South Africa has postponed the implementation of its new Solvency Assessment and Management (SAM) regime.
According to A.M. Best the SAM regime will not come into effect until January 2016, coinciding with the expected implementation of Solvency II.
But according to the ratings firm the delay will create some much needed breathing space for niche insurers and in particular captives.
“The country’s captive community have made the least progress toward complying with the [SAM] framework. This in part reflects the considerable uncertainty that remains as to the treatment of captives under Solvency II, and the extent to which the sector will be subject to proportionality,” said A.M. Best in a recent article.
In a recent report entitled, Africa’s Diverse Insurance Markets Offer Growth Opportunities, Untapped Demand, A.M. Best explained that the SAM framework was created during a period of greater economic stability.
“If the framework were applied fully today, it is likely that several South African insurers would be unable to comply with all the requirements.”
But despite the logic in delaying implementation, the ratings firm stated that it is “imperative” that the new risk-based framework is rolled out in the next few years.
“It is important that an insurance market on the scale of South Africa adopts a risk-based regime. Solvency II is setting the pace in terms of regulatory development, and the financial services board rightly considers its domestic market as sophisticated enough to adopt the principles of Solvency II, and adapt the principles of the regulation to the South African market.”
