SA insurers have reserves - Asisa
SA’s life insurance industry has more than double the legally required reserve buffers in place and is well positioned to deal with the fallout from the Covid-19 pandemic in the coming months, the Association for Savings & Investment SA (Asisa) says.
SA’s life insurance industry has more than double the legally required reserve buffers in place and is well positioned to deal with the fallout from the Covid19 pandemic over the coming months, according to the Association for Savings and Investment SA (Asisa).
The lobby group, which has about 130 members across SA’s asset management and insurance sectors, said SA’s life insurance industry has free assets of R373bn — more than double the reserve buffer required by Solvency and Capital Requirement regulations.
These requirements refer to the amount of funds insurance companies need to hold in order to have 99.5% confidence that they could survive the most extreme expected losses over the course of a year — a one in 200 year event.
Asisa life and risk board committee deputy chair Hennie de Villiers said life insurers in the country have measures in place to ensure exposure to listed equities, and while those would have declined due to concerns over the coronavirus outbreak, their liabilities would have declined as well.
“We are therefore confident that our industry remains well capitalised despite the current turmoil,” De Villiers said.
About half of the R2.7-trillion in liabilities of SA’s life insurance industry is in linked products, said Asisa CEO Leon Campher, implying that market volatility that reduces the value of assets will also reduce liabilities.
Linked products refer to a policy in which clients pay a premium that is both a life insurance product and an investment product.
The R373bn in free assets are also very conservatively managed, with limited exposure to equity markets, said Campher, adding that the sector is also conservative in estimating its liabilities.
“By world standards, we are in terms of sophistication of our financial system — in the top five or six,” Campher said.
“We have been planning for this eventuality.”
Systems are in place to ensure there is no disruption to benefit payments or trust transactions, he said.
The ability of the life industry to pay claims and benefits will be of critical importance to the SA
— economy in the months ahead as the Covid-19 pandemic reduces the income streams of citizens, Asisa said.
Various life insurers are looking at ways to assist policyholders who may be struggling financially as a result of the measures enforced by the government to try to curb the spread of Covid-19, but it will be done on a case-by-case basis.
According to S&P Global Ratings, the capital strength that is typical of the insurance sector will help stave off widespread downgrades across the global industry as it faces the Covid-19 pandemic.
As of March 25, nearly 425,000 cases of the disease had been confirmed globally, of whom nearly 19,000 were deaths, but S&P said most insurers will be able to withstand the resulting losses
“We consider that life insurance companies are more at risk of negative rating actions as a result of the pandemic than nonlife players, because they have larger exposure to financial market risk,” said S&P primary credit analyst Dennis Sugrue in a report.
Global markets have been battered by the viral outbreak, with the JSE all share having lost 21.36% so far in 2020.
The JSE’s life insurance index has lost a third of its value over the same period.
BY WORLD STANDARDS, WE ARE IN THE TOP FIVE OR SIX [COUNTRIES]. WE HAVE BEEN PLANNING FOR THIS EVENTUALITY