The Bank of Ghana (BoG) has issued the bancassurance directives as an Exposure Draft to solicit comments and inputs from the banking industry and the general public, in line with the BOG’s Procedures for Issuance of Directives, 2020.

According to the BoG, Bancassurance has notably grown in Africa and around the world since the 1980’s by offering banks and other financial institutions (BOFIs), an opportunity to provide more diversified products to their customers whilst earning additional income by providing their distribution channels and other platforms to insurance companies.

Insurance companies on the other hand, can have an increased reach to a broader audience and achieve more sales by leveraging on the BOFIs’ distribution channels.

“For customers, there is convenience, as BOFIs provide a one-stop-shop for all their financial needs including insurance products. In the case of Ghana, insurance companies have resorted to entering into partnership agreements with banks for the provision of Bancassurance products through the distribution channels of the latter”, the directive said.

The BoG said its approved model for Bancassurance as emphasised in this Directive is the Distribution Partnership Model.

The model allows Regulated Financial Institutions (RFIs) to sell insurance products to their customers on behalf of an insurer using an RFI’s distribution network.

The model permits an RFI to contract one life and one general insurance company and allows for individual or retail customers to choose their desired product and insurer. The model ensures that there is no sharing of risk between the RFI and the insurer.

It also aligns with the Bancassurance model as adopted by the National Insurance Commission (NIC).

“This Directive is therefore being issued to provide BOG’s regulatory expectations to the banking industry to ensure that inherent risks associated with the product is adequately managed by RFIs as well as to further smoothen and ensure a seamless implementation of the business of Bancassurance in Ghana between the banking and insurance sectors of the economy”, the BoG said.

Sanctions and remedials

On its sanctions and remedial measures, the BoG said an RFI that fails to comply with the requirements of this Directive shall be liable to pay to the Bank of Ghana an administrative penalty of not less than two thousand penalty units and not more than ten thousand penalty units (as per section 92(8) of Act 930) as well as impose any other penalty or take any remedial action that BOG considers appropriate as set out in Act 930. 50.

“Without prejudice to the other penalties and remedial measures prescribed by Act 930, BOG may impose one or more of the following sanctions where any of the provisions herein are contravened:

a. Suspend the RFI from engaging in Bancassurance business;

b. Prohibit the RFI from further lending or taking further financial exposures, including investments, or capital expenditure;

c. Restrict payment of bonuses or excessive compensation to the defaulting key management personnel or director; and d. Suspend defaulting person from office or declare that the relevant person is no longer a fit and proper person.