KPMG South Africa has released its annual South African Insurance Industry Survey for 2024, its 26th edition, which surveyed 26 non-life insurers, 17 life insurers, and four reinsurers.
This year’s results show a strong recovery compared to those in 2022, reflecting the stabilisation of the insurance market following muted natural catastrophe events and the positive effects of strategic initiatives implemented by insurers over the past few years to moderate risk exposures, such as premium rate increases and underwriting limitations.
The constrained macro-economic environment, uncertainty around the frequency and severity of natural disasters as a result of climate risk, and ongoing geopolitical conflicts have continued to influence the results of the insurance industry. This resulted in changes to the demand for insurance products and the cost of insuring risks, and enhanced risk management initiatives.
However, the insurance sector at large reflected positive results for 2023.
It is expected that insurers will continue to apply a cautious approach to risk management. We can also expect to see an increased use of new and emerging technologies, including artificial intelligence, and the reassessment of risk management strategies and operating models.
Non-life industry: from profit to loss
The non-life insurance industry saw growth of 16.6% in IFRS 4 gross written premium and 7.9% growth in IFRS 17 insurance revenue.
The sector was significantly impacted by rising claims costs in 2023, largely driven by loadshedding, an increasing number of motor vehicle accident claims, and rising motor vehicle repair costs. This experience was compounded by disposable income pressures on consumers and high crime levels.
Relative to the previous year, 2023 was considered to be stable in respect of weather-related catastrophe events.
Insurers have had to respond swiftly with adjustments to policies, premiums, and risk management strategies to maintain their financial stability, with the outcomes of these initiatives clearly reflected in the 2023 results.
Despite the challenges, the non-life insurance industry went from a loss of R16.7 billion in 2022 (driven significantly by the political unrest and flooding in KwaZulu-Natal) to a profit of R13.7bn in 2023.
Although reinsurance rates hardened over the period and inflationary and interest rate pressures persisted, exposure to natural catastrophe events was muted compared to previous reporting periods, improving results dramatically.
Life industry’s growth trajectory continues
Similar to the past two years, the results of the life insurance industry for 2023 highlight the underlying resilience of the global and local economies. This year’s results indicate double-digit growth improvements in profitability, and a higher-than-expected return to shareholders than predicted.
The largest insurance groups in the country showed significant growth over the past financial year. The life insurance industry continued to generate profitable results, with an increase in profits from R27.3bn in 2022 to R37.4bn in 2023. These results reflect the return to normal mortality levels after Covid-19 and the relatively robust performance of investment markets.
Life insurers experienced growth of 10.4% in IFRS 4 net premium income and 3.9% growth in IFRS 17 revenue.
This performance can be attributed to the following key trends:
- a continued focus on the personalisation of insurance products;
- risk mitigation measures;
- merger and acquisition activity within multinational groups;
- investments into countries in East Africa and Asia;
- attention to capital management and balance sheet optimisation;
- strongly capitalised businesses with sufficient liquidity, improving cash generation; and
- cost-containment measures, contrasted with a deliberate focus on capital deployment for project spend.
Reinsurance industry
Insurance revenue declined slightly by 2% in 2023, with varied results across the reinsurers surveyed. However, we are beginning to see a restoration of profitability and balance sheet strength through price increases and the implementation of stricter underwriting.
We noted mixed performance results across the reinsurers surveyed, reflecting the complexity and nuances of market dynamics on each reinsurer’s business operations.
Munich Re and Hannover Re continue to lead the reinsurance market, with a combined
