No imbalances could be identified in the insurance sector during the last quarter of 2010, the Financial Stability Review (FSR) of the SA Reserve Bank (SARB) released Wednesday reported. The document takes account of economic and financial sector developments in the second half of 2010.
The FSR did however note that the local insurance industry faced several financial and administrative challenges in 2010 including the introduction of the Solvency Assessment and Management (SAM) system.
The Financial Services Board (FSB) planned for the SAM system to be fully functional by 2014. The system required insurers to align capital requirements with the underlying risk that they carry in order to be able to meet claims should policy holders suffer losses.
Difficulties experienced by non-life insurers were attributed to the patchiness of the economic recovery and high losses.
The long-term insurance industry, the review noted, remained well capitalised in the last few months of 2010, with most insurers' capital-adequacy ratio above the minimum requirement.
“However, underwriting profitability continued to be negative and individual lapses increased,” the review pointed out. “The increase in the ratio of lapses to new policies may be a cause for concern for the industry.”
The short-term insurance sector saw positive developments. A 115% increase in underwriting profits in the year to December 2010 occurred compared to an annual decline of 26% in the year to December 2009.
Other positive developments for the sector included an annual increase in underwriting and investment income and an annual deceleration in the ratio of claims to premium income.
“However, management expenses and commission were higher in December 2010 compared with December 2009,” said the review.
Source: http://www.iol.co.za
The FSR did however note that the local insurance industry faced several financial and administrative challenges in 2010 including the introduction of the Solvency Assessment and Management (SAM) system.
The Financial Services Board (FSB) planned for the SAM system to be fully functional by 2014. The system required insurers to align capital requirements with the underlying risk that they carry in order to be able to meet claims should policy holders suffer losses.
Difficulties experienced by non-life insurers were attributed to the patchiness of the economic recovery and high losses.
The long-term insurance industry, the review noted, remained well capitalised in the last few months of 2010, with most insurers' capital-adequacy ratio above the minimum requirement.
“However, underwriting profitability continued to be negative and individual lapses increased,” the review pointed out. “The increase in the ratio of lapses to new policies may be a cause for concern for the industry.”
The short-term insurance sector saw positive developments. A 115% increase in underwriting profits in the year to December 2010 occurred compared to an annual decline of 26% in the year to December 2009.
Other positive developments for the sector included an annual increase in underwriting and investment income and an annual deceleration in the ratio of claims to premium income.
“However, management expenses and commission were higher in December 2010 compared with December 2009,” said the review.
Source: http://www.iol.co.za
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