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South African insurance industry resilient, says Fitch

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New Fitch Ratings reports say that, while the operating environment in South Africa remains generally challenging, both the life and non-life insurance industries have proved widely resilient.

“The local insurance industry performed well in H111, despite tough economic conditions,” the company said in their report. “Profitability improved (although it remains under pressure), with major insurance companies reporting higher net profit compared with H110.

“Although the local economy showed a gradual recovery, the investment markets were volatile and consumers’ disposable incomes remained under pressure.”

The success was evidence of improved underwriting performances, strong solvency positions, and the maintenance of market share by major players, said Nicole Gibb, Associate Director in Fitch’s Insurance team in South Africa.

The report also discusses regulation affecting the industry. Fitch said they expect premium income to remain under pressure due to the industry’s high level of competitiveness and the continued financial constraints on consumers in South Africa.

In some cases, the ratings agency believes that insurers may continue to experience difficulty in charging an appropriate premium for the risks they insure. As a result, Fitch said the performance of insurers in H211 will be in line with or only slightly up on H111’s results.

The reports, entitled “South African Non-Life Insurance: Strong Operating Fundamentals in Tough Environment” and “South African Life Insurance: Good Performance in Difficult Environment” are available on the Fitch Ratings website.