SA life insurance market robust

Fitch Ratings says in a new special report that the South African life insurance industry performed well in the first half of 2011, despite tough economic conditions.

"Profitability in the South African life insurance industry strengthened in H111, which was reflective of the gradual recovery in the local economy, improved persistency experience and improved sales," says Nicole Gibb, Associate Director in Fitch's Insurance team in South Africa.

"Despite this, investment markets continued to demonstrate volatility and consumers' disposable income remained strained."

South African life insurers are also preparing for a number of reforms that will transform how they are regulated.

Solvency Assessment and Management (SAM, the new solvency regime for the South African insurance industry), National Social Security Reform (a compulsory retirement savings initiative) and the National Health Insurance (a compulsory national healthcare system) will have an impact on the way in which life insurers operate. However, Fitch expects major insurers to adapt successfully to the proposed reforms.

Fitch considers the major life insurance companies to be well-prepared to meet the industry's challenges.

In addition, the agency expects the performances of life insurers to remain constrained as a result of the tough operating environment.