News Africa13 Apr 2020

South Africa:Association says life industry able to weather COVID-19 turmoil

13 Apr 2020

The South African life insurance industry has more than double the legally required reserve buffers in place and is therefore well positioned to deal with the COVID-19 fallout over the coming months, according to a statement posted on the website of the Association for Savings and Investment South Africa (ASISA).

Mr Hennie de Villiers, deputy chair of the ASISA Life and Risk Board Committee, says new long-term insurance statistics gathered from ASISA members show that the life insurance industry held assets of ZAR3tn ($166bn) at the end of 2019 while liabilities amounted to ZAR2.7tn. 

He says this left the industry with free assets of ZAR373bn, a figure which is more than double the reserve buffer required by the Solvency Capital Requirements (SCR).

He points out that life insurers safeguard ring-fenced reserves against volatility in financial markets by minimising exposure to listed equities. In addition, while free market-linked assets would have declined as a result of the recent market shocks caused by COVID-19 concerns, liabilities would have reduced as well. “We are therefore confident that our industry remains well capitalised despite the current turmoil.”

Mr de Villiers says a healthy reserve buffer is critically important for the long-term insurance industry, because it enables insurers to honour long-term promises made to policyholders.

He adds that healthy reserves take on even greater importance in a crisis. “As an industry we understand that the COVID-19 pandemic will present challenges that are unprecedented. While we are not able to predict with certainty how this will unfold in the months to come, we can give policyholders and their beneficiaries the assurance that the industry is well positioned to weather this storm and that we will be able to honour every single valid claim.”

Mr de Villiers says that the ability of the life industry to pay claims and benefits will be of critical importance to the South African economy in the months ahead as the COVID-19 pandemic reduces the income stream of citizens.

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