3. Licensing, Ownership and Market Entry

Introduction and Context

Insurance markets cannot operate safely through ordinary commercial registration alone. An insurer accepts premiums today in exchange for promises that may mature many years later. The policyholder therefore depends not only on the insurer’s present financial position but also on its future solvency, governance, claims capability and willingness to honour contractual obligations. Licensing and market-entry regulation exist to manage this distinctive form of public reliance.

The regulatory authority performs a gatekeeping function before an enterprise is permitted to underwrite risk. It examines the proposed business model, capital structure, ownership, management competence, financial resources, systems and governance arrangements. The same logic applies, with suitable modifications, to reinsurers and insurance intermediaries. A broker does not ordinarily assume underwriting risk, but it may control significant client information, premiums and advice. A reinsurer may be less visible to the public than a primary insurer, yet its financial failure can transmit stress throughout the insurance system.

Market entry is consequently not a single event. It is a regulated process involving incorporation or registration, authorisation, capital deployment, ownership assessment, appointment of responsible persons, operational readiness and continuing supervision. This chapter examines that process and the policy choices underlying it. Because licensing rules differ across jurisdictions, the discussion uses general regulatory principles applicable across modern insurance systems; students should read them alongside the legislation and regulations of the relevant country.

Learning Objectives

After studying this chapter, the learner should be able to:

1. Explain why insurers, reinsurers and intermediaries require specialised authorisation.

2. Distinguish permitted classes of insurance business and the significance of licensing scope.

3. Analyse capital, solvency, governance and fit-and-proper requirements.

4. Evaluate ownership controls, foreign participation and control transactions.

5. Describe portfolio transfer, merger and exit approval processes.

6. Apply a regulatory market-entry framework to practical cases.

7. Identify governance, conduct, competition and technology-related risks in licensing decisions.

The Regulatory Logic of Authorisation

A licence is a formal permission to conduct a specified regulated activity. It is also a continuing supervisory relationship. The authority does not merely determine whether an applicant is legally incorporated; it assesses whether the applicant is suitable to perform a socially important financial function.

Three ideas explain the architecture of licensing. First, insurance involves inter-temporal trust: premiums are collected before the insured event, sometimes decades before a pension or life benefit becomes payable. Second, insurance produces externalities. The failure of one insurer can harm policyholders, employees, creditors, reinsurers and financial stability. Third, the sector contains substantial information asymmetry. Consumers may not understand exclusions, reserving practices or the financial strength of an insurer, while owners and managers may possess information unavailable to the regulator.

Authorisation therefore serves several purposes:

• protecting policyholders and beneficiaries;
• maintaining solvency and claims-paying capacity;
• preventing criminal proceeds, connected-party abuse and improper control;
• promoting fair competition without encouraging reckless entry;
• ensuring that insurance is conducted by competent and accountable persons; and
• supporting orderly restructuring or exit when an undertaking can no longer operate safely.

A sound licensing regime must balance two risks. Excessively easy entry may produce undercapitalised firms, poor underwriting and destructive price competition. Excessively restrictive entry may protect incumbents, reduce innovation and make insurance expensive or inaccessible. The appropriate standard is not simply “more licences” or “fewer licences”, but credible entry by firms capable of sustainable and fair operation.

Who Must Be Authorised?

Insurers

An insurer assumes contractual obligations to policyholders by underwriting risks. Depending on the jurisdiction, separate licences may be issued for life insurance, general or non-life insurance, health insurance, agricultural insurance, credit insurance or other specialised classes. Some systems require strict separation between life and non-life operations because long-term savings and mortality risks have different actuarial and investment characteristics.

The licence normally specifies the classes of business permitted, geographical scope, distribution channels and sometimes the conditions under which products may be offered. An insurer authorised for motor and property business cannot assume life risks merely because it has adequate capital. Conducting business outside the licence is a regulatory breach even if the enterprise is otherwise financially sound.

Reinsurers

A reinsurer accepts risks ceded by insurers. Its authorisation may distinguish treaty and facultative reinsurance, life and non-life reinsurance, domestic and cross-border business, or specialised forms such as catastrophe or financial reinsurance. Regulators examine the reinsurer’s capital, retrocession arrangements, risk concentration, modelling capability and access to reliable claims information.

Reinsurance regulation also has a systemic dimension. Primary insurers rely on reinsurance to manage catastrophe exposure and capital volatility. A weak reinsurer can therefore undermine several insurers simultaneously. At the same time, regulation should recognise the professional nature of reinsurance counterparties and avoid imposing consumer rules designed for retail policyholders where they are inappropriate.

Intermediaries

Intermediaries include agents, brokers, corporate agents, bancassurance distributors, managing general agents, surveyors, loss adjusters, third-party administrators and other regulated service providers. Their authorisation depends on the function performed. An agent usually represents one or more insurers under defined arrangements; a broker commonly acts for or advises the customer and may arrange coverage with several insurers. A surveyor or adjuster may investigate losses without underwriting risk, but its reports can materially affect claims outcomes.

Intermediary licensing commonly covers competence, examinations, professional indemnity insurance, client-money controls, disclosure, remuneration, conflict management, complaint handling and record retention. The regulatory question is not only whether an intermediary can sell a policy, but whether it can perform its role honestly, competently and with sufficient operational safeguards.

The Architecture of an Authorisation Application

Although application forms vary, a serious application normally contains the following connected elements:

1. Legal identity and business plan. The applicant identifies its legal form, proposed classes, territories, target customers, distribution model, products and projected financial statements.

2. Ownership and control information. The authority traces direct and indirect shareholders, ultimate beneficial owners, voting arrangements, shareholder agreements and sources of funds.

3. Capital and financial resources. The application demonstrates paid-up capital, liquidity, solvency projections, investment policy and access to additional funding.

4. Governance and management. Proposed directors, senior managers, actuaries, auditors, compliance officers and risk officers are identified and assessed.

5. Risk and operational systems. The applicant explains underwriting, pricing, reserving, reinsurance, claims, cybersecurity, outsourcing, business continuity and internal-control arrangements.

6. Conduct arrangements. Product governance, sales supervision, disclosure, complaints and treatment of vulnerable customers are addressed.

7. Regulatory history. Previous licences, refusals, disciplinary actions, insolvencies and criminal or civil proceedings must be disclosed.

The regulator may use a staged approval model. A preliminary or “no-objection” stage may assess the promoter and concept, followed by incorporation and a final licence after capital, staffing and systems are in place. Other jurisdictions use a single application but reserve the right to impose conditions or require a pre-opening inspection. Approval should not be understood as an endorsement of profitability; it means that the applicant meets the legal threshold for conducting the proposed regulated activity.

Permitted Business and Scope of Licence

The scope of permission is central to regulatory control. Insurance classes are not merely administrative labels; they correspond to different risk characteristics, technical expertise and policyholder expectations. A licence may be restricted by:

• class of insurance;
• product type or customer segment;
• territory or branch location;
• direct insurance or reinsurance activity;
• underwriting limits or risk concentrations; and
• conditions relating to distribution, outsourcing or retrocession.

A regulator may require an insurer to submit product filings, policy forms, actuarial certifications or pricing information. In competitive markets, prior product approval may be limited to certain products, while conduct supervision and post-market monitoring receive greater emphasis. Regardless of the model, a licensed entity remains responsible for ensuring that its products are lawful, understandable, actuarially supportable and consistent with its licence.

The principle of regulatory perimeter control is important. Activities that resemble insurance, such as warranties, protection plans, embedded insurance and parametric risk products, may create uncertainty about whether a licence is required. Firms should obtain regulatory clarification rather than design products to evade the perimeter. Misclassification can expose customers to inadequate protection and the firm to enforcement action.

Capital, Solvency and Financial Soundness

Capital is an entry condition and a continuing safeguard. Minimum paid-up capital provides a basic financial foundation, but it is not equivalent to solvency. A firm may satisfy the statutory minimum and still be unsafe if its risks are excessive, its reserves inadequate or its assets illiquid.

Modern solvency frameworks generally combine a minimum capital requirement with a risk-based capital or solvency requirement. Relevant risks may include underwriting, market, credit, operational, catastrophe and concentration risk. The core relationship can be expressed conceptually as:

Solvency ratio = Available eligible capital / Required solvency capital.

The precise calculation is jurisdiction-specific. The principle is that capital should reflect the risk profile rather than merely the size of the company. A catastrophe insurer, for example, may need substantial capital or reinsurance despite modest premium income because a single event can generate correlated losses.

Regulators also examine the quality of capital. Paid-in common equity is generally more loss-absorbing than uncertain future contributions or subordinated instruments. Sources of funds must be lawful, transparent and sufficiently stable. The authority may require evidence of banking arrangements, audited financial information, financial support commitments and projections under adverse scenarios.

Capital planning must include growth. Rapid premium expansion can weaken an insurer if underwriting standards decline, reserves lag behind exposure or reinsurance is inadequate. Consequently, applicants should demonstrate not only that they can enter the market, but that they can survive plausible stress events.

Fit-and-Proper Assessment and Governance

The fit-and-proper test determines whether persons who direct or significantly influence a regulated entity are suitable. “Fit” generally concerns competence, qualifications, experience and capacity to perform the role. “Proper” concerns integrity, reputation, honesty, financial soundness and respect for legal and regulatory obligations.

The assessment may cover directors, chief executives, key function holders, actuaries, principal officers, controllers and significant shareholders. Relevant considerations include:

• criminal convictions, fraud or dishonesty;
• previous regulatory sanctions or licence cancellations;
• bankruptcy or serious financial distress;
• misleading statements or non-cooperation with authorities;
• experience appropriate to the proposed business; and
• conflicts of interest and time commitment.

Fit-and-proper status is not permanent. A person who was suitable at authorisation may later become unsuitable because of misconduct, undisclosed conflicts or persistent governance failure. Firms must therefore maintain appointment, notification and succession processes.

Governance assessment extends beyond individual biographies. The regulator considers whether the board collectively possesses expertise in insurance, actuarial matters, investments, technology, compliance and consumer protection. It examines the separation of oversight from management, the independence of control functions, committee structures, related-party policies and escalation procedures. A board composed entirely of representatives of one shareholder may formally exist but fail to provide meaningful challenge.

Ownership, Control and Foreign Participation

Insurance ownership is regulated because owners can influence strategy, capital, related-party transactions, investment decisions and management appointments. Authorities commonly require approval for significant holdings, changes in control, indirect acquisitions and arrangements that confer influence without majority voting rights.

The regulator traces the ultimate beneficial owner, not merely the immediate corporate shareholder. Complex chains can conceal politically exposed persons, sanctioned parties, excessive leverage or conflicted interests. Applicants should provide a transparent ownership chart, constitutional documents, shareholder agreements and evidence of the source and legitimacy of funds.

Ownership controls commonly pursue four objectives:

1. preventing unsuitable persons from controlling insurers;

2. ensuring that controllers have adequate financial capacity;

3. avoiding excessive concentration and conflicts of interest; and

4. preserving the insurer’s independence and policyholder focus.

Foreign participation may provide capital, technology, actuarial expertise and access to international reinsurance networks. It may also create concerns about regulatory arbitrage, transfer of resources within a group, dependence on a foreign parent and difficulty supervising cross-border operations. Contemporary regimes therefore often permit foreign investment subject to ownership thresholds, approval, local incorporation, governance requirements, information-sharing arrangements and group supervision.

The regulatory issue is not whether foreign ownership is inherently beneficial or harmful. It is whether the ownership structure allows effective supervision and assures that policyholder obligations remain supported by accessible and suitable assets. A local subsidiary, branch, joint venture and cross-border service model produce different supervisory consequences.

Market Entry by Intermediaries

Intermediary entry is often less capital-intensive than insurer entry, but it is not risk-free. A broker may handle premium funds, recommend products, transmit sensitive data and influence whether a claim is properly presented. Licensing therefore focuses on competence, fiduciary behaviour and operational controls.

A robust intermediary application addresses professional qualifications, responsible officers, business processes, insurer appointments, client-money segregation, professional indemnity cover, complaints, commission disclosure, conflicts and data protection. Digital intermediaries must also explain algorithmic recommendations, platform resilience, identity verification and the allocation of responsibility between the platform and the underwriting insurer.

An intermediary should not represent that it is authorised to perform functions outside its permission. For example, arranging a policy does not necessarily authorise claims settlement, premium financing or underwriting. Clear role allocation reduces consumer confusion and supervisory gaps.

Portfolio Transfer, Merger and Exit

Insurance obligations cannot ordinarily be transferred like ordinary commercial contracts. A portfolio transfer moves some or all policy rights and liabilities from one insurer to another. It may occur during restructuring, a merger, withdrawal from a line of business or resolution of a failing firm.

Regulatory approval generally requires evidence that:

• the receiving insurer is authorised for the relevant business;
• it possesses adequate capital and reserves after the transfer;
• policyholder rights are not unfairly reduced;
• assets and liabilities are accurately valued;
• the transfer is properly documented; and
• affected policyholders, creditors and other stakeholders receive required notice.

The authority may seek an independent actuarial report, require publication or direct communication to policyholders, invite objections and impose conditions. A transfer should be assessed on both financial and conduct grounds. A technically solvent receiving insurer may still create consumer harm if claims access becomes impractical or policy administration deteriorates.

Mergers and acquisitions involving insurers normally require both corporate and regulatory approvals. The competition authority may examine market concentration, while the insurance authority assesses control, solvency, governance and policyholder impact. Exit should be orderly. Voluntary run-off, portfolio transfer, cancellation of licences and resolution proceedings are distinct routes, and the appropriate route depends on the firm’s financial condition and remaining obligations.

A Decision Framework for Regulators and Applicants

A useful analytical framework is the SAFE test:

• Scope: Is the activity clearly within the proposed licence and regulatory perimeter?
• Adequacy: Are capital, systems, personnel and reinsurance adequate for the risks?
• Fitness: Are owners, directors and key officers fit and proper?
• Effect: What will entry, ownership change or transfer mean for policyholders, competition and financial stability?

The framework is not a substitute for statutory requirements. It helps organise analysis and identify weaknesses before submission. Applicants should also use a “licence-to-operate” map that links each legal permission to a responsible executive, control, document and reporting obligation.

Applied Case: Meridian Shield Insurance Limited

Background

Meridian Shield Insurance Limited is an illustrative company proposing to enter a national market with commercial property, engineering and small-business liability insurance. A foreign insurance group intends to hold seventy per cent of the shares through a local subsidiary. The remaining shares would be held by domestic investors. Meridian plans to distribute products through brokers and a digital platform.

Situation and Problem

The promoters have sufficient funds to meet the stated minimum capital requirement. However, the proposed chief executive has extensive banking experience but limited insurance experience. The foreign parent proposes a quota-share reinsurance arrangement with a related reinsurer. The digital platform will use automated pricing based on business data supplied by customers. The application also fails initially to identify one indirect beneficial owner behind a private investment vehicle.

Analysis

The minimum capital figure does not resolve the application. The regulator must examine whether capital remains adequate after catastrophe and liability stresses. It should analyse the related-party reinsurance agreement, including pricing, counterparty strength, collateral and concentration. Dependence on a related reinsurer is not automatically prohibited, but it requires transparency and arm’s-length controls.

The proposed chief executive may be acceptable if supported by experienced insurance officers, an actuarial function, a strong board and a documented development plan. Alternatively, the regulator may require appointment of an experienced principal officer before authorisation. The undisclosed beneficial owner raises a more serious concern because transparency is essential to ownership approval; the omission may reflect poor due diligence or an attempt to conceal control.

The digital pricing model requires governance over data quality, discrimination, explainability, cybersecurity and customer communication. The insurer remains responsible for automated decisions and cannot transfer accountability to a technology vendor.

Approach and Regulatory Solution

The authority requests a revised ownership chart, verified source-of-funds documents, a stress-tested capital plan, an independent review of the reinsurance arrangement and evidence of board-level oversight of the pricing model. It permits conditional approval only after Meridian appoints an experienced insurance executive, establishes independent risk and compliance functions, tests the platform and adopts a related-party transaction policy.

Outcome

Meridian receives authorisation for specified commercial property and engineering classes, subject to limits on concentration and a requirement to notify the authority before expanding into liability products. The approval includes reporting conditions during the first operating years. The case demonstrates that licensing is a judgement about sustainable capability, not a mechanical check of incorporation and minimum capital.

Learning Points

The principal lessons are that ownership transparency is substantive, not clerical; related-party arrangements require scrutiny; technology creates governance obligations; and conditional licensing can reconcile market access with supervisory caution.

Risks, Common Mistakes and Ethical Considerations

Applicants frequently underestimate the time required to verify ownership and prepare reliable financial projections. Other common mistakes include treating minimum capital as a complete solvency plan, appointing nominal independent directors, outsourcing core functions without retaining oversight, failing to disclose past regulatory problems and submitting generic policies copied from another jurisdiction.

Regulators also face risks. Inconsistent interpretation can create uncertainty, while excessive reliance on formal documents may overlook the practical ability of the applicant to operate. Supervisory decisions should be proportionate, reasoned and documented. Confidential information must be protected, but confidentiality should not become a barrier to necessary supervisory cooperation.

Ethically, market entry involves fairness to both customers and competitors. A new firm should not obtain approval through unrealistic pricing designed to gain market share and later impose abrupt corrective measures. Owners and managers must treat policyholder assets and information as matters of trust. Conflicts involving shareholder loans, commissions, tied distribution and related-party reinsurance require disclosure and independent review.

Technology and Emerging Developments

Digital applications are changing the form of market entry. Insurtech firms may seek to become full insurers, managing general agents, distributors or technology providers. Regulatory classification must follow the substance of the activity. Cloud outsourcing, application programming interfaces, artificial intelligence, digital identity and automated underwriting can improve efficiency but create concentration, cyber and operational risks.

Regulators increasingly expect applicants to demonstrate data governance, model validation, human oversight, resilience testing, incident reporting and third-party risk management. A firm using artificial intelligence should be able to explain the data used, test outcomes for unfair bias, monitor model drift and provide a process for correction or review. Regulatory technology can assist with ownership screening, document analysis, solvency monitoring and suspicious-transaction detection, but automated tools do not replace accountable human judgement.

Other emerging developments include cross-border digital distribution, climate-related underwriting, embedded insurance, resolution planning and group-wide supervision. These developments make the distinction between licensing and continuing supervision increasingly important: authorisation is the starting point of accountability, not its end.

Best Practices for Applicants and Supervisors

Applicants should begin with a regulatory-perimeter analysis, build a transparent ownership structure, appoint genuinely capable directors and control officers, and integrate legal, actuarial, financial, technology and conduct planning. Their business plan should include adverse scenarios rather than only growth assumptions. Pre-application engagement with the authority can clarify expectations, but it does not guarantee approval.

Supervisors should apply clear criteria, assess substance over form, coordinate with competition and financial-intelligence authorities, and use proportional conditions where risks can be controlled. They should monitor whether the approved business model is actually followed. Both applicants and regulators benefit from complete disclosure, timely communication and a documented reasoning trail.

Chapter Summary

Licensing is the principal mechanism through which insurance regulators control entry into a trust-based financial sector. Insurers, reinsurers and intermediaries require different forms of authorisation because their risks and responsibilities differ. A licensing decision examines business scope, capital, solvency, governance, fit-and-proper status, ownership, foreign participation, operational systems and customer protection.

Minimum capital is only a threshold; sustainable entry requires risk-sensitive financial resources and credible systems. Ownership approval focuses on ultimate control, source of funds and the capacity of owners to support sound governance. Foreign participation can bring benefits but requires effective group supervision. Portfolio transfers, mergers and exits require approval because policyholder obligations cannot be treated as ordinary commercial assets. Technology adds new opportunities and risks, while conditional licensing and continuing supervision help align innovation with protection. The central professional principle is that authorisation must be based on demonstrable capability, transparency and accountability.

Key Terms

Authorisation: Regulatory permission to conduct a specified insurance activity.

Licence scope: The classes, products, territories and activities an authorised entity may undertake.

Insurer: An entity that assumes insurance risk under contracts with policyholders.

Reinsurer: An entity that accepts risks transferred by another insurer.

Intermediary: A person or entity that arranges, advises on, distributes or services insurance without necessarily assuming underwriting risk.

Fit and proper: A standard assessing a person’s competence, experience, integrity, reputation and financial soundness.

Ultimate beneficial owner: The natural person or persons who ultimately own or control an entity.

Controller: A person able to exercise significant influence over an insurer’s management or policy.

Paid-up capital: Capital actually contributed and available to support the authorised entity.

Risk-based capital: Capital calibrated to the risks undertaken by an insurer.

Solvency ratio: A measure comparing eligible available capital with required solvency capital.

Regulatory perimeter: The boundary between regulated and unregulated activities.

Portfolio transfer: The approved movement of insurance policies, rights and liabilities to another insurer.

Run-off: The process of administering existing obligations without writing substantial new business.

Related-party transaction: A transaction involving an entity or person connected with the insurer’s ownership or management.

Retrocession: Reinsurance purchased by a reinsurer to transfer part of its assumed risk.

Conditional approval: Authorisation subject to specified restrictions, milestones or supervisory conditions.

Group supervision: Regulatory oversight of an insurance group, including its parent, subsidiaries and significant affiliates.

Review Questions

Short Answer Questions

1. Why is insurance licensing more than ordinary company registration?

2. Distinguish between minimum capital and risk-based solvency capital.

3. What matters are examined under a fit-and-proper assessment?

4. Why must regulators identify the ultimate beneficial owner?

5. What is a portfolio transfer?

Long Answer Questions

1. Explain the authorisation process for a new insurer from business-plan submission to operational approval.

2. Compare the regulatory concerns applicable to insurers, reinsurers and intermediaries.

3. Discuss the benefits and supervisory risks of foreign participation in insurance markets.

4. Explain how governance and capital requirements work together to protect policyholders.

5. Analyse the regulatory and consumer issues involved in mergers, portfolio transfers and orderly exit.

Analytical / Application Questions

1. An applicant meets the statutory capital minimum but proposes rapid growth, weak reinsurance and inexperienced management. Should it receive an unconditional licence? Apply the SAFE framework.

2. A digital broker uses an algorithm that recommends products but cannot explain its ranking or detect discriminatory outcomes. Identify the licensing and conduct issues and propose controls.

3. An insurer proposes transferring a distressed portfolio to a smaller company with adequate current capital but limited claims infrastructure. What evidence should the regulator require before approving the transfer?

22. Multiple Choice Questions with Answers

Question 1

What is the principal reason insurance regulators assess an applicant’s future operating capability rather than merely its incorporation documents?

A. Insurance contracts create long-term obligations and policyholder dependence

B. Insurance companies are exempt from ordinary company law

C. All insurance products must be approved by competition authorities

D. Intermediaries are required to own insurers

Correct Answer: A. Insurance contracts create long-term obligations and policyholder dependence

Question 2

An insurer authorised only for property insurance begins selling life policies. Which licensing principle has it breached?

A. The principle of portfolio transfer

B. The principle of licence scope

C. The principle of retrocession

D. The principle of group supervision

Correct Answer: B. The principle of licence scope

Question 3

Which feature most directly distinguishes risk-based capital from a simple minimum-capital rule?

A. It is paid only by foreign shareholders

B. It reflects the risks undertaken by the insurer

C. It applies only to insurance intermediaries

D. It eliminates the need for technical reserves

Correct Answer: B. It reflects the risks undertaken by the insurer

Question 4

Which person would normally be subject to a fit-and-proper assessment?

A. A policyholder purchasing motor insurance

B. A regulated insurer’s proposed chief executive

C. A customer requesting a claims form

D. A supplier providing office furniture

Correct Answer: B. A regulated insurer’s proposed chief executive

Question 5

Why does a regulator investigate the ultimate beneficial owner of an insurance applicant?

A. To determine the applicant’s advertising budget

B. To identify the persons who ultimately own or control the entity

C. To calculate the applicant’s claims ratio

D. To approve every policy wording

Correct Answer: B. To identify the persons who ultimately own or control the entity

Question 6

A foreign parent wants to reinsure most of its subsidiary’s business through a related reinsurer. What is the most appropriate regulatory response?

A. Automatically prohibit all related-party reinsurance

B. Ignore the arrangement because reinsurance is never regulated

C. Examine counterparty strength, concentration, transparency and arm’s-length terms

D. Approve it solely because the parent is foreign

Correct Answer: C. Examine counterparty strength, concentration, transparency and arm’s-length terms

Question 7

Which factor is most relevant when approving a portfolio transfer?

A. Whether the receiving insurer has adequate capital and can protect policyholder rights

B. Whether the transferring insurer has changed its logo

C. Whether all policyholders agree to purchase new products

D. Whether the transfer increases the broker’s commission

Correct Answer: A. Whether the receiving insurer has adequate capital and can protect policyholder rights

Question 8

A digital insurer uses an automated pricing model. Which governance expectation is most appropriate?

A. The insurer can avoid responsibility by blaming its technology vendor

B. The model need not be tested if it reduces operating costs

C. The insurer should maintain data governance, validation and human oversight

D. The model should replace all compliance personnel

Correct Answer: C. The insurer should maintain data governance, validation and human oversight

Question 9

Under the SAFE framework, examination of whether the proposed activity falls within the requested permission concerns which element?

A. Scope

B. Adequacy

C. Fitness

D. Effect

Correct Answer: A. Scope

Question 10

Why may a regulator impose conditions during an insurer’s early operating period?

A. To permit controlled entry while monitoring risks and capability

B. To remove all continuing supervisory obligations

C. To guarantee that the insurer will be profitable

D. To allow the insurer to operate outside its licence

Correct Answer: A. To permit controlled entry while monitoring risks and capability