BoG warns of sanctions in bancassurance directives to stakeholders in financial sector

The Bank of Ghana (BoG) has released a draft of its bancassurance directives as an Exposure Draft, seeking feedback and suggestions from the banking sector and the general public. This initiative aligns with the BoG’s 2020 Procedures for Issuance of Directives.

Bancassurance, which involves partnerships between banks and insurance companies to offer insurance products through banking channels, has significantly expanded across Africa and globally since the 1980s. 

This model allows financial institutions to diversify their offerings while earning additional income by providing distribution platforms for insurance products. Similarly, insurance companies benefit by extending their reach to a wider audience through these partnerships.

Customers also gain from the convenience of accessing both banking and insurance services under one roof. In Ghana, this concept has taken the form of partnerships between banks and insurance firms, enabling the sale of insurance products through banking channels, according to the draft directive.

The BoG has endorsed the Distribution Partnership Model for bancassurance. Under this approach, regulated financial institutions (RFIs) serve as intermediaries, selling insurance products on behalf of insurers through their networks.

This model allows RFIs to collaborate with one life and one general insurance provider, giving individual customers the flexibility to select the products and insurers they prefer. Importantly, the model ensures that RFIs do not share the financial risks associated with the insurance products they sell. This approach also aligns with the framework adopted by the National Insurance Commission (NIC).

The directive aims to clearly define regulatory expectations for the banking industry, ensuring that RFIs effectively manage the risks associated with bancassurance. It is designed to foster a seamless and efficient integration of bancassurance practices between the banking and insurance sectors in Ghana.

Penalties and Remedial Actions

The BoG has outlined penalties for RFIs that fail to comply with the directive. Non-compliant institutions will face administrative fines ranging from 2,000 to 10,000 penalty units as stipulated under section 92(8) of Act 930. Additional sanctions or remedial measures may also be imposed, depending on the severity of the infraction. These measures include:

• Suspending the RFI from conducting bancassurance activities.
• Restricting the RFI from extending further loans, taking on new financial exposures, or making capital investments.
• Limiting payment of bonuses or excessive compensation to responsible management or directors.
• Suspending or disqualifying individuals deemed unfit for their roles.