In its 2003 Financial Sector Stability Assessment, (FSSA) the International Monetary Fund (IMF) commended the Moroccan authorities for the progress achieved in reforming the financial sector. However, the IMF noted that Morocco's compliance with the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS) was very low. Internal governance, internal control, asset and risk management, and information sharing with foreign supervisory agencies were identified as major weaknesses within Morocco's insurance supervision. The Moroccan authorities welcomed the IMF assessment and began implementing its recommendations through a government financial sector reform program. In 2005, the World Bank approved a Financial Sector Development Policy Loan to Morocco to support this reform program. As far as the insurance sector is concerned, the aim of the reform is to bring insurance supervision in line with IAIS principles. At the time of the 2005 World Bank report, the Moroccan authorities had already issued a revised Insurance Code that contained important new implementing regulations. In 2006 the World Bank reported on the significant progress achieved in the implementation of the project which, in the insurance sector, involved enhancement of accounting standards and prudential requirements, as well as preparation of a law on insurance mechanisms for natural disasters and political events.

General Overview

The International Monetary Fund (IMF) in 2003 conducted a Financial Sector Assessment Program (FSAP) of Morocco. The objective of the FSAP is to identify strengths and vulnerabilities of financial sector in a given country, to assess risks inherent in the system, to determine developmental and technical needs, and make recommendations for improvement. Overall, the IMF commended the Moroccan authorities for the progress achieved in reforming the financial sector, but noted that important challenges remain. Regarding the insurance sector, the IMF concluded that Morocco's compliance with the Insurance Core Principles (ICPs) promulgated by the International Association of Insurance Supervisors (IAIS) was very low. Internal governance, internal control, asset and risk management, and information sharing with foreign supervisory agencies were identified as major weaknesses of insurance supervision in Morocco.

The Moroccan authorities welcomed the assessment and started implementing the IMFs recommendations through a government financial sector reform program that is supported by the World Bank. In a 2005 report, the World Bank reported that it had approved a Financial Sector Development Policy Loan to Morocco in order to "strengthen the enabling legal and institutional environment for financial intermediation and risk management, and to increase private sector role and participation in the provision of financial services" (p. i). The same report added that there were three supporting elements to this objective: "(1) improving the legal, regulatory and supervisory framework for the financial industry; (2) restructuring the public financial institutions; and (3) strengthening financial sector infrastructure" (p. 12). In the insurance sector, the reforms aim to align insurance supervision in Morocco with IAIS principles. At the time of the 2005 World Bank report, the Moroccan authorities had already issued a revised Insurance Code and important implementing regulations to the Code.

Later in 2006, the World Bank in the "Status of Projects In Execution - Fy06 SOPE" report pointed out that "[p]rogress towards achieving project development objectives has been substantial" (p. 2011). Regarding insurance supervision, the World Bank reported that prudential requirements and accounting standards had been enhanced, and that the law on insurance mechanisms for natural disasters and political events was under consideration. Further, Oxford Analytica, in a 2006 assessment, pointed out that the new 2006 Law Related to the Establishment of Credit Institutions and Affiliated Organizations (Banking Law) established a commission for the coordination of institutions in charge of financial sector supervision, the Commission for the Coordination of Institutions in Charge of the Financial Sector (Commission de coordination des organes de supervision du secteur financier). This commission is composed of the Central Bank (Bank Al-Maghrib, or BAM), the Securities Commission (Conseil Déontologique des Valeurs Mobilières, or CDVM) and the DAPS, which is in charge of supervising the insurance sector and facilitating the exchange of information on their supervision activities and supervised entities.

According to Decree No. 2-78-539 of 1978, the Ministry of Finance (MoF) is responsible for "regulating and supervising the activities of insurance and reinsurance companies and their capitalization." The MoF is accountable to the King of Morocco and the Parliament. The Insurance and Social Division (DAPS) of the MoF is a body in charge of administration of the supervision of insurance companies. Morocco is listed as a member on the IAIS website.

The Principles

ICP 1 Conditions for effective insurance supervision

II

There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 2 Supervisory objectives

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There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 3 Supervisory authority

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The IMF, in its 2003 assessment, recommended that the independence of the insurance supervisor be investigated and a new operational system be implemented. However, there is insufficient publicly available information as to Morocco's compliance with the revised ICPs issued in 2003.

ICP 4 Supervisory process

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There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 5 Supervisory cooperation and information sharing

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The 2003 IMF assessment identified supervisory cooperation and information sharing among the major weaknesses of the insurance supervision framework. It was recommended that laws and regulations be amended to provide for the MoF's cooperation with domestic and foreign authorities. Oxford Analytica, in a 2006 assessment, pointed out that the new 2006 Banking Law established a commission for the coordination of institutions in charge of financial sector supervision, the Commission for the Coordination of Institutions in Charge of the Financial Sector (Commission de coordination des organes de supervision du secteur financier. The Commission is composed of the BAM, the CDVM, and the DAPS, in charge of supervising the insurance sector with the aim of facilitating the exchange of information on their supervision activities and supervised entities. However, there is no further publicly available information as to Morocco's compliance with the revised ICPs issued in 2003.

ICP 6 Licensing

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There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 7 Suitability of persons

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The 2003 IMF report recommended that the MoF introduce requirements for approval of the Board of Directors and the managers. However, there is insufficient publicly available information as to Morocco's compliance with the revised ICPs issued in 2003.

ICP 8 Changes in control and portfolio transfers

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There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 9 Corporate governance

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The 2003 IMF assessment identified internal governance as one of the major weaknesses of the insurance supervision framework. However, no further information is publicly available as to Morocco's compliance with the revised ICPs issued in 2003.

ICP 10 Internal control

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The 2003 IMF assessment identified internal control as one of the major weaknesses of the insurance supervision framework. However, no further information as to Morocco's compliance with the revised ICPs issued in 2003 is publicly available.

ICP 11 Market analysis

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There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 12 Reporting to supervisors and off-site monitoring

II

In the 2002 assessment of accounting and auditing practices in Morocco, the World Bank concluded that the institutional framework for accounting standards applied by the insurance companies was inadequate and undermined investor's perception of the quality of financial information. In 2006, the World Bank in the "Status of Projects In Execution - Fy06 SOPE" report pointed out that accounting standards had been enhanced. However, no further information as to Morocco's compliance with the revised ICPs issued in 2003 is publicly available.

ICP 13 On-site inspection

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The 2003 IMF report recommended that the frequency and quality of inspections conducted by the MoF be increased. However, no further information as to Morocco's compliance with the revised ICPs issued in 2003 is publicly available.

ICP 14 Preventive and corrective measures

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There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 15 Enforcement or sanctions

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There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 16 Winding-up & exit from the market

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There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 17 Group-wide supervision

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There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 18 Risk assessment and management

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The 2003 IMF assessment identified risk management as one of the major weaknesses of the insurance supervision framework. In 2006, the World Bank's "Status of Projects In Execution - Fy06 SOPE" report pointed out that prudential requirements had been enhanced. However, no further information as to Morocco's compliance with the revised ICPs issued in 2003 is publicly available.

ICP 19 Insurance activity

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There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 20 Liabilities

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There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 21 Investments

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According to the 2003 IMF report, Moroccan compliance with the IAIS requirements in the area of assets was "weak." It was recommended that the requirements on asset management be incorporated into legislation. Tahari et al. report in 2007 that Morocco passed legislation in 2004 permitting insurance companies to invest 5 percent of their funds abroad, which "represents a step in the right direction" (p. 30). However, no further information as to Morocco's compliance with this principle is publicly available.

ICP 22 Derivatives and similar commitments

II

The IMF in its 2003 report recommended that the MoF introduce rules on derivatives and off-balance sheet items. However, no further information as to Morocco's compliance with this principle is publicly available.

ICP 23 Capital adequacy and solvency

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There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 24 Intermediaries

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There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 25 Consumer protection

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The IMF in its 2003 report recommended adopting rules and regulations on market conduct for insurers and intermediaries. However, no further information as to Morocco's compliance with this principle is publicly available.

ICP 26 Information, disclosure & transparency towards the market

II

There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 27 Fraud

II

There is insufficient publicly available information as to Morocco's compliance with this principle.

ICP 28 Anti-money laundering/ Combating the Financing of Terrorism

II

There is insufficient publicly available information as to Morocco's compliance with this principle.