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The South African Insurance Industry Survey 2016 | 99
–– Value Master Protector (VMP), a subsidiary of the Phik’a Group (Phik’a) and
firstEquity, launched the Depreciation and Shortfall Protector (DSP) the world’s the current prudential regulatory framework to ensure that reinsurance
first value-added product (VAP) not to rely on comprehensive insurance (or
other ancillary insurance) to admit liability and settle legitimate claims.
–– PPS group officially launched a short-term insurance company in partnership
with Santam in March 2016.
–– In February 2016 it is announced that Zurich Global, the parent of Zurich
Insurance Company South Africa Limited, will embark on a ‘footprint review’
exercise that might result in the brand disinvesting from its insurance units in –– A new Prudential Authority within the Reserve Bank. This Authority will be
South Africa and Morocco.
Regulatory front
With the expectation of the SAM go-live date of 1 January 2017, the industry
entered into the implementation phase of SAM during 2014, with the first
parallel run concluding with the annual CPR return submitted at the end of
August 2015 for companies with a December year-end. However it was
announced in the first week of July 2015, that the SAM go-live date had been
delayed resulting in the parallel run phase being extended.
The industry has been assaulted by increasing regulation during the year under
review and BN 158 became effective 1 April 2015. The Board Notice introduced
a corporate governance, risk management and internal control framework for
South African insurers. The framework forms part of the interim measures
of the FSB’s Solvency Assessment and Management (SAM) regime and it
aligns the South African insurance market with the principles of Solvency II
and the International Association of Insurance Supervisors (IAIS) for insurance
supervision and regulation.
In April 2015 the reinsurance review discussion paper was released. This
Discussion paper –
–– outlined the results of the reinsurance regulatory review carried out by the
FSB;
–– sets out the challenges inherent in the current regulatory framework relating
to reinsurance; and
–– puts forward a number of proposed reforms aimed at mitigating these
challenges.
7FSB Reinsurance review discussion paper
The objective of the review was to assess how best to revise and develop
arrangements within South Africa allow for and support the objective of
insurance regulation – namely, to promote the maintenance of a fair, safe and
stable insurance market for the benefit and protection of policyholders.7
The bedding down of the Twin Peaks regulation will also provide some answers
to the industry in terms of market conduct and prudential regulation. The twin
peaks regulatory framework will provide a comprehensive framework for
regulating the financial sector.
responsible for the oversight of the safety and soundness of banks, insurers
and financial conglomerates.
–– A new Market Conduct Authority to protect customers of financial services
firms, and to improve the way financial service providers conduct their
business. This Authority will also be responsible for ensuring the integrity and
efficiency of financial markets, and promoting effective financial consumer
education.
Where to from here?
Early indications in trading updates provided by insurers for the first half of
2016 are that their underwriting performance will not be stellar. Although
no individually significant loss events have taken place in the 2016 year to
date insurers have struggled to achieve their desired premium rates in a very
competitive environment. Also, the investment markets have been volatile
experiencing the economic rollercoaster ride following the country’s possible
credit rating downgrade and Brexit. Also, the industry will monitor with
interest the conclusion of Zurich’s disinvestment in its local operations and
other potential entries into the local market by including life insurers wishing
to add short-term insurance to their product offering. In summary, the trading
conditions for the year ahead will not become easier than 2015 but as can be
seen from our write-up above, the entrepreneurial approach to the industry
allows it to adapt and offer adequate returns to its shareholders. No reason to
believe that will not be the case for 2016.