S&P Global Ratings has forecast SA’s real GDP will grow between 1.3% and 1.6% over 2025 to 2027 — more than double its estimated 0.58% growth for 2024 — suggesting the country’s medium-term economic prospects have improved.
The ratings agency attributes the expected rebound to the easing of load-shedding, which has long hampered productivity, business confidence and investment.
“That said, ongoing logistical bottlenecks will continue to constrain economic activity. We also expect inflation to fall from its peak of about 7.0% in 2022 to close to 4.0%-4.2% in 2025/26,” S&P said.
The forecast comes in a Credit FAQ, in which S&P responded to questions raised by insurers and market participants about the risks facing the country’s financial sector.
The agency made clear the report does not constitute a ratings action, even though it was released ahead of its formal review of SA’s sovereign credit rating, to be announced on Friday.
It did, however, state it does not expect US tariffs to affect its ratings or outlooks on SA insurers in the short to medium term.
In November, S&P revised SA’s credit rating outlook from stable to positive, citing encouraging signs of fiscal reform and improved growth prospects under the government of national unity (GNU). The country currently holds a BB- rating.
While unemployment remains stubbornly high, the report suggests the easing cost-of-living crisis may help improve policy persistency and reduce lapses in the life insurance sector, especially within lower-income markets.
Insurers have also been able to grow life and non-life insurers’ premiums faster than GDP.
“We continue to see claims inflation, particularly in the motor line of business. Insurers are reacting by increasing premiums accordingly,” the agency said.
“We expect that growth in non-life insurance premiums will continue to outpace GDP growth, at 7%, while growth in life insurance premiums will be relatively flat.”
The insurance sector continues to show resilience in the face of mounting climate-related risks, the report states.
The last major natural disaster was the April 2022 flooding in KwaZulu-Natal, which caused an estimated R65bn in economic losses — of which only 18% were insured. Subsequent weather events, including floods in the Western Cape in 2023, hailstorms in Gauteng in 2023 and tornadoes in KwaZulu-Natal and the Eastern Cape in 2024, have reinforced the need for enhanced risk modelling.
“While climate change remains a significant concern, the industry is taking proactive steps to mitigate its impact,” S&P noted.
“By incorporating advanced climate modelling into their underwriting practices, insurers are ensuring that product pricing remains both competitive and reflects the evolving risks. In addition, the integration of technology such as geo-mapping and geo-coding is helping insurers to accurately identify flood-prone areas, enhancing their underwriting capabilities.”
Reinsurers have also reacted by increasing reinsurance costs and reducing capacity, S&P said.
Non-life insurers have responded with premium hikes and are projected to maintain a strong net combined ratio of about 95%, with returns on equity near 15% through 2026, it said.
The agency warned that external risks, including the effects of US import tariffs and global financial market volatility, could weigh on household income.
“This may lower insurers' premium growth, increase their claims and operating costs, and, ultimately, weaken their profits. Additionally, potential volatility in the capital markets could reduce the returns on insurers’ investments. This could weaken insurers’ balance sheets, particularly for life insurers, which have more exposure to market risk,” S&P said.
However, it underscored that SA insurers are generally well capitalised, providing a buffer against market turbulence.
“Capital adequacy is a key rating strength for SA insurers, and it provides some protection against investment-related risks. We don’t see the tariffs affecting our ratings and outlooks on SA insurers in the short-to-medium term, although this would be the case if capital market volatility persists or if the economic effects exceed our current expectations,” S&P said.
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