South Africa: South African Reinsurance: Proposed Future Regulatory Framework

Last Updated: 23 February 2015
Article by Rashad Ismail

The Financial Services Board ("FSB"), the authority that regulates the activities of insurers and reinsurers in South Africa, is looking at proposals to alter the regulatory framework under which reinsurance business will be carried out in South Africa in future. This may have an impact on foreign reinsurers and Lloyd's underwriters that do write or intend writing reinsurance business in South Africa.

Currently, in order to carry out reinsurance business, a person or entity must be registered to do so. The Short-term Insurance Act, 19981 ("STIA"), prohibits any person from carrying our short-term insurance business (i.e. indemnity insurance) unless that person is licensed to do so. The FSB cannot issue a license unless the applicant is a public company incorporated in South Africa. There are also ongoing requirements for a registered insurer or reinsurer, in order to maintain its license, to ensure that its business is in a financially sound condition and that it possesses sufficient assets; can provide for its liabilities so as to ensure that these can be met of any given day. The only exception to the above requirements is Lloyds's underwriters who do not have to obtain a license. This is part of a dispensation granted to Lloyds in the STIA.2 Thus the ability to carry out reinsurance business in South Africa is an onerous process with excessive reporting requirements.

The current framework is about to change probably for the better

The actual impact of the FSB's intended proposals remains uncertain at this stage. The FSB, in keeping with its usual practice of engaging with the industry, is expected to publish a "position paper", for comment, imminently that will set out what it intends doing and how it will go about implementing the proposals. The relooking at the reinsurance framework is a part of the FSB's gradual implementation of the "twin peaks" model and the proposals are part of the Solvency Assessment and Management Project that is seeking to introduce a risk-based solvency regime for insurers based on Solvency II. In November 2014, the FSB published a "high level" newsletter setting out briefly the "initial policy proposals".3

The FSB has stated4 that the following principles informed its initial policy proposals:

  • An appropriate and effective regulatory and supervisory framework that affords the necessary protection for insurers and policyholders
  • Minimising/avoiding regulatory arbitrage
  • Alignment with international standards and meeting of international trade obligations
  • Level playing fields and a competitive reinsurance market
  • Maintenance and enhancement of current skill levels
  • Ongoing development of the local reinsurance industry as a hub for reinsurance business into Africa

The high-level proposals are:

  • Allowing foreign reinsurers to operate in South Africa through a branch:

    • It is hoped that this will increase the supply of reinsurance in the South African market
  • The treatment of reinsurers in the solvency calculation for direct insurers:

    • Designed so that foreign reinsurers and cross border business do not receive an undue advantage compared to local insurers
    • By either downgrading the cedant's credit rating or notionally capping its reinsurance assets

  • Some of the limitations that will be placed on reinsurance business:

    • No composite licenses5 will be allowed
    • The amount of outwards retrocession that locally incorporated reinsurers and direct insurers may place with foreign insurers on a cross-border basis will be limited – to prevent fronting by foreign insurers
    • Locally incorporated direct insurers will not be permitted to accept inwards retrocession business from other local (re)insurers without formal regulatory approval (temporary & reviewable at discretion of regulator) – to prevent market spirals that may threaten financial stability
    • Acceptance of intra-group and related party reinsurance will not be permitted without formal regulatory approval – to prevent contagion risk
    • Reinsurers may not write direct insurance
  • Different options are being explored in relation to Lloyds:

    • Continue to operate under the existing dispensation
    • Continue to operate under the existing dispensation, but with additional governance and reporting requirements
    • Require Lloyds to establish either a local branch or a locally incorporated subsidiary

The above proposals, whilst still in its early stages of development, will no doubt when implemented, entirely change the face of reinsurance in South Africa. Whether this will have the desired effect remains to be seen. It also remains to be seen what content is given to the above initial policy proposals when the "position paper" is published and also how this will change after the intended consultation process, particularly with local reinsurers. Despite the solvency incentives being mooted for placing reinsurance business locally, seemingly the protection of local reinsurers by the FSB appears to be coming to an end. This may open up South Africa as a hub for reinsurance business, particularly foor reinsurance business into the rest of Africa.


1. The Long-term Insurance Act, 1998, deals with life insurance.

2. Although Lloyd's underwriters are required to maintain sufficient assets in trust.

3. FSB Newsletter, 7 November 2014

4. Insurance Regulatory Seminar, Johannesburg, 14 November 2014

5. Reinsurers registered under both the STIA and LTIA.

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

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
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”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions