South Africa Delays New Regulations for Insurers Until 2016Robert Brand
South Africa delayed the start of a new regulatory system for the nation’s insurers amid concern it would fail to meet the deadline and that companies wouldn’t be able to comply with the requirements.
The new regime, known as Solvency Assessment and Management, or SAM, will apply from January 2016, compared with a previous target of 2015, Ian Marshall, head of the SAM unit at South Africa’s Financial Services Board, said today at an investor conference in Durban, on the nation’s east coast.
“There is still a lot of uncertainty around development, which makes it very difficult to plan and to make decisions,” Marshall said. “There was also a question whether we are going to be able to implement the full regime” by 2015, he said.
SAM will require insurers to hold more capital and implement new governance, risk management and reporting systems. The new rules may add as much as 10 percent to insurers’ costs and raise premiums for customers, Ralph Mupita, chief executive officer for emerging markets at Old Mutual Plc, South Africa’s biggest life insurer, said yesterday.
The introduction of a similar regime for Europe, known as Solvency II, has been delayed amid objections by German, French and British insurers over how much capital will be required to back long-term savings products.
The five-member FTSE/JSE Africa Life Assurance Index climbed 1.1 percent by the close in Johannesburg, compared with an advance of 0.1 percent for the benchmark FTSE/JSE Africa All Share Index. Old Mutual rose 1.6 percent to 27.84 rand, while Sanlam Ltd., the second-biggest insurer, gained 0.6 percent to 45.81 rand.
The delay will give insurers more time to prepare for the new rules and may allow some to return cash to shareholders in the short term, Harry Botha, an analyst at Avior Research Ltd., said.
“This is positive for the insurers although most of them have already put the staff in place to implement the regulations,” Botha said by phone from Johannesburg.