Reports on Observance of Standards and
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).
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.