Fitch Ratings has published two reports on the South African insurance markets.
The ratings agency says that although the operating environment in South Africa remains challenging, the performance of non-life insurers has been resilient.
"Despite pricing remaining under pressure, and the volatility in the investment markets, profitability in the South African non-life insurance industry strengthened in H111," says Nicole Gibb, associate director in Fitch's Insurance team in South Africa. "This was reflective of improved underwriting performances, strong solvency positions and the maintenance of market share by major players."
The report also discusses regulation affecting the industry. Fitch expects premium income to remain under pressure due to the industry's high level of competitiveness and the continued financial constraints on consumers in South Africa. In some cases, Fitch believes that insurers may continue to experience difficulty in charging an appropriate premium for the risks they insure. As a result, Fitch expects the performance of non-life insurers in H211 to have been in line with or only slightly up on H111's results.
Fitch Ratings says in another report that the South African life insurance industry performed well in H111, despite tough economic conditions.
"Profitability in the South African life insurance industry strengthened in H111, which was reflective of the gradual recovery in the local economy, improved persistency experience and improved sales," says Gibb. "Despite this, investment markets continued to demonstrate volatility and consumers' disposable income remained strained."
South African life insurers are also preparing for a number of reforms that will transform how they are regulated. Solvency Assessment and Management (SAM, the new solvency regime for the South African insurance industry), National Social Security Reform (a compulsory retirement savings initiative) and the National Health Insurance (a compulsory national healthcare system) will have an impact on the way in which life insurers operate. However, Fitch expects major insurers to adapt successfully to the proposed reforms.
Fitch considers the major life insurance companies to be well-prepared to meet the industry's challenges. In addition, the agency expects the performances of life insurers to remain constrained as a result of the tough operating environment.
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