Insurance Interrupted, South African Short-Term Insurance Industry Remains Resilient but Downside Risks Prevail
- Industry Research: Insurance
- Year : Mar 2021
Summary
The short-term insurance industry outperformed the broader economy, reflecting resilient demand for insurance. Sample gross written premium (“GWP”) growth nevertheless moderated to 5% from 8% in 2019 but is expected to rebound to an extent in 2021. Contingent Business Interruption (“CBI”) claims and provisions resulted in the sample underwriting margin narrowing to 5% from 8% in 2019, offsetting low claims frequency during the hard lockdown.
Additional Information
Lower earnings caused the median Solvency Capital Requirement (“SCR”) coverage ratio for the sample to decrease to around 140% from 155% in 2019, although we consider this to be within a sound range, supported by slower premium growth, broadly conservative investment allocations and high profit retention. Going forward, settlement of large CBI claims could help to reduce reserving and reinsurance counterparty risk charges, and along with limited dividend payments, preserve solvency at a comfortable level.
