3Sixty Life, an underwriter of life insurance and funeral policies ultimately owned by the investment arm of the National Union of Metal Workers of SA (Numsa), has accused the Prudential Authority (PA) of betrayal for placing it under provisional curatorship. It said the step wasn’t needed and would place the business at risk.
The Gauteng high court ordered that 3Sixty Life be placed under curatorship on Tuesday after the PA made an urgent application on an ex parte basis, a legal term referring to orders granted without waiting for a response from the opposing side. That saw Yashoda Ram of auditor BDO SA being appointed as the insurer’s provisional curator. The court set a return date of April 12, 2022 to allow 3Sixty Life to argue why the provisional curatorship should not be made final.
“This curatorship is a failure of the PA. They jumped the gun behind our backs,” Khandani Msibi, acting CEO of 3Sixty Life and CEO of the Numsa Investment Company, told Business Day. “The PA has betrayed the trust that we have built with them. That business is solid — it does not need to be in curatorship. This was an unnecessary step...the regulator has introduced unnecessary risk into our business.”
Msibi says that by making its application on ex parte basis, the PA has damaged the company’s reputation. He also says 3Sixty Life was not aware that the PA had approached the high court to have it placed under curatorship.
“Ex parte is behind your back,” he said. “That’s what ex parte is — you lose without playing because you don’t have a right to play. I don’t think a regulator should be having the powers of ex parte.”
Msibi explains that 3Sixty Life was badly impacted by the first two waves of Covid-19 infections, which undermined its ability to meet the two key ratios that insurers are measured on: their solvency and minimum capital ratios. At the height of the first wave of infections, 3Sixty Life’s reserves dipped below its required solvency capital level, the higher of the two ratios.
When the second wave hit towards the end of 2020 and continued into early 2021, its reserves also fell below its minimum capital ratio, resulting in it losing its right to trade as an insurer.
Those events saw 3Sixty Global Solutions Group, the holding company that is majority-owned by Numsa Investment and under whose structure 3Sixty Life falls, opting to dispose of some assets and use the proceeds to recapitalise its struggling underwriter. One of the companies it chose to sell was Salt Employee Benefits, a fund administration business that dates back to 1953.
However, Msibi says while the PA was satisfied with this plan, it was scuppered after communications by the Financial Sector Conduct Authority (FSCA) implicated Salt Employee Benefits in the alleged squandering of funds from the Private Security Sector Provident Fund (PSSPF). Subsequent media reports indicated the money was allegedly blown on overseas trips, football tickets, hotels and drinks.
“They attacked Salt over matters that happened before our acquisition of Salt,” said Msibi. “As a result the transaction collapsed.”
While 3Sixty Global Solutions Group announced in May 2019 that it had bought a 74.9% stake in Salt Employee Benefits, the FSCA said in a statement in September that it had conducted on-site inspections of the PSSPF as early as November 2017. The 2017/18 annual report of the Pension Funds Adjudicator also noted the inability of Salt Employee Benefits to provide accurate responses timeously on the high volume of complaints relating to the PSSPF.
Msibi says 3Sixty Global Solutions Group then came up with an alternative plan to transfer roughly R130m in property assets owned by its subsidiary Doves Group to 3Sixty Life to bolster its capital levels. While Doves Group also forms part of the broader 3Sixty Global Solutions Group, it is actually the legal entity that owns 3Sixty Life.
Msibi says external actuarial consultants approved the property transfer plan and that this should have satisfied the PA. However, he says when the PA’s head, Kuben Naidoo, was informed he merely asked that the plan be communicated to the regulator in writing.
Despite this being done before the close of business the next day, Msibi says the PA nevertheless continued with its ex parte application to the High Court without 3Sixty Life’s knowledge.
“We co-operated with them and then they went ex parte to get curatorship against us,” said Msibi. “When this goes back to court and we are in front of a judge this curatorship will be lifted. It’s unnecessary, there’s no point to it.”
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