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The South African Insurance Industry Survey 2016 | 137

The South African reinsurance market faced many difficult decisions in would be for a prompt transition, as the burden of parallel regulation is high in
2015. Decisions, amongst others, in respect of growth and structural terms of costs and the strain on staff. Reinsurance regulatory review proposals
developments, were driven primarily by far-reaching economic and are very topical and the industry is scrutinising their options through the proposal
regulatory change. process.

Tough economic conditions persist. The weakening of the Rand, poor GDP Industry performance
growth and the potential downgrade of South Africa's sovereign rating, provided Illustrated below is the composition of the reinsurance market by Gross Written
for a challenging environment for the insurance and reinsurance markets in Premium (GWP), as reported in the audited annual financial statements of the
2015. South Africa’s economic growth is sluggish, with real GDP growth in 2015 reinsurers participating in this survey, including a combined view of life and non-
floundering at 0.4% and projected to worsen in 2016, due to a combination of life results.
domestic constraints and external headwinds arising from the fall in commodity
prices and a slowdown of the Chinese economy. The impact of Brexit will also OTHERS2 0%
put pressure on commodity prices, export volumes and capital flows to South 1%
Africa in the mid-term. To achieve the growth expected by foreign parents,
South African reinsurers will have to focus on alternative high growth markets, MUNICH RE 32%
mobilising renewed focus on the rest of Africa. These markets are attractive due 33%
to lower insurance penetration and reduced competition. There are however
major regulatory constraints, particularly in Nigeria, one of the biggest target HANNOVER RE1 30%
markets. South African insurers will also look to capture African market share, GENERAL RE 27%
with capital and innovative ideas key to access them. Reinsurers will have to AFRICAN RE
consider how they will be able to assist their cedants in this regard. Concerns 12%
remain regarding a sovereign credit rating downgrade that could adversely affect SCOR RE 12%
the competitiveness of local reinsurers going forward.
RGA RE 12%
On a regulatory front, the regulations pertaining to reinsurance are less stringent 12%
when compared to those applicable to the primary insurance market. The 2014
differences stem from the primary purpose of insurance regulation, which 2015 5%
is to protect insurance consumers who may lack insight or sophistication in 6%
understanding the business of insurance. Reinsurance, on the other hand, is
often referred to as the “wholesale arm” of the insurance industry. 8%
8%
2015 marks a milestone in the SAM process and this risk-based regulatory
regime is close to being fully implemented. The industry has gone to great
lengths to ready itself for SAM implementation. An industry-wide preference

¹ For the purposes of overall market performance, Hannover Reinsurance Africa Limited and Hannover Life Reassurance Africa have been combined to make the results comparable to the composite licenses.
2 Reinsurers included in the “Other” caption includes Emeritus Reinsurance Company (SA) Limited and GIC Re South Africa Limited