life expectancy in comprehensive life insurance policies, enabling the purchase of insurance coverage through a company that manages a provident fund, and identifying lost monies. In February 2012 the Supervision of Financial Services Regulations (Provident funds) (Management fees) were published. These regulations, which went into effect on January 1, 2013, impose a uniform model for collecting management fees from both accruals and deposits, similar to the model used for pension funds. This model creates better incentives for producers and distributors. The ceilings on management fees for provident funds and comprehensive life insurance policies stand at 1.05% from accruals and 4% from deposits. In July 2012 the CMISD announced a program for changing life insurance policies that was formulated in the wake of studies conducted on the demographic assumptions in pension funds and life insurance policies. The studies showed that life expectancy has risen significantly in Israel, even more than was projected in a previous study carried out just three years earlier. In light of this research, the demographic assumptions used to prepare actuarial reports for pension funds were updated. The tremendous uncertainty regarding life expectancy and the rate at which this is changing means that marketing comprehensive life insurance policies with guaranteed factors challenges the companies ability to meet their liabilities in 7

8 Annual Report the long term. Furthermore, these policies are not suitably transparent for the insureds. First, the cost of the factors is not explicitly presented but is implied in the management fees of these policies. Second, the restrictions on the guaranteed factor are not fully understood by the consumers, such as the fact that it is available only in certain annuity plans. Therefore, in November 2012, regulations were published stating that as of January 2013 policies with guaranteed Annuity Factors could not be marketed except to insureds over 60 years old. In December 2012, regulations were announced indicating the types of insurance that could be purchased as part of long term savings, and gave the conditions for insurance premiums and maintaining insurance coverage. Rules were also imposed such that a company that manages a provident fund would be permitted to sell its members insurance against disability and death risks. These provisions increase the competition in long term savings, because they make the provident funds a better substitute for pension funds and comprehensive life insurance. In order to minimize the disparities between commissions on home insurance acquired when taking a mortgage and those paid for other home insurance policies, regulations were enacted that limit the commission when selling insurance by way of a mortgage. According to these regulations, in 2013 the commission rate will not exceed 30%, in 2014 the rate will not exceed 25%, and beginning in 2015 the rate will not be more than 20%. These regulations are expected to lower the premiums that insureds pay for home insurance policies of this type. In October 2012 regulations went into effect defining a fair mechanism for calculating premium refunds for standard car insurance policies (both comprehensive and third party insurance) for an insured that cancels his policy. In March 2012 a circular was published defining principles for preparing a long-term care insurance plan. This circular guarantees the availability of long-term care insurance despite the sharply increased risk of needing long-term nursing care during the course of one s life. The circular states that long-term care will apply to the insured s entire life and the increases in premiums will be restricted to a rate of 4% each year. With regard to dental insurance, principles were defined in June 2012 for preparing insurance schemes. These principles relate, among other things, to the option of choosing a service provider and the ability to cancel the policy during the insurance period. Additionally, the principles state that insurance companies may not interfere with the dentist s discretion. During 2012 the continued to promote various measures to improve the insurance and long term savings market, and make it more up-to-date and efficient. In particular, the CMISD began working on a web site that would make it possible to identify members accounts. The site was launched in 2013 and it gives users an indication regarding the existence of long term savings plans they may have forgotten about, including education funds, life insurance policies, provident funds, pension funds and risk insurance policies. This is good news for consumers as the total sum of these lost monies is estimated at many billions of shekels. As of press time, more than a million users have used the site to search for such accounts. In August 2012 Ness Technologies Company, Ltd. was chosen to establish and operate a central pension clearing system through a designated subsidiary company Swiftness, Ltd. At the end of June 2013 the clearing system began transmitting data between licensees and institutional bodies. Later on, savers will also be able to obtain updated information through the clearing system. Ultimately, there will be financial clearing, initially between operating bodies and subsequently, with employers as well. Establishment of the clearing system creates a highly advanced infrastructure for the modern long term 8

9 2012 Ministry Of Finance The Capital Markets Insurance And Savings Division PREFACE savings market. It supplements the establishment of the uniform pension registry, the creation of structured forms, digital signatures, data classification and more. The CMISD is working to ensure that these efforts will help make the long term savings market more advanced, precise and efficient, will enhance transparency in the market and reduce costs to savers. In October 2012 a national strategy was announced to promote financial education in Israel. The strategy represents a five-year plan, the purpose of which is to enhance people s awareness concerning financial education, will increase people s access to age-appropriate information, will instill basic financial skills and promote financial education suitable for specific population groups. In 2012 the CMISD continued to work vigorously to promote, develop and optimize the savings and long term insurance markets for savers and insureds, and will continue to do so in order to ensure markets that are competitive, transparent, stable and equitable. of Capital Markets, Insurance and Savings Division and Insurance Supervisor Prof. Oded Sarig 9

10 Annual Report Division structure The Capital Markets, Insurance and Savings Division of the Ministry of Finance is responsible for supervising and regulating financial services in the State of Israel in the insurance and long-term savings market. The Division s two primary goals, which are integrated and complementary, are: a. To protect insureds and savers and ensure fairness, transparency and competition in insurance and long-term savings; b. To maintain the stability of institutional bodies and that of the insurance and long-term savings market in general. At the head of the CMISD is the of Capital Markets, Insurance and Savings who, according to the law, is also the Insurance Supervisor. The government appoints the for a period of five years. In addition to the, the CMISD leadership includes the Deputy, the Actuary of the Finance Ministry, and five senior deputies who coordinate the work of CMISD s various departments, as described below: Long-term Savings Departments include the Pension, Life Insurance and Provident Fund Departments. These departments are responsible for regulating the long-term savings market and approving products sold to consumers. Non-life Insurance Department and Health Insurance Department responsible for regulating the insurance market except for life insurance policies included in long-term savings, and for approving insurance products sold to consumers. Agents and Advisors Departments these departments handle the distribution of insurance and long-term savings products by insurance agents and advisors, and engage in licensing and regulation. Risk Management Department responsible for regulating corporate governance and risk management in institutional bodies. Solvency Department responsible for applying and implementing the Solvency II Directive in Israel and compiling the planned regulations codex. Institutional Bodies Licensing Department deals with licensing institutional bodies and granting permits to those who control or own them, and with regulating these spheres. Capital Markets Department regulates various aspects of the activities of institutional bodies in the capital market. Accounting Department regulates various aspects relating to accounting statements of institutional bodies. Institutional Regulation Department handles various arrangements in connection with institutional bodies in general. Information and Reporting Department responsible for the intake and analysis of reports and arranging for the payment of report debts owed by institutional bodies to the Division. Actuarial Department headed by the Finance Ministry actuary. This department specializes in analyzing and understanding the insurance risks of institutional bodies. In cooperation with the Division's other departments it also regulates and supervises spheres such as risk management, non-life insurance, life insurance, health and long-term care insurance and pensions. 10

11 2012 Ministry Of Finance The Capital Markets Insurance And Savings Division PREFACE Supervision and Enforcement Department deals with supervision and enforcement of bodies that the CMISD oversees: institutional bodies, insurance agents, pension marketing agents and pension advisors. The goal of this supervision is to ensure the stability of the institutional bodies, to see that they meet their obligations towards insureds and members, and their ability to meet these obligations in the future. Public Ombudsman Unit investigates public complaints regarding institutional bodies, insurance agents and advisors in spheres relating to insurance, pension and providence funds, and determines these complaints with quasi-judicial authority; its decisions may be appealed in the district court. Financial Education Department this is a new department established in 2011, the purpose of which is to shape and manage a national policy to promote financial education and increase financial awareness and understanding among the Israeli public. Information and Development Department deals with research and monitoring various indicators in the insurance and long-term savings spheres, develops and applies methodologies and support tools for supervising and regulating the CMISD, and coordinates ongoing contact with supervisory authorities around the world and various international entities. Currency Services Providers Department registers and supervises currency service providers and enforces regulations regarding their activity. 11

12 Annual Report Figure A-1 Structure of the Capital Market, Insurance and Savings Division Of The Capital Markets, Insurance And Savings Division, Prof. Oded Sarig Assistant to the Senior Deputy Deputy Deputy Chief Actuary Deputy Deputy Deputy Non-Life Insurance Life Insurance 1 - Public Ombudsman Actuary Solvency II Licensing Institutions Institutional Bodies 1 R&D Health Insurance Pension Funds 2 - Public Ombudsman Risk Management Accounting Institutional Bodies 2 Financial Education Provident Funds 3 - Public Ombudsman Information And Reporting Institutional Bodies 3 Licensing Distributors Regulatory Activity Institutional Bodies 4 Regulating Distributors Capital Market Special Activities Currency Service Providers Auditing Administration 12