SA insurance industry bounces back after Covid-19 storm, survey finds

While the SA insurance industry rode out the Covid-19 storm, climate change and global market volatility remain potential risks, according to an annual survey conducted by KPMG SA.

The survey comes as short-term insurers and reinsurers are still feeling the effects of climate change through the volumes of claims triggered by deadly floods in KwaZulu-Natal earlier in 2022.

As a consumer-facing industry, it is also sensitive to cost-of-living crises that invariably erode consumers’ disposable income.

However,  KPMG SA said on Thursday the results of the survey, which covered 34 non-life insurers, 19 life insurers and four reinsurers, showed the companies navigated 2021 much better than 2020.

“It is great to see in this year’s survey that the non-life and life insurers have bounced back nicely after the pandemic and have shown strong recovery at the top and bottom lines — creating a strong base from which the industry is able to enter what seems to be the end of the pandemic,” said KPMG Africa’s Mark Danckwerts.

After the big volumes and values of business interruption claims in 2020 because of the pandemic, the non-life insurance industry more than doubled 2020 profits with a total of R12.1bn.

The industry reported gross written premiums (GWP) of R131.6bn, an increase of 7% from the prior year. The 10 largest non-life insurers, when measured on GWP, have a market share of 76.5%.

“While life insurers faced another turbulent year, the industry experienced improvements in the volume and profitability of new business and a positive lapse experience and better equity and bond market performance,” said Danckwerts.

In 2020, several life insurers reported having paid or accrued more claims than ever before, resulting in an overall loss of R5bn. The life insurance industry returned to profitability in 2021, reporting profit of R17.1bn. 

“It is important to note, however, that for many life insurers results have not yet returned to pre-pandemic levels and these insurers would need to refocus efforts on other drivers of profitability such as digital innovation, cost optimisation and pricing reviews,” said Danckwerts.

While the primary insurance industry was sufficiently protected by the reinsurance industry through robust cover, the reinsurance industry bore the brunt of the pain during 2020 and 2021.

With GWP growth of only 1%, an 11% decline in investment income and underwriting losses from all those surveyed, reinsurers did not recover well after Covid-19-related business interruption claims from non-life insurers and increased mortality experienced by life insurers.

“The reality is that while reinsurers writing life insurance risks were hit much harder than non-life insurance risks, it was a tough year all round for both. Consequently, we have seen the hardening of reinsurance rates in 2022,” said Danckwerts.

mahlangua@businesslive.co.za