Insurance. Picture: ISTOCK
Insurance. Picture: ISTOCK

Short-term insurer Lion of Africa, which is owned by JSE-listed empowerment company Brimstone, has decided to halt its operations with immediate effect, citing continued losses in a difficult operating environment.

The insurer which offers policies to small and medium-sized enterprises and public-sector entities said it would continue to meet all obligations under existing policies but it would not be issuing any new insurance policies. The winding down process for existing policies is expected to last for two years or longer, depending on the underlying policy conditions, the company said.

In the past two years, the short-term insurance industry has battled with high claims ratios as a result of catastrophes and natural disasters. It said it was, in most instances, impacted by the same perils experienced by other insurers.

“The decision was not taken lightly, and significant efforts were made to find alternative solutions,” said the statement issued on Wednesday morning.

Lion parent company, Brimstone, said the insurer made up less than 1% of its gross asset value.

“Although the decision to place Lion into run-off was based on sound business rationale, it was still a particularly difficult decision to make which was only considered once all other viable options had been explored and exhausted,” said Brimstone chair Fred Robertson.

Lion of Africa's last published financials for the year to December 2016 show the company's loss ratio was 66%. The year before that the loss ratio was in excess of 100%. This reflects how much the company received in premiums versus claims it paid out. A loss ratio of more than 100% shows that it was paying out more claims and operational costs than premiums received in 2015. 

The insurer had embarked on a turnaround strategy in 2015 and appeared to be steadying  the ship when it posted a progress report in 2017 which showed that it had reduced its net loss after tax to R15.4m in 2016 from R191.5m in 2015. The company had already exited the corporate and personal insurance businesses to try and stem losses. Earlier in 2018 it hosted an inaugural annual Lion of Africa Day at JSE themed  “Lion Roars" to celebrate its 19 years of existence. 

“The company’s turnaround strategy was yielding results, however, setbacks were encountered during 2017. This adversely impacted the solvency of the company which was exacerbated by the introduction of Solvency Asset Management, which became effective on 1 July 2018,” said Lion acting CEO Anees Vazeer.

 He said as the leadership team, they were bitterly disappointed that they could not prevent this.

“Our employees worked hard over the years to build a solid brand and together with the management team and the board, did everything possible to get the business on a sustainable and profitable path,” Vazeer said.

The company said it had already informed its staff  and the insurance regulator of its decision.

buthelezil@businesslive.co.za