Industry outlook for 2008

The main drivers of South Africa's current economic boom, increased consumer spending, especially by the emerging middle class, and the significant infrastructure development required in the run up to 2010 are expected to account for continued new business growth in the short-term insurance sector in 2008. We may even see new investment by large foreign insurers seeking to establish a local presence and cash in on the opportunities to be created by the sustainable growth that the country is likely to enjoy for the next five to seven years.

In 2008 the focus on consumer rights is unlikely to abate, with more consumer related legislation in the pipeline, and increased supervision and enforcement on the cards. Over the past year, the regulator has made known its expectation for industry associations to become actively involved in policing their members, activities and this trend is set to continue.

No significant movement in underwriting ratios is expected this year. Despite some rate increases, markets, especially for corporates, remain fairly soft. However, weather patterns are changing and predictions in this regard remain volatile.

It is hoped that 2008 will see the practical alignment of the Financial Sector Charter and the Department of Trade and Industry's codes on black economic empowerment, which will make it easier for the industry to properly plan and measure its targets.

The alternative risk transfer (ART) industry can expect solid growth in pockets of the industry this year. This will link directly into the growing consumer spend with more affinity type groups likely to be formed, along with stronger branding of products as retailers diverge into financial services in order to provide more services to their clients. Similarly, the ART market is expected to be called on to provide the increased insurance capacity (which will not be readily available in the local traditional market) that will be required by corporates and the rapidly developing infrastructure.

Internationally, we are seeing a material development in the employee benefits arena, as more and more employers move towards customised solutions that suit their employees specific risk profiles. With a growing shortage of skilled labour in South Africa (especially in the light of infrastructure growth) employers are expected to step up their offerings, including employee benefits, to attract and retain skilled employees. This is another area where the ART market should enjoy growth, as employers use their ART vehicles to help them develop their EB programmes into a competitive differentiator.

All in all, the outlook for the insurance industry in general and the ART sector in particular is positive for 2008.

For further information please contact:
Herman Schoeman, MD of Guardrisk
Telephone: 011 669-1001

Issued by:
Melanie Davis, PR@Work
Telephone: 011 615-3309 / 083 225 7450