Botswana International Insurance Act, 2005, extends range of services under IFSC
Contributed by Botswana International Financial Services Centre
08 June, 2005
BOTSWANA IFSC and the insurance industry warmly welcome the introduction of the International Insurance Act, which was passed in May 2005.
The Act aims to create the fiscal and regulatory environment necessary to make Botswana an attractive location from which international insurance services, such as reinsurance, captive insurance and related activities, can be provided to non-citizens and in currencies other than the Pula.
Botswana IFSC has identified international insurance as a strategic growth sector and the Act will enable it to be included in the broad range of activities currently permissible under the IFSC framework.
The Act will confer legal status and create a regulatory framework for the carrying on of international insurance activities from the Botswana IFSC. The legislation will also allow Botswana authorities to address the prudential concerns related to reinsurance operations and protect the integrity of the insurance businesses and the host jurisdiction, namely Botswana.
International insurance is a globally traded business and the sectorâs requirements for growth and success fit in well with Botswanaâs fundamental strengths. Botswana has no exchange controls, which allows the flexibility of free movement of capital. The country is a lower cost environment compared to traditional European and Caribbean offshore jurisdictions. Further, the Botswana IFSC framework provides for full transparency, applies a complete information exchange programme through a double taxation treaty network and requires the establishment of genuine and substantive economic activity in the country.
Tabling it in the National Assembly in April, when it was still a Bill, the Minister of Finance and Development Planning, Honourable Baledzi Gaolathe, explained that companies operating under the IFSC are restricted to conducting nondomestic business in non-Pula currencies only. Although they are registered under the Companies Act and can locate their offices in Botswana, they are not allowed to carry on their business transactions with residents or resident companies. Therefore to be licensed to do business under the IFSC, insurance companies cannot be regulated and supervised under the Insurance Industry Act of 1987, because it is concerned solely with insurance companies serving only the local or domestic market.
The Minister said the Act provides for the âmaintenance of orderly conduct of international insurance business and related servicesâ through the appointment of a regulatory authority with specific responsibilities and powers. A rigorous process of authorisation and supervision is aimed at screening out potential problem firms and ensuring that a strict regulatory regime is implemented on an ongoing basis and in the best economic interests of Botswana.
The International Insurance Act is a major development, said Pat Honnet, managing director of AON Risk Management Services, an IFSC registered company.
He said: âThis is a significant step forward for the financial services industry. It will create an ideal environment for international insurance companies to provide services to non-citizens, in various currencies. This paves the way for, among other things, reinsurance companies and captive insurance companies to start operations here.
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