Insurance industry shows resilience amid Covid-19
CAPE TOWN - KPMG has said that the country’s insurance industry was financially healthy last year and had shown resilience in weathering Covid-19 this year.
The auditing firm said in its South African Insurance Industry Survey that the pandemic had, however, forced the industry to reassess the risks it faces, adopt new ways of operating and accelerate its shift to digitisation.
KPMG said the industry reported gross written premiums (GWP) of R110.6 billion in 2019 – a 7.6 percent increase from the recorded performance in 2018. It said the top five companies that realised the growth were Santam, Hollard, Old Mutual Insure, Guardrisk and Renasa. The overall claims (loss) ratio was 58.9 percent from 55.3 percent in 2018.
KPMG partner for financial services Pierre Fourie said: “A further feature was the focus on reducing the cost of business and improvements in value of new business margins, seen at Momentum Metropolitan, Liberty and Sanlam. Loyalty programmes have become the norm rather than the exception with the introduction of the Old Mutual programme and improvements to the programmes of Liberty, Momentum Metropolitan and Discovery.”
The survey analysed the 2019 financial results of 33 short-term insurers, 18 life insurers and eight reinsurers. It also provides a range of expert insights into industry trends and challenges, globally and in South Africa. It said the insurers embedded value, which reflects expected profitability from existing policies plus current net worth, was: Old Mutual R72.3bn, Discovery R71.2bn, Sanlam R60.2bn, Momentum Metropolitan R41.2bn and Liberty R34.4bn.
It said solvency ranged from 1.6 times the requirement to 2.11 times. KPMG associate director Kashmira Naran said the insurers achieved respectable growth levels in 2019 but lower than the previous years. Naran said the insurers’ GWP improved 14 percent compared to 20 percent in 2018. She said the loss ratios showed a mixed bag of performance.
“The overall loss ratio for the reinsurers participating in the survey declined marginally, from 79 percent in 2018 to 80 percent in 2019.”
Naran said it was highly likely that a hardening of premium rates would continue into 2020 due to the anticipation of increased losses arising from business interruption claims, business failures, loss of employment, death and increased health-related claims in the face of Covid-19.