State of the SA Insurance Market

State Of The SA Insurance Market

 

 

To a large extent, the South African Non Life Insurance industry has been hit by a perfect storm, given the extreme challenges it faces. These include South Africa’s energy crisis, the repercussions of natural disasters and escalating geopolitical tensions, collectively creating a complex web of difficulties for the sector.

 

In a nutshell, the above challenges have resulted in a hardening of the insurance market, whether it be pricing or risk acceptance.

 

A summary of the challenges are:

 

Catastrophic Events

 

In April 2022, South Africa witnessed one of the deadliest and costliest flood events in its history, resulting in significant economic and catastrophic insured losses, costing SA Insurers and Reinsurers billions of Rands.

 

Energy Crisis

 

The energy crisis has led to restrictions on insurance policies, particularly for property damage and business interruption due to power supply interruptions.

 

Erratic energy supply has drastically increased the frequency and severity of property fire losses and grid failure is now seen as an uninsurable risk and is totally excluded.

 

Hardening Market

 

Poor underwriting results due to factors mentioned above, have caused insurers to limit their exposure or avoid high risk industrial sectors, including manufacturing processes involving plastics, wood, paper, textiles and chemicals.

 

Rising Cost of Insurance

 

Inflation, the interest rate and exchange rate changes are leading to increased costs, which ultimately have a negative impact on the cost of insurance.

 

Insurance premiums continue to rise in 2023, with an average increase of 15 – 20% for good risks.

 

Cyber Concerns

 

Ransomware activity is increasing, raising concerns about the collection and disclosure of personal data collected via digital means.

 

Other Trends Impacting Insurance

 

Reduced availability of spares and machinery, as well as vehicles for car rentals, is affecting the industry.

 

How We Can Help

 

Chadwicks is here to assist you in navigating this complex insurance landscape.

 

Please consider the following practices to protect and enhance your risk profile:

 

1. Risk Control & Management: Actively find ways to reduce the frequency and severity of losses.
2. Risk Retention: Protect your risk profile by setting aside financial resources to absorb losses when possible.
3. Insurance Survey Requirements: Demonstrate your commitment to reducing exposure by cooperating with your insurer when they request risk improvements.