Market Presentation
South Africa
www.lloyds.com/SouthAfricaMI
October 2014
John Sibanda, Lloyd’s Representative for South Africa
© Lloyd’s
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CONTENT
1 THE MARKET
2
3

Macro Environment

Reinsurance

SA as a Regional Hub

Reinsurance Market Leaders

Insurance Market

Market Leaders
LLOYD’S

Distribution Channels

Review of 2014 Opportunities

Regulatory Developments
OPPORTUNITIES

Lloyd’s South Africa as a hub

Local presence

Infrastructure development

Agriculture

Development of coverholders

Meet the Market 2015
© Lloyd’s
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1






MARKET
Macro Environment
SA as a Regional Hub
Insurance Market
Market Leaders
Reinsurance
Reinsurance Market Leaders
© Lloyd’s
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THE MARKET >Macro Themes
1
ECONOMIC HIGHLIGHTS
800
5%
Chart: 2010 – 2018 GDP
4.3%
Nominal GDP in billion US$; Real GDP Growth
600
4.3%
4%
3.8%
3.6%
Actual Nominal GDP
4.4%
3.1%
3%
2.8%
X%
Real GDP Growth
400
2.5%
2%
1.8%
Forecast Nominal GDP
200
1%
0
0%
2010

2011
2012
2013
2014
2015
2016
2017
2018
ECONOMIC GROWTH:
+1.8% (2014)
Predicted GDP growth in 2014 is 2.8%. Growth will be positive but laboured as challenges remain, (including a
growing current-account deficit)

LABOUR MARKET:
Unemployment at 25.5%. June 2014 saw five-month-long mining-sector strike came to an end.

INFLATION:
Expected to stay above inflation target but currently benefits from a stable currency.
Source: Market Intelligence calculation based on: IHS Global Insight, (2014); www.ihs.com
© Lloyd’s
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THE MARKET >Macro Themes
FDI inflows to Africa reached US$56.3bn in 2013, an increase of 6.8% over 2012.
Source: UNCTAD, WSJ, 2014

Africa as an investment destination is
ranked 2nd of 10 regions in 2014 from
8th in 2011.

SA is main destination for FDI
projects in SSA.

China is Africa’s largest trading
partner with US$200bn of trade in
2013 (US$10bn in 2000).

SA companies are expanding into
Africa with SA now a launchpad for
foreign investment into Africa.

Africa has labour resources to
become world’s next manufacturing
hub.
© Lloyd’s
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1
THE MARKET >SA as a regional hub
With an increase in FDI in the region, South Africa is now establishing itself as a hub for cross boarder direct
and reinsurance business
Where are the opportunities regionally?
West Africa
• Nigeria – large oil reserves and urbanized population
• Ghana – Abundant natural resources and
strong investment environment
• Rwanda – Robust economic growth
• Angola – Large oil industry and emerging middle class
East Africa
• Kenya – Oil reserves and leading TMT sector
• Uganda – Rapidly expanding population
with large oil and agriculture sectors
• Tanzania – Emerging gas sector and
large gold producer
Southern Africa
• Mozambique – Huge coal deposits and offshore gas fields
• Zambia – 3rd largest Copper producer in the world
• South Africa – Rich in Agriculture, Minerals and Developed financial services
© Lloyd’s
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THE MARKET >SA as a regional hub
Lloyd’s main competitors are using SA as a springboard to access regional business
• Agreement with Sanlam to access their regional
non-life business
• Investing in Malawi, Zambia and Tanzania
• International expansion is key pillar of strategy
• Plan to generate 50% growth in
profits regionally by 2015
• Have established a presence in
SADC and are targeting 20% market
share
•
•
Similar to Santam following parent,
M&F is leveraging off Old Mutual brand outside SA
Plans to move into Nigeria
© Lloyd’s
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1
THE MARKET >Insurance Market
In 2013 Lloyd’s wrote US$ 248m of South African premium. The total Non-Life market was US$ 10.0bn.
36%
38%
2012 Non-Life market
2013 Lloyd’s Business
South Africa vs. Africa
South Africa vs. Africa
62%
64%
South Africa
Rest of Africa
According to Swiss Re, in 2012, the total South African insurance market accounted for 36% of the
continent’s non-life gross premiums.
Lloyd’s wrote 38% of African business in South Africa, growing from, 1% in 2012.
Source: Market Intelligence based on: Lloyd’s Compare Countries, www.lloyds.com/comparecountries (2014), Swiss Re
© Lloyd’s
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1
THE MARKET >Market Leaders
2013 Top Market Players by Gross Written Premium
SUMMARY
Others
19%
1
Top 5 insurers have approx.
46% market share
2
Lloyd’s is a niche player
3
Top local insurers have
greater penetration on
personal lines
36%
37%
2013
Non-life Market
US$9.8 bn
9%
6%
2%
2% 2%2%
3%
6%
4%
Source: Market Intelligence based on: FSB 2013 Annual Report (2014)
6%
© Lloyd’s
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THE MARKET >Reinsurance
Lloyd’s has constantly written profitable RI in South Africa
Gross Accepted Premiums, Claims and (Gross) Incurred Loss Ratios (2011 - 2013)
US$ m
150.0
90%
80%
70%
100.0
60%
50%
40%
50.0
30%
20%
10%
0.0
Gross Premium
Incurred Claims
Lloyd's ILR
SA Reinsurers ILR
Source: Market Intelligence based on Xchanging and FSB Data
2011
124.6
42.3
34%
58%
2012
98.7
18.4
19%
56%
0%
2013
93.4
24.7
26%
79%
© Lloyd’s
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THE MARKET >RI Market Leaders
Lloyd’s is the 4th largest Reinsurance player in the market
2013 Top Market Reinsurers by Gross Premium
9%
1%
10%
22%
31%
2013
Non-life
Reinsurance
Market
US$901 mn
27%
Source: Market Intelligence based on: FSB, (2013); Audited Annual Returns, (2013); Lloyd’s Xchanging data, (2013)
© Lloyd’s
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2
LLOYD’S
 Distribution Channels
 Review of 2014 Opportunities
 Regulatory Developments
© Lloyd’s
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2
LLOYD’S >Distribution Channels
CHART: Gross Written Premium (US$ mn) by channel
TOTAL
112
2013
R2.48 bn (US$ 258 mn)
71
75
OMC
Coverholders
Direct Assured
115
2012
R2.35 bn (US$ 286 mn)
88
83
157
2011
103
R2.58 bn (US$ 359 mn)
99
Source: Market Intelligence based on: Lloyd’s South Africa, (2013)
© Lloyd’s
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LLOYD’S >Review of 2014 Opportunities
Africa Update

BRICS RISK POOL:

The declaration has given momentum to the project. It is estimated that in excess of US$ 4 trillion will be
spent over the next few years across BRICs on collective infrastructure, providing significant opportunity and
life span for the pool.

SOUTH AFRICA “MEET THE MARKET”:
15th July 2014 the 6th BRICs Summit formally adopted the insurance/reinsurance project and directed its
relevant authorities to explore avenues of cooperation in insurance and reinsurance markets.
2014 Conference in Sun City was attended by 1300 delegates; including 12 Boxholders from London and 8
Coverholders.

PROPERTY BUSINESS:
Not much development in the construction of social housing; remains work in progress.

EXPORT & INVESTMENT INSURANCE:
Opportunity to partner with Export Credit Insurance Corporation of South Africa (ECIC) has exhibited
significant growth. Currently, there are enquiries involving gas exploitation projects in Mozambique.

INDIGENOUS/LOCAL PRESENCE:
Not much achieve in creation of a service company/reinsurance coverholder/local insurance company
support.

MICROINSURANCE:
Over last decade, Insurers, NGOs and Community Organisations have launched micro-insurance
programmes across several product lines and markets.

Source:
Aim was to have draft legislation by mid-2014 to allow for consultation and early implementation by 2018.
© Lloyd’s
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LLOYD’S >Regulatory Developments
2
1
New Financial Sector Regulatory Bill
• Expected to be released for consultation Q1/2015
• Ensure Lloyd’s structure is accommodated
2
New (Draft) Reinsurance Regulations
• Expected to be released by end Oct/2014
• Ensure Lloyd’s trading status is maintained
3
Introduction to Solvency Assessment and Management (SAM)
• SAM is an analogue of Sol II capital and reporting requirements
• Lloyd’s is currently exempt
• Ongoing discussions with regulator to retain Lloyd’s status
4
MPA Form
• Applicable to all direct placements into Lloyd’s
5
Consultation on Governance and Risk Management
Source: Lloyd’s International Regulatory Affairs
© Lloyd’s
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





OPPORTUNITIES
Lloyd’s South Africa as a hub
Infrastructure development
Development of coverholders
Local presence
Agriculture
Meet the Market 2015
© Lloyd’s
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Source: Market Intelligence based on: Lloyd’s South Africa, (2014)
Meet the Market 2015
Agriculture
Local Presence
Development of Coverholders
Infrastructure Development
Lloyd’s South Africa as a hub
3
OPPORTUNITIES
OPPORTUNITIES
© Lloyd’s
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3
OPPORTUNITIES
Source: Market Intelligence based on: Lloyd’s South Africa, (2014)
Meet the Market 2015
Agriculture
•
Local Presence
•
Access to Namibian market in
collaboration with local OMCs.
Access to Mozambique market
through OMCs and collaboration with
ECIC (Export Credit Insurance
Company).
Develop and maintain relationships
with government departments and SA
and African development banks to
ensure Lloyd’s is front of mind when
insurance is needed for infrastructure.
Development of Coverholders
•
Infrastructure Development
Lloyd’s South Africa as a hub
OPPORTUNITIES
© Lloyd’s
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3
OPPORTUNITIES
Source: Market Intelligence based on: Lloyd’s South Africa, (2014)
•
Meet the Market 2015
•
Agriculture
•
Government intends to spend R1
trillion on infrastructure over the next 5
years.
The government has allocated R847
billion over the next 3 years towards
clearing infrastructure backlogs.
Urban migration, creation of 2000 new
cities and 10 mega cities by 2020.
AU infrastructure Programme in
collaboration with banks.
Local Presence
•
Development of Coverholders
Infrastructure Development
Lloyd’s South Africa as a hub
OPPORTUNITIES
© Lloyd’s
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OPPORTUNITIES
Source: Market Intelligence based on: Lloyd’s South Africa, (2014)
•
•
Meet the Market 2015
•
Aspiring to be the first Black Economic
Empowerment (BEE) coverholder
approved – important message that
Lloyd’s is looking to the future
Local companies aspiring to expand
into Africa.
Opportunities arising from the SAM
(Solvency Assessment and
Management) Requirements.
Reinsurance Coverholder
Agriculture
•
Local Presence
Development of Coverholders
Infrastructure Development
Lloyd’s South Africa as a hub
OPPORTUNITIES
© Lloyd’s
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3
OPPORTUNITIES
Source: Market Intelligence based on: Lloyd’s South Africa, (2014)
Meet the Market 2015
Agriculture
Local Presence
Infrastructure Development
•
Promote and facilitate consortia
arrangements
Development of new UMAs
Lloyd’s South Africa as a hub
•
Development of Coverholders
OPPORTUNITIES
© Lloyd’s
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OPPORTUNITIES
Source: Market Intelligence based on: Lloyd’s South Africa, (2014)
Meet the Market 2015
Agriculture
Local Presence
•
This relates to proposed PPP covering
insurance products for both the
commercial and emerging farmer
market in order to ensure credit can be
extended to them.
It is expected that Govt will provide
some form of catastrophic loss
protection
Development of Coverholders
•
Infrastructure Development
Lloyd’s South Africa as a hub
OPPORTUNITIES
© Lloyd’s
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OPPORTUNITIES
Source: Market Intelligence based on: Lloyd’s South Africa, (2014)
.
•
Meet the Market 2015
•
Agriculture
•
Meet the market in Johannesburg on
Friday 24 July 2015.
Target market is the top 100 FIA
members and other independent
brokers.
Pre-arranged meetings between
brokers and managing agents.
Delegates from SADC markets.
Local Presence
•
Development of Coverholders
Infrastructure Development
Lloyd’s South Africa as a hub
OPPORTUNITIES
© Lloyd’s
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OPPORTUNITIES >Class Review
 A full in depth report analysing the
South Africa non-life market
 Structured Analytical Framework
 Class specific insights gathered by
interviewing local class experts from
service companies, coverholders and
brokers
 Key classes include







Property
Engineering
Transport
Guarantee
Liability
A&H
Motor
 Contact [email protected]
www.lloyds.com/SouthAfricaMI
© Lloyd’s
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OPPORTUNITIES >Conclusions
1
OFFICE SUPPORT
Our office based in Sandton is willing and ready to provide primary
support relating to market dynamics and business opportunities.
2
OPPORTUNITIES
•
•
•
3
To be updated
Lloyd’s south africa as a hub
Infrastructure development
Development of
coverholders
•
•
Local presence
Meet the Market 2015
SEE YOU in Johannesburg: Friday 24th july 2015
© Lloyd’s
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A
APPENDIX
 Market Growth
 Lloyd’s Premiums
 Coverholders and OMCs
© Lloyd’s
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APPENDIX >Market Growth
• Growth in ZAR is rising, 8% in 2013
• The exchange rate has had a huge impact on US$ premiums
Premium (US$ mn) [Left axis]
Premium (ZAR mn) [Right axis]
12,000
100000
90000
10,000
80000
70000
8,000
60000
6,000
50000
40000
4,000
30000
20000
2,000
10000
0
2008
2009
Gross Written Premium (US$)
Gross Written Premium (ZAR)
Dervied from Premiums & Claims
Source: Market Intelligence based on: FSB Annual Report (2013)
2010
2011
2012
2013
2008
2009
2010
2011
2012
2013
7,828
8,280
9,945 11,043 10,605
9,815
63,500 68,672 72,479 79,407 87,000 94,372
46.3% 46.6% 42.9% 43.2% 41.6% 43.6%
© Lloyd’s
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APPENDIX >Lloyd’s Premiums
Overseas
Motor
Casualty Treaty 1%
Energy 0.3%
Property
Treaty
4%
7%
Marine
26%
Aviation
8%
Accident &
Health
12
%
2013
Total Market
US$ 247.9m
24%
18%
Casualty
Property D&F
Source: Lloyd’s Market Intelligence calculations based on Xchanging.
© Lloyd’s
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APPENDIX >Coverholders and OMC’s
Number of Coverholders & OMCs
(including branches):
PROVINCE
Source: Lloyd’s South Africa (2014)
C/H
OMC
Gauteng
19
40
Kwa-Zulu Natal
5
12
Western Cape
3
15
Eastern Cape
0
4
Northern Cape
0
1
Mpumalanga
0
1
North West
0
1
Free State
0
2
Limpopo
0
1
TOTAL
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© Lloyd’s
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© Lloyd’s
Market Intelligence – Core Products
© Lloyd’s
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APPENDIX > Limitations & Disclaimer
Lloyd’s Data Limitations
Please note the information contained in this document is based upon data collected from Xchanging and may be incomplete
for some classes of business; for instance a substantial figure, which is missing from the REG 258 data set is comprised of UK
Motor, which is not processed by Xchanging.
Gross Premiums: Original and additional inward premiums, plus any amount in respect of administration fees or policy
expenses remitted with a premium but before the deduction of outward reinsurance premiums.
Lloyd’s figures are based on gross written premiums based on figures processed by Xchanging by processing year and country
of origin.
Country of Origin: denotes the country from where demand for the insurance / reinsurance emanates; i.e. the coverholder or
policyholder, irrespective of the country to which the risk is classified for regulatory reporting purposes.
Processing Year: relates to the calendar year in which the premium, additional or return premium is processed by Xchanging,
irrespective of the actual underwriting year of account of the risks (which is determined by the inception date of each risk).
Example: A policy holder in the UK insuring a holiday home in France would be classified as a UK risk by Country Of Origin, but
French for regulatory reporting purposes. Similarly a risk incepting on 1st December 2007 would be classified at 2007
underwriting year of account but may not be processed by Xchanging until 2008 and so be allocated to the 2008 processing
year
Exchange Rate Policy
Annual average exchange rates are used in all conversions.
www.oanda.com
ZAR to US$
2006
0.1492
2007
0.1424
2008
0.1233
2009
0.1206
2010
0.1372
2011
0.1391
2012
0.1219
2013
0.1040
Disclaimer
This document is intended for general information purposes only. Whilst all care has been taken to ensure the accuracy of the
information Lloyd's does not accept any responsibility for any errors or omissions. Lloyd's does not accept any responsibility or
liability for any loss to any person acting or refraining from action as a result of, but not limited to, any statement, fact, figure,
© Lloyd’s
expression of opinion or belief obtained in this document.
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