For most of the past five years, the South African Insurance Industry has been pre-occupied with the race towards a new regulatory framework conceptualised to make insurance regulation, supervision and business conduct principles-based and risk-focused, similar to Solvency II in Europe. At the end of this process, South Africa aims to become a third-country equivalent jurisdiction under Solvency II with all the advantages of South African companies being able to operate in Europe.

The process has been undertaken in two main phases, with each phase comprising several sub-phases and key activities, just as the new framework has been built on three key pillars – namely, Pillar I (capital requirements), Pillar II (governance and risk management requirements) and Pillar III (reporting and disclosure requirements). The first phase of SAM (Solvency Assessment and Management) was the Development Phase. The second is the Implementation Phase. This started in 2011 with the design and prescription of interim measures on the valuation of assets and technical provisions as well as the calculation of capital requirements for short-term insurers and reinsurers.

South Africa is one of the countries currently in process for approval and designation by the European authorities as having a third-country equivalence status to Solvency II. When granted, this status would enable South African insurance and reinsurance entities to undertake insurance business in Europe on the same terms as European companies.

Through its wholly-owned subsidiary African Reinsurance Corporation (South Africa) Limited, the Africa Re Group enthusiastically welcomed and embraced the SAM initiative, leading to full participation and involvement in all its activities and requirements. The industry is well prepared to put into practice the SAM regulatory regime even though the FSB is still adjusting some regulatory and technical issues following the results of the last SA QIS 3 before full implementation of SAM. The solvency capital requirements, through standard formula or the few internal capital models, are good as ready for implementation.