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Market Report, "South Africa Insurance Report Q2 2011", published

New Financial Services research report from Business Monitor International is now available from Fast Market Research

May 3, 2011 - PRLog -- Key Insights On South Africa's Insurance Sector

Writing in April 2011, we see that the insurance sector of South Africa is experiencing change, development in maturity and consolidation. One change will be because the Financial Services Board (FSB) plans to put in a solvency assessment and management (SAM) regime based on the European regime, Solvency II, by 2014. The financial and administrative challenges affect the whole industry but will be especially cumbersome for life insurers. However, many of the developments should eventually result in a stronger, more resilient industry.

The market is made up substantially of large South African financial services groups. In the non-life segment, Mutual & Federal, Santam and the local operations of Zurich account for nearly 40% of total premiums. In the life segment, the largest players are Old Mutual (the owner of Nedbank and many others) and Sanlam. Absa has non-life and life subsidiaries. FirstRand Group is represented by Momentum Group (life insurance) and OUTsurance (non-life). Standard Bank owns Liberty Group, which is a major life player. There are some significant independent companies, including Discovery, which focuses on health insurance, Metropolitan and Hollard, a private company expanding into Australia and elsewhere.

A key change in the life segment was the merger of Metropolitan with Momentum, creating a large new listed life insurer out of two broadly complementary businesses, with an embedded value of about ZAR30bn. Metropolitan traditionally focuses on the low-to-middle income segment of the retail market, while Momentum concentrates its activities in the upper-income segment.

The non-life sector has struggled in recent years from the slow economic recovery in South Africa and this has led to higher losses and lower underwriting margins. There has been a general trend in sideways moving premiums but we expect a return to double-digit growth in 2012.

Volatility in the financial markets decreased over the last year. Customers have become more adverse to risk but this has affected the market negatively and positively, with growing life sales offsetting diminishing single premium products. Of the insurers that cover niche business, it is possible that the one affected least by the downturn was Guardrisk, which is part of Alexander Forbes (a broker of shortterm insurance and provider of various risk management solutions). Guardrisk is one of the world's leading providers of captive cell solutions to its clients. It has grown by virtually all measures as its customers seek the advantages of underwriting their own risks through captives.

There has been an increase in the number of people out of work in South Africa. Job losses and increasing household debt have led to a reduction in disposable incomes - reducing the affordability of life insurance and other long-term savings products. The strong regulatory regime has supported consumer confidence in these products but it has also (since the beginning of 2009) forced brokers to book a part of the commission that they own over the life of policies - rather than booking all commission upfront. The sector is also up against non-financial products such as property.

Issues To Watch

Increase In Repeat Life Business

The resilience of the industry has been highlighted by a continuing trend of dropping lapses and surrenders of life insurance policies.

Measures To Reduce Motor Claims Costs

Initiatives by the industry to lower the number of road accidents could help lower claims costs. The South African Insurance Association (SAIA), which represents non-life insurers, has emphasised the need to reduce the number of deaths on the road.

Opportunities Overseas

South Africa's insurance sector is fairly mature and companies cannot look to expand by merging with other large players. An obvious option for the country's insurers is to use their strong balance sheets and expand abroad.

For more information or to purchase this report, go to:
-  http://www.fastmr.com/prod/152606_south_africa_insurance_...

About Business Monitor International

Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets.  BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports.  Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports.  View more research from Business Monitor International at http://www.fastmr.com/catalog/publishers.aspx?pubid=1010

About Fast Market Research

Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.

For more information about these or related research reports, please visit our website at http://www.fastmr.com or call us at 1.800.844.8156.

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Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.

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Source:Fast Market Research
Location:Massachusetts - United States
Industry:Finance, Research, Banking
Tags:Insurance, Premiums, Insurer, Non-life, Zarmn, Written, Momentum, Guardrisk, Ratings, Regime
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