Capitec and Sanlam have announced that their funeral product co-operation arrangement will end on 31 October next year.
Sanlam, through Sanlam Developing Markets and Centriq, a wholly owned subsidiary of Santam, and Capitec, through Capitec Bank and Capitec Ins, have enjoyed “a mutually beneficial and successful relationship” over the past six years through the funeral product co-operation arrangement, which was jointly launched by Sanlam and Capitec Bank in November 2017 to service the mass retail funeral insurance market, Sanlam said in a SENS announcement on Monday.
Santam is a subsidiary of Sanlam, which holds 62.3% of Santam’s shares. Capitec Bank and Capitec Ins, an investment holding company, are wholly owned subsidiaries of Capitec Holdings Limited.
“On 30 October 2023, Capitec Bank and Capitec Ins jointly gave notice to Sanlam of the termination of the funeral product co-operation arrangement at the end of the initial seven-year term with effect from the termination date,” Sanlam said.
“Subject to the relevant regulatory approvals and effective 1 November 2024, Sanlam will cease to provide reinsurance and any administration services in relation to the funeral policies forming part of the funeral product co-operation arrangement.
“Capitec Life Limited, a newly licensed insurer forming part of the Capitec group, will take over the administration of the in-force insurance book pursuant to the terms of the relevant agreements and will commence writing new funeral business on its own insurance licence,” the announcement said.
The in-force policies on 31 October 2024 will remain in the Centriq cell captive licence and will be transferred to the Capitec Life licence later, subject to regulatory requirements and approvals.
As a result of the termination of the arrangement, Capitec will pay a reinsurance recapture amount of R1.9 billion to Sanlam. The reinsurance recapture amount represents the loss to Sanlam for its 30% participation in the arrangement expected to be in-force on 31 October 2024.
Capitec had 2.4 active million funeral policies covering 11.1 million lives, according to the group’s interim results presentation in August. Funeral insurance accounted for 4% of its total income.
For several years, two cell captive arrangements enabled the group to provide long-term insurance products to its retail bank clients:
- credit insurance, underwritten by Guardrisk; and
- the Capitec funeral plan, underwritten by Centriq.
In October last year, the Prudential Authority granted Capitec a licence to conduct life insurance business, and Capitec said Capitec Life would replace the cell captive insurers as underwriter of its credit life and funeral policies.
Capitec Life started to underwrite credit life insurance policies from May 2023, and the in-force book in the cell captive on the Guardrisk licence started to be run-off. By the end of August 2023, Capitec Life had 248 224 active policies.
“The process to transfer the policies currently underwritten on the Guardrisk licence to the Capitec Life licence has been initiated,” Capitec said in its interim results.
