INSURANCE MARKET FAVOURABLE FOR CELL CAPTIVES AND UMAs

At the 2017 Insurance Conference (IISA) held at Sun City recently, Peter Jennett, chief executive officer of leading specialist insurer, Centriq Insurance, said the cell captive insurance model is going strong despite tough market conditions and ongoing regulatory challenges.

“We are seeing a good number of underwriting management agencies (UMAs) entering the market through cell captives with good reinsurer support for local role players wanting to put up capital as UMAs through the cell captive structure in South Africa,” said Jennett.

There is a steady, growing interest in cell captives worldwide. A recent global benchmarking report released by Marsh notes a steady pattern of growth in cell captives worldwide for the past 30 years, underpinning Jennett’s belief that “cell captives are sustainable, resilient and here to stay.”

Currently, the number of cell captives worldwide is estimated at 2 750 (Marsh), although it must be noted that these are mostly first-party cell captive business models.

Nonetheless, the fact of the matter is that the cell captive insurance business model as a non-traditional structure to insure and fund, transfer or retain risk is widely used because it is effective and viable.

Commenting on the current state and future of UMAs in SA, Jennett said that the current regulatory landscape that restricts UMAs to deal direct has proven to be quite a hurdle to jump for many UMAs in the market place. “This is especially true for insurance technology ventures wanting to take on more underwriting risks by selling insurance directly to customers,” said Jennett.

“However, should legislation change in this regard, and we are hopeful that it will, role players will be presented with more opportunities to optimise their businesses,” he said.

Overall, UMAs are healthy and turning out good results. “Service levels are high while those operating in niche lines of business are reaping the most rewards,” concluded Jennett.