The key to a successful insurance business is being able to balance short-term performance with long-term stability. To stand out from their peers, insurers and reinsurers need to manage risks over decades, invest in sustainable growth and adapt to evolving regulations.
The adaptability, responsiveness and resilience of South Africa’s leading insurers is on display in the KPMG South African Insurance Industry Survey 2024 report, which features an analysis of the financial statements of 28 non-life insurers, 16 life insurers and four reinsurers, alongside a series of thought-leadership articles. Your writer attended the survey report launch webinar to learn more.
Kashmira Naran, a director at KPMG South Africa, led an insightful discussion with a team of insurance, risk management and sustainability experts. At the outset, she commented on the comparability of annual reports under evolving reporting standards.
“This year’s process has been significantly streamlined in that all participating insurers are producing their results under IFRS 17, allowing for more consistent and insightful comparisons,” she said.
The global professional services firm’s latest report is themed ‘Up in the Air’ in recognition of the constant change faced by businesses and economies over the past three decades.
“We often hear that change is the only constant; over the past few decades it feels as if the world has been in a continuous state of transformation,” Naran said. Africa Ahead readers will be familiar with some of the chaos, beginning with the Y2K scare in 1999 and continuing through the dotcom bubble, the 2008 Global Financial Crisis and the Covid-19 pandemic.
Investment returns
Marius Botha, a partner in financial risk management at KPMG South Africa, was tasked with extracting some key themes from the survey process. His first observation was that insurers and reinsurers were revelling in better-than-trend investment returns over 2024 and year-to-date 2025.
However, the South African insurance market remains ex-growth, meaning a dearth of new business growth. Botha noted that brands growing premium or revenue ahead of inflation were doing so at the expense of competitors that were often struggling with persistence. Businesses in both the insurance and insurance distribution disciplines were responding to the tough macroeconomic backdrop through acquisition or the disposal of unprofitable books or divisions.
The expert noted a significant change in insurers’ operational risk postures, with a renewed focus on managing cyber, fraud, and third-party risks in the context of the Financial Sector Conduct Authority (FSCA) and Prudential Authority (PA) Joint Standard 1 of 2023: IT Governance and Risk Management for Financial Institutions. The standards introduced therein are important to protect customer data, but they do come at a cost, weighing on profitability.
Skills and technology emerged as strong themes too. According to Botha, insurers are prioritising attracting new staff while continually re-skilling and upskilling their workforces. He encouraged businesses to consider how the rapid integration of artificial intelligence (AI) and other technologies was impacting both their own and clients’ business models.
Climate risk management
It is impossible to talk about general insurance without stumbling into the conjoined topics of climate risk management and environment, social, and governance (ESG).
“In general, physical risk exposure is probably in a good place in terms of how companies are managing that; but we are seeing companies begin to grapple with what to do from a transition risk point of view,” Botha said. Transition risk is the financial and operational exposure that arises as economies shift towards lower-carbon models.
A benign natural catastrophe year emerged as a main driver of general insurer profitability in South Africa in 2024. Nishan Bikhani, an audit partner in the KPMG SA insurance practice, revealed that 90% of the 28 non-life insurers participating in the survey reported improved results for 2024. Combined, these insurers increased revenue by 9.8% to R154.2 billion (US$8.42 billion in that year), with profit after tax rising from R14.2 billion (US$780 million) to R17.7 billion (US$970 million).
The facilitator called on Poogendri Reddy, associate director for sustainability services at KPMG SA, to expand on the industry’s response to climate risk and ESG reporting.
“South Africa has a long history and a solid foundation in sustainability reporting, driven outside of domestic regulations or legislation,” she said. She noted that quantifying the financial impact of catastrophic weather events was part and parcel of the insurance business model and required to inform regulatory solvency assessments anyway.
However, quantifying emission and transition risks presents unique challenges, including inconsistencies across methodologies and the difficulty in obtaining data from third parties. “We have not quite got there in terms of comparability for everybody; stakeholders find it difficult to compare information,” she said.
The European Sustainability Reporting Standards (ESRS) and International Sustainability Standards Board (ISSB) disclosure standards should introduce the necessary structure, with hopes that industry differences will be accommodated.
Brendon Thorpe, an actuary and IFRS 17 expert, weighed in with some insurance fundamentals. He warned of growing affordability and insurability challenges as flooding and wildfire events in the United States (US) became more and more certain in nature. Insurers in some US states have escalated from simply increasing premiums to stepping out of the market for such perils altogether.
“State regulators have enacted legislation forcing insurers to provide cover in high-risk areas if they want to continue providing cover in the state as a whole, and that introduces some very interesting actuarial questions around pricing risks,” Thorpe said. His contention was that actuaries are being asked to price an unpriceable risk.
Resilience at the centre
In South Africa, the response could involve innovative ways of pooling risk, perhaps through parametric solutions. But for the time being, insurers are making resilience central to their underwriting decision-making, requiring their commercial clients to do more to mitigate losses from fire and flood perils.
Failing or poorly maintained infrastructure was acknowledged as a complementary risk and a “driver of increased severity of catastrophe losses”. The expert called on all stakeholders to pay closer attention to geolocation data when underwriting assets and especially when choosing locations for new buildings.
Naran closed out the formal part of the presentation by asking her co-presenters how consumers might interpret the non-life sector’s return to profit. “Insurance is a long game, but it only exists because of its customers,” Botha said, before exploring the profitability conundrum from an AI perspective. Insurers, he said, would have to decide to what extent they invest in AI to improve internal operations and generate shareholder value versus investing for the benefit of the customer.
Although profitability and sustainability are interlinked, insurers will have to balance the return they generate for shareholders with doing social good. The parting message was to take a common-sense approach to emerging technology to create winning outcomes for customers, insurers and their staff, intermediaries and, of course, shareholders and other providers of capital.
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