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Mar 2024

South Africa: Life insurers remain well-capitalised despite tough operating conditions in 2022

Source: Middle East Insurance Review | May 2023

South African life insurers navigated volatile investment markets and a tough operating environment in 2022, emerging well-capitalised and in a strong position to continue honouring contractual promises made to policyholders and their beneficiaries, according to the Association for Savings and Investment South Africa (ASISA).
 
The long-term insurance statistics released by ASISA on 15 March 2023 show that life insurers held assets of ZAR3.7tn ($204.45bn) at the end of 2022 while liabilities amounted to ZAR3.4tn, both the same as at the end of 2021. This left the industry with free assets of ZAR347bn at the end of December 2022, almost double the capital required by the Solvency Capital Requirements (SCR).
 
ASISA Life and Risk Board Committee deputy chair Hennie de Villiers pointed out that the assets held by the country’s life insurers at the end of 2022 were significantly higher than at the end of 2019 before the COVID pandemic. “While liabilities also increased substantially, there was only a slight downward adjustment in the average SCR ratio over the same period, from 2.14 in 2019 to 1.96 in 2022, demonstrating the industry’s resilience during the COVID pandemic.”
 
Claims and benefits paid
Policyholders and beneficiaries received claims and benefits payments worth ZAR578bn from South African life insurers in 2022, the second highest paid in a year. The payments included claims against life, disability, critical illness and income protection policies, and retirement annuity and endowment policy benefits.
 
Mr De Villiers said that while the value of claims and benefits paid had come down from the ZAR608bn paid in 2021 when death claims as a result of the COVID pandemic were at their highest, the statistics show that the impact of COVID is likely still a threat and is still costing lives.
 
“Last year, life insurers paid 501,785 death claims, 26% lower than in 2021, but still 24% higher than in 2019,” he said.
 
Hardship
Mr De Villiers said that hidden deeper in the statistics is evidence of South African consumers’ unprecedented hardship. For many, this means stopping risk insurance premiums and cashing investment policies to survive financially.
 
The ASISA statistics show 689,888 recurring and single premium savings policies were surrendered in 2022. A surrender involves a policyholder withdrawing the fund value before a savings policy matures. While this is lower than in 2021 when 938,148 savings policies were surrendered, this is still too high and therefore concerning, he said.
 
The ASISA statistics also show 8.4m recurring premium policies lapsed last year – 1m more than in 2021. A lapse occurs when the policyholder stops paying premiums for a risk policy with no fund value. “On the other hand, almost 1.2m fewer recurring premium policies were sold in 2022 than in 2021, further demonstrating the financial pressure experienced by consumers,” noted Mr De Villiers. M 
 
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