Because the legislature passes laws of general application and cannot think of everything, the insurance laws provide for exemptions granted in relation to specific provisions.

Section 21 of the Financial Sector Regulation Act of 2017 provides for an exemption from financial sector laws when there is no specific provision in the particular law. The Insurance Act of 2017 contains its own exemption provision under section 66. Because the Conduct of Financial Institutions law is not yet in place, exemptions under the Short-term Insurance Act and its subordinate laws (the Regulations and Policyholder Protection Rules) are dealt with under section 281 of the FSRA. Section 66 of the Insurance Act empowers the FSCA to grant exemptions from the Insurance Act itself.

In both cases the Financial Sector Conduct Authority is the appointed body to grant exemptions for insurance purposes. The test is whether the granting of the exemption will be contrary to the public interest or may prejudice the achievement of the objects of the Act. The Insurance Act specifically requires the FSCA to consider whether granting the exemption will prejudice policyholders. The objects of the FSRA and the STIA include the fair treatment and protection of financial customers, including policyholders and potential policyholders. This will be a primary concern of the FSCA when considering an exemption.

Section 66 of the Insurance Act also covers exemptions where the practicalities impede the strict application of the Act, or strict compliance will not be proportional to the business concerned, or for the incremental application of the Act. The Act therefore specifically allows for the achievement of developmental, financial inclusion or transformation objectives if necessary to promote entry into and advancement within the industry for new players.

For major exemptions the Authorities may consult the industry or the public before granting the exemption. For all exemptions the process requires publication of each exemption which gives those affected the ability to comment on the proposed exemption. Relaxing the strict provisions of the laws in order to improve inclusion, transformation, promote the best interests of policyholders, and give access to a competitive market would justify an application for exemption.

By way of comparison, many exemptions are granted under the FAIS Act but these generally relate to the particular application of the Act to particular financial services providers or persons.

The reasons for granting an exemption are stated in very general terms in the FSR Act and the Insurance Act for the obvious reason that each case must depend on its own facts and the effect that the exemption will have on the application of the Act and on policyholders. An exemption will be more favourably looked at if it improves the insurance market or the lot of its customers but any genuine need for an exemption will be carefully considered.

Patrick Bracher
Norton Rose Fulbright South Africa
July 2024