Foreign reinsurance companies operating in South Africa may find that they need to restructure their operations and the way they access the marketplace, in the wake of substantial changes from a recent Insurance Bill.
Due to the enacting of this Insurance Bill there will be a tightening on the prohibition of foreign insurers and reinsurers conducting business in South Africa, according to global law firm Clyde & Co.
As a result of the changes enacted, the majority of business models adopted by insurers and reinsurance firms in South Africa will no longer be viable and therefore firms may need to focus on restructuring their businesses in 2017, according to Clyde & Co’s Ernie Van Der Vyver in Johannesburg.
Options to adjust business models to comply with the new rules include to incorporate a local insurer in South Africa, operate via a Lloyd’s Underwriter, or even abandon their South African business altogether.
Foreign reinsurance firms will, in some instances, have the additional option of establishing a branch office in South Africa in order to retain access to the market, Van Der Vyver notes.
As a result, Clyde & Co. forecast “a substantial up-tick in business by way of Lloyd’s underwriters” in 2017.
Overall the first half of 2017 is likely to see a rush of activity as foreign insurers and reinsurers attempt to restructure their businesses to bring them into line with the structures envisaged in the Insurance Bill.