1, 2. South African Business Environment & SEC

Question 1

How LTIA impacts NB sales

Answer 1

• Requirement for insurers to be licensed
• Commission restrictions
• Regulatory capital requirements (prudential valuation) - higher loadings which ultimately increase price of insurance
• Min/ max surrender penalties (product design)
• HAF –> satisfied actuarially sound

Question 2

Sources of capital for South African life insurers

Answer 2

• mutuals: capital reserves
• issue shares
• securitisation
• Financial Reinsurance
• Contingent loan
• Subordinated debt

Question 3

Cell captives

Answer 3

• cell captive insurers ‘rent out’ insurance license to cell owners
• cell owners purchase specific type of share in exchange to sell insurance business on cell owner license
• cell owner usually outsources traditional insurance functions: pricing, accounting, capital calculations etc to cell owner in exchange for a fee
• there’s first party, third party, and promoter cell business
• diversification between cells not allowed in calculation of SCR

under IFRS 17 the agreement between cell owner and cell captive insurer may be viewed as an in-substance arrangement