|
Market Update
|
South Africa
Printable Version
|
In respect of both South African and African markets, we have seen a
continued improvement in terms driven by an ongoing state of overcapacity
in the insurance market. A feature of the local market around
the July renewals has been a focused hardening of insurers’ attitudes
when it comes to accounts with very negative loss history risk profiles
and firms that are unable to implement structured Risk Management
programs.
These accounts have seen a significant increase in their own retentions
through increased deductibles and restrictive cover in the problem
areas. Careful consideration of all the aspects of an enterprise-wide
Risk Management program needs to be made by both brokers and the
Risk Management divisions of our clients.
Here are some brief comments within specific classes of business.
Property
The property insurance market in South Africa is showing signs of
hardening, with the July renewals reflecting fewer rate reductions and, at
best, renewals concluded at expiring terms. The South African market
was badly hit by a number of large fire losses in the first half the year,
with several local insurers taking a severe strain on their net books. As
a result, one or two local companies withdrew their capacity from certain industry sectors that have had bad loss
experience and/or not complied with risk management recommendations.
In the mining sector, over US$600 million of losses hit the international market in the first few months of this year.
We have seen severely reduced international capacity and restricted terms as a result. We can now foresee more
stringent underwriting practices by insurers, capacity becoming more of a problem, restrictions in cover where no
risk management practices are in place and, possibly, increased rating and deductibles.
Liabilities—General
The local liability market remains competitive as a result of the relatively low claims incidence over the last eighteen
months. Several new players have indicated some profitability in this class of business; however, the merger earlier
this year between the Stalker Hutchison Group and Admiral Underwriting (now known as Stalker Hutchison
Admiral Group), has served to reduce the local competition somewhat.
In a few cases, there are still only limited markets for certain covers and/or business risks. This is so, in particular,
for many mining risks. Taking advantage of the current stable market conditions, where capacity is available
and premiums or deductibles are affordable, many clients are rightly making the most of the situation and are
purchasing cover limits in excess of their foreseeable exposures.
Motor
Motor insurance classes remain a major challenge for those insurers that underwrite this business. Motor insurance
is South Africa’s dominant source of short-term premiums, with approximately 37 percent of our industry’s total
gross premium flowing from the various motor classes, which range from private cars, to assorted light and heavy
commercial vehicles, to special-types of vehicle. All manner of vehicle crime remains high in South Africa and
motor classes continue to produce negative financial results for most insurance companies.
Construction
The construction and engineering insurance markets are still soft, due to the absence of any major South African
construction and engineering losses. We are, however, seeing the impact of the electricity supply problem,
particularly for the major high-consumption projects (such as beneficiation furnaces), which are being put on hold
until clients can be guaranteed enough electricity to support their production requirements.
To South Africa’s north, the demand for new construction projects continues, as does the need for allied risk and
insurance expertise in evaluating and/or placing all the necessary risk issues and insurance covers for the different
parties involved.
SMME and Commercial
With the continued soft insurance market in this sector, "consumerism" is rife! However, some commercial
insurance buyers are paying little attention to the value brought to their business by good quality insurance products
and services or to the potential pitfalls of buying inferior solutions.
Our business environment is also becoming more litigious, which is apparent from the number of queries the
Financial Services Board has to attend to on behalf of complainants. This is, inevitably, a consequence of the
choices made by some businesses at the time of buying their insurance solutions. The commercial segment
continues to present us with excellent growth opportunities, which we are systematically exploring in line with our
overall operational strategy.
Credit Ratings
Most South African insurance companies enjoy ratings within the "A" groupings above. Some examples are:
| ABSA Insurance Company |
AAA |
| AIG Insurance Company RSA |
AAA |
| Coface SA Insurance Company |
AAA |
| Credit Guarantee Insurance Corp |
AA+ |
| Mutual & Federal Insurance Company |
AA+ |
| Santam Insurance Company (Fitch rating) |
AA+ (local currency-public info rating) |
| Zurich Insurance Company |
AA+ |
| Guardrisk Insurance Company |
AA |
| Regent Insurance Company |
AA- |
| ACE Insurance Company |
A+ |
| Centriq Insurance Company |
A+ |
| Compass Insurance Company |
A+ |
| Emerald Insurance Company |
A+ |
| Etana Insurance Company |
A+ |
| Lombard Insurance Company |
A+ |
| Lion of Africa |
A |
| Constantia Insurance Company |
A- |
| MUA Insurance Company |
A- |
| New National Insurance Company |
A- |
| RMB Specialised Lines |
A- |
Lloyd’s of London has an A+ rating from Standard & Poor’s UK.
|
|
|
Please contact your Lockton Representative for further information regarding any information contained in this
market update.
|
 |
Tom Healy
Business Unit Manager
Knowledge Center
Alexander Forbes Risk Services
Sandton, South Africa
Tel: 027.11.669.3075
E-mail: healyt@afordbes.co.za |
|
|
|
|
|