Proposed regulatory changes that will allow foreign reinsurers to operate branches alongside locally registered professionals for the first time are expected by the end of 2016.
Amidst a raft of legislative and regulatory changes to be implemented in South Africa over the next two years, we expect to see draft rules pertaining to reinsurance to be published during the second quarter of 2016. Following a period set aside for public commentary, the changes will likely come into force in the final quarter of the year.
The new rules are likely to be well received by the market and will result in a substantial number of foreign reinsurers establishing branches in South Africa. We also anticipate that foreign reinsurers operating via subsidiaries registered in the local market will consider closing such subsidiaries and operating from the parent company by way of a foreign branch.
The changes will also likely include limits on an insurer directly or indirectly reinsuring more than 75% of premiums to either a foreign re/insurer on a cross-border basis, a branch of a foreign reinsurer, a professional reinsurer, or another direct insurer in South Africa. The same limitation would apply for a direct insurer conducting reinsurance business as well as a professional reinsurer. Furthermore, the proposal is that foreign reinsurers will be prohibited from soliciting business in South Africa on a cross-border basis.