Here is the section from the Financial Services Board newsletter on 7 November 2014:
“The FSB proposes to allow foreign reinsurers to operate in South Africa through a branch, if
approved to do so by the FSB. Opening up the reinsurance market to branches will increase
the supply of reinsurance within the South African market. There may also be incentives for
reinsurers that operate on a cross border basis to establish branches in South Africa, adding
to the development of a local reinsurance industry that can serve as a regional hub for
These are subject to meeting the same conditions from SAM (Solvency and Assessment Management Regime) that local reinsurers must meet as stipulated below from the Newsletter:
- Pillar 1
o Technical Provisions would also need to be calculated in line with the SAM
requirements and it would be required that assets at least equal to the
technical provisions are held in a trust account. The investments held in the
trust account will be subject to the prudent person principle.
o The assets in the trust would not be accessible by the parent reinsurer without
prior permission from the FSB, and the FSB may access the assets if there
are prudential or conduct failures by the branch.
o If the figures are calculated by the parent reinsurer, they would be subject to
an annual independent review process.
- Pillar 2
o An ORSA will be required to be conducted in respect of the business written
through the branch.
o The regulator will have the ability to apply capital add-ons where the SCR
does not reflect the risk profile of the branch, or where there are concerns
relating to risk management or governance.
o Control functions will be required, but in a proportionate manner.
- Pillar 3
o Branches will be required to report to the same level as is required for a locally incorporated reinsurer.”
This should allow for ease of expansion to the South African market, increasing employment possibilities and growth in the industry in general. It will also allow for stronger relationships of local insurance companies with foreign reinsurers and possibly bring more expertise and knowledge into the South African market.