Reports on Observance of Standards and Codes

Cameroon and the IMF

Cameroon ROSC
I.  Fiscal Transparency
II.  Transparency of Monetary and Financial Policies
III.  Banking Supervision
IV.  Insurance Supervision
V.  Payment System

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IV.  Insurance Supervision
Prepared by a staff team from the International Monetary Fund and the World Bank in the context of a Financial Sector Assessment Program (FSAP), on the basis of information provided by the Cameroonian authorities.

May 2000

Review of International Association of Insurance Supervisors (IAIS) Principles1

1. The assessment of IAIS Supervisory Principles applicable to the regional insurance supervision council CRCA (Commission Régionale de Contrôle d'Assurance) has demonstrated substantial shortcomings in supervisory practices (Table 3).

Table 3. Cameroon: Observance of the IAIS Principles

CP Principle FC1 BC2 PC3 NC4 Mat
Comments and Corrective Actions
1. Organization   X       CIMA Secretariat needs additional human and financial resources.
2(1) Licensing X          
2.(2) Licensing Fit and proper X          
2.(3) Licensing Reliance on Other Jurisdiction   X       There is no routine contact with other jurisdictions.
3. Changes in Control X         Transfer cannot occur if not authorized by the Minister and supported by a positive opinion from CRCA.
4 Corporate Governance         X Code does not prescribe rules for Board of Directors. Is this relevant for Cameroon?
5 Internal Controls         X There is no evidence of any internal controls.
6 Assets     X     There is no requirement for an investment policy statement from the Board of Directors and no rules concerning safekeeping.
7(1) Liabilities   X       No requirement for actuarial evaluation of liabilities.
7(2) Liabilities:
Technical Provisions
  X       CIMA professionals are seeking to develop appropriate techniques for verification
7(3) Liabilities Reinsurance Credit     X     CRCA does not have a practice of reviewing reinsurance arrangements
8 Capital Adequacy and Solvency X          
9 Derivatives and "off-balance sheet" items           Not relevant.
10 Reinsurance         X CRCA does not gather information on reinsurance companies; and makes no contact with authorities in other countries.
11 Market Conduct     X     Tariff of automobile insurance rates is not being enforced.
12 Financial Reporting X          
13 On-site Inspection   X       Human and financial follow up procedures need to be improved.
14 Sanctions X          
1FC: Fully compliant
2BC: Broadly compliant
3PC: Partially compliant
4NC: Non-compliant
5Mat. NC: Materially non-compliant

2. Since the founding of the CRCA in 1992 to implement the CIMA (Inter-African Conference on Insurance Markets) Treaty , regional insurance regulations (the CIMA Code) has been harmonized, and supervision has been strengthened considerably. Nevertheless, the insurance sector in Cameroon is still in engaged in an ongoing restructuring process. The insurance sector remains small, with turnover smaller than 1 percent of GDP in 1997/98, mainly concentrated in the property and casualty sector.

Principles 1 (Organization) and 13 (On-site Inspection)

3. In order to carry out both on-site inspections and desk analysis of more than 100 companies across 14 countries, the CRCA needs additional staff and other resources. In order for the work of supervision to be effective, the findings of inspections and analysis must be pursued and this follow-up also requires additional resources.

Principles 2(3) (Licensing) and 10 (Reinsurance)

4. In order to be fully compliant with these principles, the CRCA will need to establish a program of regular communication with insurance supervisors in countries outside the franc zone. They will likely be obliged to enter into contracts ("Concordat") with other supervisors, that call for the exchange of information, subject to appropriate confidentiality rules.

Principles 4 (Corporate Governance), 5 (Internal Controls) and 6 (Assets)

5. The IAIS Principles presume that supervised financial institutions will practice good corporate governance. Under such a system, boards of directors are obliged to establish special committees from among their members, making these committees responsible for controlling important aspects of the business of the financial institution, such as investment policy, internal controls and proper market conduct.

6. These board responsibilities are not discussed in the CIMA Code. Nor did the mission find that insurance companies based in Cameroon had established such committees or had any such expectations of requests for creating these committees from board members.

Principle 7 (1) Liabilities

7. The existing CIMA Code does not require that mathematical provisions for life insurance policy liabilities be computed and certified by a qualified actuary. Life insurance business does not represent a significant proportion of the business of Cameroon insurance companies at the present time. However this situation would be altered significantly with reforms in the area of social security. Under the circumstances, it would be preferable if local companies began to make use of the services of professional actuaries--in the calculation of premiums as well as in the preparation of technical provisions for liabilities.

Principles 7(3) (Liabilities) and 10 (Reinsurance)

8. Reinsurance of large risks is essential for insurance companies operating in Cameroon. In reality, their ability to settle claims submitted by their clients will be directly impacted by the claims-paying practices and the financial condition of their reinsurance companies.

9. As specified in the IAIS principles, it is essential that supervisory authorities monitor closely the reinsurance contracts undertaken by local companies. In order to do that properly, they should ask the companies to forward to the supervisory staff copies all reinsurance contracts. The supervisory staff should have the authority and the means to obtain information concerning the financial condition of the reinsurance companies. They should also have the authority to communicate directly with the supervisory authorities in those foreign jurisdictions where the reinsurance companies have their headquarters. There is no mention of these activities nor of these powers in the CIMA Code.

1This module was prepared in consultation with the Cameroonian authorities and the CRCA in the context of an FSAP mission conducted in Cameroon in March 2000. The work of the FSAP mission was coordinated by a joint IMF-World Bank team led by Mr. Durand (IMF) and Ms. A.C. Rennie (World Bank) with assistance from Mr. Driessen and Mr. Fonteyne (both IMF). The main contributor was Mr. Mac Isaac (World Bank).


III. Banking Supervision        Cameroon ROSC         V. Payment System