SAIA

South African Insurance Association

+27 11 726 5381

Bulletin October 2022

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Contents

  1. From the Desk of the CEO
  2. Insurance Risks
    1. International Union of Marine Insurance (IUMI) launches new Masterclass in Cargo.
  3. Transformation
    1. Resumption of the SAIA Motor Transformation and Sustainability Forum (MTSF)
    2. Feedback: SAIA attends the Automotive Indaba, in the Eastern Cape
    3. SAIA Consumer Education programmes report
  4. Governance
    1. Declaration of a crypto asset as a financial product under the FAIS Act
    2. The Intergovernmental Fintech Working Group’s regulatory sandbox opens for applications
    3. The FSCA sets out conduct standard for requirements applicable to third party cell captives
    4. Draft Guidelines on the Exchange of Competitive Sensitive Information under the Competition Act
  5. Industry News
    1. South African Engineering Insurance Conference – SAEIC 2022
  6. SAIA Circulars – October 2022

1 From the Desk of the CEO

We are now in the middle of the fourth quarter of 2022, and most organisations have hit the final descent button in preparation for that long-awaited December break. Like the other two or so previous years, this year also came with its own unique challenges that tested the industry’s resilience and resolve to deliver on its promise.

One of the worst natural disasters took place in KwaZulu Natal where there was severe flooding and landslides caused by heavy rainfall on 11 to 13 April, resulting in the unfortunate death of 448 people, and displacing over 40 000 people. The heavy rains destroyed over 12 000 houses, while also severely damaging infrastructure. The severity and scale of the devastation prompted the President of South Africa, Mr Cyril Ramaphosa, to declare a national state of disaster. SAIA members were on the ground providing not only relief resources, but also providing valuable advice to the impacted property owners whose policies were valid on how to lodge their claims.

According to the Global Risks Report 2021, published by the World Economic Forum, the top four risks that are systemic in nature are extreme weather events, climate action failure, human environmental damage and infectious diseases, and it is without doubt that this year’s KwaZulu Natal floods were the biggest natural disaster to have happened to the insurance industry since the 2017 Knysna fires, which led to damage claims in excess of R7-billion.

The industry has continued to experience the effects of some man-made potential disasters, one of which is the continued challenges faced by the state utility, Eskom, in the generation and distribution capacity of electricity within South Africa. The loadshedding which SA business and domestic dwellings have witnessed intermittently over the last decade or so continues to intensify. It is only natural for the industry to be concerned about the consequences this has on our members in terms of theft and domestic power surge claims.

SAIA has over time, issued the public with a series of recommendations speaking to what one could do to protect their property and household contents during loadshedding. It remains our utmost hope that loadshedding will soon be a thing of the past, but until then, we will continue to issue these advisory notices to the public on how to mitigate loss for our members, business, and ordinary South Africans.

Let me take this opportunity to thank all our member company chief executives and managing directors who made it to our highly informative CEO Roundtable held at The Venue, on 6 October 2022. Also, I would like to pass my sincere gratitude to all our valued stakeholders who made it to the Annual Cocktail Function at the same venue, on the same evening. It is always a pleasure to host you, and SAIA looks forward to hosting you again in the coming year. Lastly, I would like to congratulate the South African Association of Engineering Insurers (SAAEI), a division of SAIA, for a very successful conference held on 13 to 14 October 2022 at the Kloofzicht Hotel and Spa.

Viviene Pearson
SAIA Chief Executive

2 Insurance Risks

2.1 International Union of Marine Insurance (IUMI) launches new Masterclass in Cargo

The International Union of Marine Insurance (IUMI) is introducing a new Masterclass in Cargo Insurance. This programme is aimed at senior underwriters and executives who want to expand their knowledge of their own business. Individuals involved in the management of the cargo book of business that their insurers write will benefit most from the course.

The programme will take place in London in March 2023 and will have a strong focus on key principles and practices of cargo insurance. This will be IUMI's first in-person training course.

This article was written by Kabelo Paile, SAIA Technical Manager: Insurance Risks. For more information, please contact kabelo@saia.co.za.

3 Transformation

3.1 Resumption of the SAIA Sustainability Forum (MTSF)

In the last few months, SAIA has received numerous renewed calls for the reinstatement of the SAIA Motor Transformation and Sustainability Forum (MTSF). The MTSF had remained suspended since 2019, with SAIA having continued to engage with individual motor body repairer (MBRs) associations as and when required.

However, developments such as the Covid-19 pandemic and its effect on the  economy, including global supply chains, as well as the implementation of the Competition Commission Guidelines on the Automotive Aftermarket have had a tremendous impact on the motor body repairs industry, resulting in more requests for engagements with SAIA and its members by different MBR Associations.

SAIA has therefore resolved to consider the resumption of the MTSF as an appropriate platform for all stakeholders to engage on industry related matters. Therefore, SAIA would like to invite its members to discuss the industry’s position and ree on the way forward. The set date for the meeting is Wednesday, 9 November 2022.

This article was written by Themba Palagangwe, SAIA GM: Transformation and Governance. For more information, please contact themba@saia.co.za

3.2 Feedback: SAIA attends the Automotive Indaba, in the Eastern  Cape

During the month of October, SAIA was invited to the Eastern Cape Automotive Indaba, which was an event organised by the Automotive Industry Development Centre Eastern Cape (AIDC). The Indaba focussed on SMMEs in the automotive sector, and the theme was franchising as an option to participate in the automotive sector, and right to repair.

SAIA presented alongside, RMI, The Competition Commission, Banks, MIBCO and other government departments and agencies. Zanele Gigaba, Transformation Manager at SAIA, presented on progress made by the industry in directing repair spend to Black Motor Body Repairers (MBRs) especially 100% Black owned and 30% Black Women Owned MBRs. Other initiatives taken by Motor Insurers towards transformation, such as the Treating Suppliers Fairly framework, Motor Repairer Minimum MBR Standard Guidelines, and the proposed amendments towards the  Financial Sector Code, were presented.

The Automotive Indaba, first of its kind in the Eastern Cape, was lauded as a great platform to bring together various stakeholders in the automotive sector, to discuss issues affecting the sector and its sustainability.

Attached is the presentation made at the Indaba – document # 154638.

This article was written by Zanele Gigaba, SAIA Manager: Transformation. For more information, please contact zanele@saia.co.za.

3.3 SAIA Consumer Education programmes report

The SAIA Consumer Education Fund programmes; Know Your Cash, Building Resilient Businesses and the Consumer Financial Education Radio programmes have progressed well for 2022. All programmes are complete and will begin the evaluation phase during the fourth quarter.

The SAIA Consumer Financial Education (CFE) Radio Programme The Consumer Financial Education (CFE) Radio Programme is delivered through community and regional radio stations, targeting South African households on awareness about the non-life insurance industry, its product offerings and policy management. It further focuses on creating awareness of the effectiveness of risk management and using insurance products as a risk mitigation tool to protect personal assets against unforeseen events. This programme includes segments aimed at Small to Medium and Micro Enterprises.

The programme is estimated to have reached 1 353 200,00 listeners through 84 radio interviews delivered on radio stations such as Jozi FM, Capricorn FM, Gagasi FM and more.

The table below includes the demographic profile of the beneficiaries reached:

Geographical Area SA Households:
41% Rural
59% Urban
SMMEs
59% Rural
41% Urban
Age 18 - 65 18-65
Race 98% Black 86% Black

SAIA Consumer Education Fund projects are evaluated by independent Monitoring and Evaluation specialists appointed by SAIA to measure the reach and impact of the programmes. Each project is measured against Key Performance Indicators adopted from the Organisation for Economic Cooperation and Development (OECD)’s frameworks on measuring financial literacy programmes.

Below is a graph from a report by Geo Poll on the Consumer Education Radio me on the changes of consumer buying behaviour and how often consumers read their policy documents after listening to the radio programme. The graph depicts a positive increase in consumer behaviour after listening to the programme.

The graph depicts a positive increase in consumer behaviour after listening to the programme

Building Resilient Businesses (BRB) Programme

The Building Resilient Businesses (BRB) Programme aspires to contribute towards the growth and sustainability of SMMEs in building resilient businesses by increasing their confidence and capabilities in managing business risks, creating awareness of risk transfer by buying appropriate business insurance products and improving the financial literacy levels through basic business management interventions.

The programme is delivered to matured businesses with an annual turnover of up to R10 million. The BRB Programme reached 676 SMMEs from various sectors through online and face to face workshops.

The table below includes the demographic profile of the beneficiaries reached:

Ethnicity 95% Black
Geographics National reach
Gender 60% Women
40% Men
Age Increased younger participation.
SMME Sectors Export
Agriculture
Manufacturing
Transportation
Hospitality
Auto Repairs
Mining
Waste Management
Personal Grooming, etc

The BRB programme is also delivered to start-up businesses with an annual turnover up to R500 000 and includes topics on Risk Management and Financial literacy. The programme reached 473 beneficiaries through online and face to face workshops. Challenges included loadshedding and Covid-19 regulatory changes. These changes impacted how the programmes were delivered with facilitators having to adapt their programmes from online to face-to-face.

Know Your Cash (KYC) Programme

Targeted at the youth, the programme aims to address the challenges of low financial capabilities by the target group and equip them with the confidence to make sound financial decisions while creating awareness about the financial sectors’ products and services.

The programmes are delivered through online and in person sessions at tertiary institutions and with the newly employed and reached 1743 direct beneficiaries.

Tertiary institutions and sessions with the newly employed included:

Tertiary Institutions - 2022:

  • Sol Plaatje University
  • Fort Hare University
  • Gert Sibande University of Technology
  • Orbit TVET Collage
  • Durban University of Technology
  • Cape Peninsula University of Technology
  • University of Johannesburg
  • Mangosuthu University

Newly Employed Sessions - 2022:

  • ICASA
  • Wits Incubation
  • OSTI
  • Ubuntu Institute

The beneficiaries were engaged on the following topics:

  • Budgeting
  • Consumer buying behaviour
  • Credit Agreements and Debt management
  • Savings & investments
  • Engaging with the financial sector
  • Awareness of insurance
  • Income generating streams

As a result of the Covid-19 regulatory changes, the online sessions had to be adapted to in person sessions as some beneficiaries no longer had access to online facilities.

This article was written by Tessa McQuire, SAIA Projects Coordinator: Transformation. For more information, please contact Tessa@saia.co.za.

4 Governance

4.1 Declaration of a crypto asset as a financial product under the FAIS Act

The Financial Sector Conduct Authority (FSCA) published the draft Declaration of a Crypto Asset as a Financial Product under the Financial Advisory and Intermediary Services Act on 20 November 2020, which was informed by the policy developments pertaining to the regulation of crypto assets.

This was necessitated by the mounting risk in the crypto environment due to an exponential increase in the provision of crypto assets in South Africa, as well as the rapid growth in interest in the use of crypto assets for investment purposes.

Also published by the FSCA is a Policy Document that supports the Declaration  (“Policy Document”) and provides background to and contextualises the Declaration while also bringing clarity to the effect of the Declaration, including transitional provisions, and the approach the FSCA is taking in the establishment of a regulatory and licensing framework under the FIAS Act appliable to Financial Services Providers that render crypto assets-related financial services.

To support a smooth transition into the FAIS framework, providers of financial services related to crypto assets are required to apply for the relevant licence between 1 June 2023 and 30 November 2023. Also published was a Draft Exemption of Persons rendering Financial Services in relation to Crypto Assets from Certain Requirements for public comment.

The draft exemption proposes to exempt licensed Crypto Asset FSPs and their key individuals and representatives from certain requirements of, amongst others, the General Code of Conduct for Authorised Financial Services Providers and their Representatives and the Determination of Fit and Proper Requirements, 2017. 

SAIA has invited its members to provide comments and inputs on the draft by no later than Friday, 18 November 2022, for consolidation and submission to the FSCA by 1 December 2022.

4.2 The Intergovernmental Fintech Working Group’s regulatory sandbox opens for applications

The Intergovernmental Fintech Working Group (IFWG) announced the opening of the regulatory sandbox (RSB) for applications and published a feedback report.

The RSB is a framework used by regulators around the world to foster innovation in the financial services sector while maintaining oversight of emerging risks. In South Africa, it also offers a controlled, yet live environment for financial sector innovators to  safely test new financial products or services they seek to bring to the market against existing regulation.

The IFWG aims to better understand the risks and benefits associated with new market solutions and to make more informed decisions regarding policy positions and regulatory frameworks. It therefore conducted a retrospective review prior to closing the first cohort to consider the performance of the RSB in achieving its objectives. The outcome of the review resulted in a shift from the cohort-based to an adjusted rolling- based approach.

The adjusted rolling-based approach means that the RSB will remain open for applications; however, the relevant regulators will provide guidance on their areas of 9focus, regulatory appetite, and capacity and resource constraints in assessing applications throughout the RSB period.

It is anticipated that the new approach will enable the IFWG to be more agile in responding to industry innovation and be more expedient in providing feedback to applicants. The updated process is subject to further assessment to determine its adequacy and effectiveness as the IFWG strives to meet the demands of both regulators and applicants.

4.3 The FSCA sets out conduct standard for requirements applicable to third party cell captives

The Financial Sector Conduct Authority (FSCA) published a conduct standard setting out the requirements applicable to third-party cell captive insurance business, in terms of section 106(1)(a) read with sections 106(2)(b) and 108(1) of the Financial Sector Regulation Act, 2017 (Act No.09 of 2017).

Enhancements to the regulatory framework for the third-party cell captive insurance business have been under consideration for a number of years and concerns were raised around the third-party cell captive insurance business model and particular risks were identified from a regulatory and a supervisory perspective.

Extensive consultation with the industry has informed research and consideration on how best to achieve the objectives of conduct of business supervision of insurers to protect policyholders by ensuring their fair treatment by insurers, while at the same time supporting broader national policies on competition and financial inclusion, specifically insofar as it relates to third-party cell captive insurance business.

The consultation report, as required in terms of section 104(1) of the Financial Sector Regulation Act, gives a report on the consultation process undertaken in respect of the draft Conduct Standard – Requirements relating to third-party cell captive insurance business.

The objective of the Conduct Standard is to propose appropriate governance and oversight requirements on cell captive insurers to mitigate the specific risks which have been identified as particularly prominent in third-party cell captive insurance models.

4.4 Draft Guidelines on the Exchange of Competitive Sensitive Information under the Competition Act

The Competition Commission identified a need to provide guidance to industry associations and both public and private stakeholders on the sharing of information between competitors. The Guidelines present the general approach that the Commission will follow in determining whether information exchange between firms that are competitors amounts to a contravention of section 4 of the Act.

10The primary objective of these Guidelines is to provide some measure of transparency regarding the types of information exchanges between competitors. Anti-competitive conduct causes harm directly or through a third party such as a trade association, an accounting firm, or a private company that collects firms’ information, processes it, and disseminates it among firms affecting competition within the market and to consumers through, for example, increased prices, exclusion of competitors, and raising barriers to entry. The harmful effects, inter alia, depends on the nature and characteristics of the information exchanged.

Given that a long period of time has passed since the draft guidelines were initially published the Commission resolved to publish the amended draft Guidelines on the Exchange of Competitively Sensitive Information under the Competition Act for a further round of public comments.

SAIA members were invited to provide inputs on the bill and submit comments to Itumeleng Rapulane at Itumeleng@saia.co.za. These are in the process of being  consolidated into industry comments and will be submitted to the Competition Commission.

These articles were written by Ntsoaki Ngwenya, SAIA Legal Specialist. For more information, please contact Ntsoaki@saia.co.za.

5 Industry News

5.1 South African Engineering Insurance Conference – SAEIC 2022

A highlight of the 2022 insurance calendar was undoubtedly the successful hosting of the 4th annual Engineering Insurance Conference on 13-14 October 2022. The in- person event which was held at the picturesque Kloofzicht Lodge and Spa once again enabled an eager return to a face-to-face conference following a two-year postponement due to Covid-19.

The conference was attended by some 70 delegates from across the insurance discipline ranging from underwriters, claims handlers, loss adjusters, risk engineers and reinsurers. The registration fees included an overnight stay, meals and beverages. The conference was hosted by the energetic, witty and entertaining Letlhogonolo Tau. Several mystery prizes were awarded as part of the entertainment.

The programme which offered a broad and interesting appeal to all practitioners of the engineering insurance market included amongst other discussions on the macroeconomy, what happened in engineering insurance over the past 12 months, claims and legal insights, construction industry outlook, battery storage in renewable energy, reinsurance and non-damage business interruption (BI).

The speakers included both local and international subject matter experts. A first for the conference was the use of online presentations by the international speakers from their remote locations in Germany and the UK. The utilisation of this technology 11platform will certainly attract and expand greater participation of both speakers and delegates from far and wide to the conference.

The working group paper titled “The liquidation of South Africa’s big contractors and its ripple effect on the sub-contractors” was presented by Xolile Kahla and will be published in the next SAIA bulletin. A communication to the conference delegates will be circulated soon, inviting participation on the working group paper 2023.

The breakaway session required the delegates to split into groups to engage on some key topics;

  1. The state of the engineering insurance in SA
    1. Growth/decline in premium,
    2. Skills/expertise,
    3. Transformation,
  2. The state of Renewable energy industry outlook/ESG,
  3. Public Utility (Grid failure) – impact on Engineering, and
  4. Should insurers go direct in engineering?

An important highlight of the conference was a panel discussion to bring awareness to an all-inclusive market and deliberate the establishment of an Engineering Insurance Academy proposal by SAAEI. The proposition was widely supported by the delegates and work in this regard will commence in the new year.

The SAAEI would like to express its appreciation to SAIA for supporting the event. Our gratitude is extended to our sponsors namely Bryte, Consort, Firedart, Guardrisk, Hollard, Mirabilis, Munich Re, Old Mutual Insure and Swiss Re for their patronage.

To the speakers we thank you for your time and enlightenment. Finally, we are grateful to the delegates (and their respective companies) for their participation and support.

For any queries relating to the conference please contact SAIA or a SAAEI executive member.

Viva SAEIC 2023.

saia event

5 SAIA Circulars – October 2022

MD Circulars – October 2022
There were no MD circulars issued in October.
SG Circulars – October 2022
SG-2022-100 Financial Sector Conduct Authority (FSCA): Notice Regarding the Publication
of Conduct Standard 2 of 2022 (INS) – Requirements Relating to Third-party
Cell Captive Insurance Business
04.10.22
SG-2022-101 Extension for Submitting Comments on Low-Cost Benefit Option (LCBO)
Framework Report and Risk Assessment & Roadmap
07.10.22
SG-2022-102 Financial Sector Conduct Authority (FSCA) & Prudential Authority (PA)
Jointly: Competition Commission - Draft Guidelines on the Exchange of
Competitively Sensitive Information Under Competition Ac
14.10.22
SG-2022-103 Resumption of the SAIA Motor Transformation and Sustainability Forum
(MTSF)
17.10.22
SG-2022-104 Intergovernmental Fintech Working Group (IFWG) - The Intergovernmental
Fintech Working Group’s Regulatory Sandbox is Open for Applications
17.10.22
SG-2022-105 Report - Ukraine: A Conflict that Changed the World: The (Re)Insurance
Industry Response
18.10.22
SG-2022-106 SAIA Submissions to National Treasury (NT) 20.10.22
SG-2022-107 Financial Sector Conduct Authority (FSCA) - Declaration of a Crypto Asset as
a Financial Product under the Financial Advisory and Intermediary Services
Act
20.10.22
SG-2022-108 The Commission for Conciliation, Mediation and Arbitration (CCMA)
Memorandum Of Understanding (MOU) with the Department of Employment
and Labour (DEL)
24.10.22
SG-2022-109 FSCA FAIS Notice 90 of 2022 - Declaration of a Crypto Asset as a Financial
Product under the Financial Advisory and Intermediary Service Act
25.10.22
SG-2022-110 Prudential Authority (PA) - Draft Guideline on Liquidity Risk Management 28.10.22
SG-2022-111 The Prudential Authority (PA) – Operational and IT Risk Report 28.10.22

MPORTANT NOTICE
For information on the SAIA bulletin or content published herein
Contact Livhuwani Mutheiwana, Corporate Affairs Administrator

E-mail: Livhuwani@saia.co.za

Tel: (011) 726 5381

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