S&P Global Ratings has hailed SA’s regulation of the insurance industry, saying it contributes to the resilience of the sector and the dominance of few players in the sector was a strength rather than a weakness.
Sylvia Mhlanga, primary credit analyst at the ratings agency, said SA’s insurance sector had maintained resilient, sound capital buffers in a challenging economic environment.
She said this had been supported by risk management practices under the local risk-based solvency regime to manage and mitigate underwriting and financial market shocks.
“We give credit to the solid institutional framework under the supervision of the Prudential Authority and the Financial Sector Conduct Authority. These two arms regulate the local insurance market and place a robust solvency assessment framework. We expect both life and property & casualty insurance to maintain the same levels of capital strength,” she said.
“We also see the high barriers to entry in the market as a positive. For instance in the life market, we see the top five insurers controlling about 85% of the market. We see the same market dynamics on the property & casualty side. In our view, this points to more stability in the market and we view this positively.”
According to data gathering group Statista, one noticeable trend in the SA insurance market is the increasing adoption of digital technologies. Insurers are leveraging digital platforms to streamline processes, enhance customer experience and offer online insurance services.
This trend is driven by the growing tech-savvy population in the country and the need for convenient, accessible insurance solutions.
The regulatory environment in SA is pivotal in shaping the insurance market. With a focus on consumer protection and financial stability, regulators are implementing measures to ensure transparency, fair practices and sustainability within the industry.
Mhlanga said the industry was expected to register further growth over the next two years.
“We expect insurance to achieve higher than GDP growth over the next two years. This is on the property & casualty side. This is mainly supported by rate increases,” she said.
“On the life side, we forecast muted growth, reflecting macroeconomic challenges in the absence of any significant rate increases. The underwriting profitability is also expected to be maintained, even though on the property & casualty side we see elevated natural catastrophe losses.”
S&P also has a favourable outlook for SA banks, forecasting private sector credit to flourish in 2025, with the mooted multibillion-rand outlay in rail, water, ports and energy expected to increase lending opportunities for the country’s top lenders.
Investment in SA’s crumbling infrastructure is expected to ramp up in the year ahead, after the move by transport minister Barbara Creecy in December to approve the publishing of the Transnet network statement, a vital step in facilitating open access to the country’s rail network by third-party operators.
The network statement indicates that Transnet needs about R14bn a year of investment in its six corridors, which have been plagued by theft, vandalism and outdated systems.
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