Nicola Mawson
The Prudential Authority (PA) yesterday reported that it investigated 134 referrals alleging non-compliance with various laws such as the Insurance Act and levied administrative penalties totalling R2.7 million against four organisations under its ambit during the 2023/24 year.
At the same time, the PA reported that two entities were under curatorship, while one institution was under statutory management, two under judicial management, and a further two in liquidation as the authority seeks to safeguard depositors and policy holders.
In the annual report, CEO Nomfundo Tshazibana stated that the authority’s “experience with weak financial institutions continues to demonstrate that governance weaknesses and poor risk management result in financial losses, trust deficits and, ultimately, institutional failure”.
However, South African Reserve Bank (SARB) Governor Lesetja Kganyago said that there “currently appears to be no risks to the financial system posed by individual institutions”.
The PA is also moving ahead with the full implementation of the remaining components of the Basel III post-crisis reforms with effect from July 1 next year, a standard to which Kganyago said it remained committed.
The Prudential Committee has released draft two of proposed amendments to the Regulations relating to Banks for public comment.
These regulations address the standardised approach for credit risk, internal ratings-based approaches to credit risk, the revised operational risk framework, the revised leverage ratio framework and the output floor, Kganyago said.
The PA has also approved draft prudential standards related to market risk and credit valuation adjustment, he added.
Although there were several weather-related events and a difficult macroeconomic environment, the insurance sector remained well capitalised, Tshazibana noted.
She said the non-life insurance sector had a better year than the prior two, with the sector recording growth in terms of gross premiums as well as investment income.
Gross premiums recorded year-on-year growth of 15.81%, while investment income increased by 78.64% year on year.
Profitability and underwriting profit were, however, suppressed by increasing claims, mainly due to severe weather events during 2023, the report said.
Net claims increased by 21.32% year-on-year.
Tshazibana said the industry remained well capitalised with a solvency capital requirement coverage ratio of 1.61, which is well above the regulatory minimum of 1.
The PA’s annual report also noted changes in the insurance sector, with non-life insurers and reinsurers having started to impose restrictions or not covering catastrophes related to business interruptions, power supply failures and climate-related events.
“The PA will continue to monitor these emerging policy protection gaps and engage industry participants and standard-setting bodies on an ongoing basis,” said Kganyago.
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