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presented bypresented by

John DoeJohn Doe

Date hereDate hereSOUTH AFRICAN INSURANCE ASSOCIATION

The potential impact of SAM on niche and small insurers

presented bypresented by

Nico EsterhuizenNico EsterhuizenProgramme Manager: SAMProgramme Manager: SAM

nico@saia.co.za nico@saia.co.za

The Insurance Conference 2012The Insurance Conference 2012

Discussion Points

• Understanding small and niche insurers

• Impact of SAM

• Drivers and challenges

• Unknowns

World Insurance Market and Prudential Changes

1.08%=

$20bn

Rankings in Insurance Market

SA rankin

g:Nr. 22

Niche Insurers

Captives Insurers

Small Insurers

Impact, Drivers and Challenges

(Potential) impact of SAM

• Merger and acquisitions• Move to cell-captive environment• Insurers further de-risk their asset

allocations• Reduced competition in higher risk

insurance products • Increase in absolute MCR: R15m• Increase in fixed operating expenses

(Potential) impact of SAM

• Higher reserves• Higher capital adequacy requirement• Change in authorisation classes• Policyholders will ultimately bear the

costs

Improved risk management, transparency, capital adequacy.

Pillar 1 drivers and challenges

• IFRS vs. MCVB• Non-life underwriting risk calibration for SA only at QIS3• Current data quality and availability • Reinsurers data challenges with SAM• Participation in SA-QISs and quality of results• Ring-fenced funds• Segmentation• Group SCR• Documentation• Credit Ratings• Contract boundaries• Loss absorbency• Trade credit insurers

Pillar 2 drivers and challenges

• Independent Non-Executive Chairperson• Appointed Actuary• Board and the Internal Model• ORSA• Use Test• Fit and proper• Control functions• Governance and risk systems

Pillar 3 drivers and challenges

• Competitive information disclosed publically

• Significant increase in auditing-fees because of SAM auditing requirements

• Time and cost of reporting vs. value• Materiality

The real impact of SAM

Unknown

• Defining proportionality• Nature, size and complexity• EIOPA: “The principle of proportionality

is intended to support the consistent application of the principles-based … requirements to all insurers.”– Less disclosures and reporting for small

insurers?– Less onerous governance requirements?

Unknown:

• Principle of Solvency II: “Actuarial and statistical methodologies applied are proportionate to the nature, scale and complexity of the underlying risks”

• Aim not to make the calculation requirements on less complex companies too onerous….

• Simplifications to SCR standard formula allowed…Further guidance still to be issued under SAM….

Unknown

• Reserve Bank and supervisory style• Results of the Economic Impact

Study• Transitional Arrangements• Rand Bands

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presented bypresented by

John DoeJohn Doe

Date hereDate here

Thank you!