Steady growth continues in cell captive market

There is no doubt that cell captive insurance is firmly entrenched in the South African market. Since the concept was first introduced (by Guardrisk) in 1993, nine short-term cell captive insurers have been formed. To put this in context: there are currently nineteen "traditional" short-term insurers registered in South Africa, and nearly half as many cell captive insurers.

In terms of net premiums written, cell captives have consistently outperformed traditional insurers over the past three years. The Financial Services Board's "Special report on the results of the short-term insurance industry for the period ended September 2005" reflects a 14,4% growth in net premiums written for the cell captive insurance industry (9 months ended Sep 2004 to 9 months ended Sep 2005), compared to 11% for the traditional market, for the same period.

Before the advent of cell captives, captive insurance (wholly-owned insurance structures that underwrite only the risks of the owner) was reserved for large companies. But cell captives allow companies of all sizes to enjoy the benefits of owning their own insurance company, without the inherent capital requirements, and cost and administrative implications. By providing the client (cell owner) with underwriting, reinsurance, claims management, investment and accounting expertise, the cell captive insurer keeps costs down and gives clients access to a broad base of insurance skills and markets.

Since there is no cross subsidisation of risks - each cell covers only its own risks and the economic benefits belong to the individual cell - the cell captive environment can essentially be described as an "earn-as-you-go" environment. It comes as no surprise then that corporates - frustrated by the "pay-as-you-go" mindset of traditional insurers - are increasingly seeking to reap the rewards of prudent risk management that accrue within the cell captive environment.

"No doubt the volatility of the traditional market - in the wake of the costly 2005 U.S. hurricane season - will cause more and more corporates to consider placing their insurance programmes in structures like cell captives," says Herman Schoeman, MD of Guardrisk.

Take up of cell captives has not only come from corporates wishing to insure their own risks but also from companies wanting to sell their own branded insurance to their own client base. This offers considerable opportunities - both in terms of increased revenue and customer relationship management, whereby corporates can increase their offerings and service levels to their clients.

About Guardrisk
For the year ended 31 March 2005 the Guardrisk group's gross premium written increased by 16% to R2.513bn. The company pioneered the cell captive concept, introducing cell captives to the world?s short-term insurance industry in 1993, and extended the structure to the life industry in 1999.

For further information please contact:
Herman Schoeman
Guardrisk
Telephone: +27 11 669-1002
Cell: +27 82 376 3821

Prepared by:
Melanie Davis
PR at Work CC
Telephone: +27 11 615-3309
Cell: +27 83 225 7450