Santam enters into agreement with Munich Reinsurance Company of Africa Limited to support growth outside South Africa
Santam, South Africa’s largest general insurer, has entered into an agreement with leading reinsurer Munich Reinsurance Company of Africa Limited (hereinafter referred to as Munich Re of Africa) in terms of which selected Santam business units will be able to use the reinsurer’s Standard & Poor’s (“S&P”) AA- credit rating to write inwards international reinsurance business on Munich Re of Africa’s license. The transaction supports Santam’s strategy to profitably grow its insurance and reinsurance business flows from outside South Africa, with a particular focus on business from the rest of Africa, India and Asia.
In order to compete in the international insurance market an A- or better international credit rating is often required. Munich Re of Africa has an international AA- S&P rating as it benefits from a parental guarantee issued by its parent company, Münchener Rückversicherungs-Gesellschaft based in Munich. Santam’s international counterparty credit and insurer financial strength rating was adjusted from A- to BBB+ by S&P in 2014, as a result of the rating agency’s sovereign downgrade of South Africa as a whole. The revised rating was a reflection of S&P’s view on the country and was not driven by any change in the financial performance of Santam. S&P has assessed Santam’s enterprise risk management as ‘strong’ and considers Santam to have strong risk controls to manage its key risks. S&P views Santam's risk culture as positive, as it has been fully embedded across the business and is supported by an extensive risk appetite framework and effective risk governance.
The financial fundamentals and the strength of Santam remain robust and the business continues to grow through its international diversification strategy. As reported in Santam’s interim results on 31 August this year, gross written premium from the rest of Africa, India, South-East Asia and China increased by 31% to R1 263 million (2015: R962 million) during the period under review.
The agreement with Munich Re of Africa will enable Santam to further the group’s strategic objectives in territories outside South Africa in situations where these are dependent on Santam’s S&P international credit rating. The agreement will be applicable to Santam Re, and Santam’s specialist underwriting managers Emerald Risk Transfer, Stalker Hutchison Admiral (SHA) and Mirabilis Engineering Underwriting Managers. The business written on the Munich Re of Africa license by the Santam business units will be retroceded back to Santam.
The agreement between Santam and Munich Re of Africa is effective from 1 January 2017, subject to the fulfilment of certain suspensive conditions by the parties.