Short-term insurance is regulated by the Financial Services
Board (registrar of insurance) (FSB) under the Short-term Insurance
Act, 1998 (STIA) for indemnity insurance. Long-term insurance is
regulated through the Long-term Insurance Act, 1998 (LTIA) for life
and investment products. Any person carrying on insurance business
must be licensed to do so. Financial advisers and brokers must be
authorised to provide financial advisory and intermediary
An insurer must be a registered South African public company or
a Lloyd's underwriter. Branches of foreign insurers are not
permitted. An insurer/reinsurer may be a wholly-owned subsidiary of
a foreign company. Intermediaries may either incorporate a company
in South Africa or operate through a branch, but must have a
financial services provider licence.
3 FDI restrictions
Foreign ownership of insurers and intermediaries is not
restricted. The FSB welcomes foreign investment in the
4 Control approvals
Any sale or transfer of 25% of the shares in a local insurer or
reinsurer or its holding entity requires regulatory approval. The
FSB evaluates whether the transaction is in the best interests of
Directors must be approved as fit and proper. Foreign directors
are allowed. The head office and public officer must be South
Insurance/reinsurance may be placed with foreign insurers to the
extent the regulator accepts that the South African market has
insufficient capacity or no will to cover the risks.
5 Minimum capital
The current minimum capital requirements are ZAR10 million for a
long-term insurer/reinsurer and ZAR5 million for short-term
insurer/reinsurer. But see 6 below.
The capital requirements may increase depending on the five year
projections of the insurer.
Intermediaries require capital that renders the company solvent
6 Risk based capital
Insurers are required to have assets in South Africa which in
the aggregate value are not less than the aggregate value on that
day of its liabilities plus the regulated capital adequacy
The Solvency Assessment and Management Project (SAM) will from
January 2014 introduce a risk-based solvency regime for insurers
based on Solvency II.
7 Group supervision
Save for the requirement in 4.1 above, there is no group
supervision but SAM encompasses supervision of solvency at
insurance group level. The FSB has been developing an approach to
the supervision of groups by requiring more regular and extensive
8 Policyholder protection
South Africa has progressive policyholder protection provisions.
The LTIA, STIA and the Financial Advisory and Intermediary Services
Act, 2002 (FAIS Act) protect policyholder rights. The FAIS Act
requires disclosure of intermediary remuneration and mitigates
conflicts of interests.
Policyholder Protection Rules are in place. Treating Customers
Fairly policies are being developed by the FSB based on the UK
The insurance industry also sets its own standards and has
established a long-term and a short-term insurance ombud to settle
personal claims equitably.
9 Portfolio transfers
Under the STIA and LTIA insurers must obtain the consent or
mandate from policyholders for portfolio transfers.
In the case of long-term insurance policies, the High Court must
approve the transfer of the business from one insurer to another.
Short-term insurance business transfers require approval of the
Outsourcing of insurance functions that insurers would otherwise
need to perform themselves is only permitted in terms of an
outsource policy and a formal agreement with the service
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In this publication, we address how Dubai is leading the way in the application of technology to its healthcare insurance system and how the health insurance law is developing around these initiatives.
Subrogation is the insurance law term used to refer to an insurer's right, after having paid a claim and having indemnified the insured, to take the place of the insured to recover the insured's loss from the responsible third party.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).