Page 146 - MC14326 all pages

142 | The South African Insurance Industry Survey 2016 WHATEVER YOU DO,
BE DIFFERENT...
Currently, foreign reinsurers participate in the local market by IF YOU ARE DIFFERENT,
either establishing a subsidiary in South Africa or by way of YOU WILL STAND OUT.
providing cross-border reinsurance directly.
Anita Roddick
The allowance for reinsurance branches is expected to
increase the supply of reinsurance capacity in the South
African market. Many of these multinational reinsurers will
prefer the branch structure, as it:

–– allows easier movement of capital;

–– centralises multiple processes and functions;

–– reduces regulatory burden to some extent; and

–– reduces audit requirements

However, the aforementioned benefits come with certain
limitations related to which investments should be held to
meet technical provisions, and how these assets can be
utilised and/or transferred.

In addition, the direct and indirect taxation consequences
of the decision by an existing reinsurer to restructure its
business and operate using a branch structure are complex
and require detailed consideration. In this regard, a restructure
of this nature highlights the differences in the interpretation
of the corporate rule (section 41 to 47 of the Income Tax Act)
provisions within the context of the insurance industry.

Overall, an exciting, but challenging time to be operating a
reinsurance business in South Africa.