1. Titel hier presented by John Doe Date here SOUTH AFRICAN INSURANCE ASSOCIATION

2. The potential impact of SAM on niche and small insurers presented by Nico Esterhuizen Programme Manager: SAM nico@saia.co.za The Insurance Conference 2012

3. Discussion Points • Understanding small and niche insurers • Impact of SAM • Drivers and challenges • Unknowns

4. World Insurance Market and Prudential Changes 1.08% = $20bn

5. Rankings in Insurance Market SA ranking: Nr. 22

6. Niche Insurers

7. Captives Insurers

8. Small Insurers

9. Impact, Drivers and Challenges

10. (Potential) impact of SAM • Merger and acquisitions • Move to cell-captive environment • Insurers further de-risk their asset allocations • Reduced competition in higher risk insurance products • Increase in absolute MCR: R15m • Increase in fixed operating expenses

11. (Potential) impact of SAM • Higher reserves • Higher capital adequacy requirement • Change in authorisation classes • Policyholders will ultimately bear the costs • Improved risk management, transparency, capital adequacy.

12. Pillar 1 drivers and challenges • IFRS vs. MCVB • Non-life underwriting risk calibration for SA only at QIS3 • Current data quality and availability • Reinsurers data challenges with SAM • Participation in SA-QISs and quality of results • Ring-fenced funds • Segmentation • Group SCR • Documentation • Credit Ratings • Contract boundaries • Loss absorbency • Trade credit insurers

13. Pillar 2 drivers and challenges • Independent Non-Executive Chairperson • Appointed Actuary • Board and the Internal Model • ORSA • Use Test • Fit and proper • Control functions • Governance and risk systems

14. Pillar 3 drivers and challenges • Competitive information disclosed publically • Significant increase in auditing-fees because of SAM auditing requirements • Time and cost of reporting vs. value • Materiality

15. The real impact of SAM

16. Unknown • Defining proportionality • Nature, size and complexity • EIOPA: “The principle of proportionality is intended to support the consistent application of the principles-based … requirements to all insurers.” • Less disclosures and reporting for small insurers? • Less onerous governance requirements?

17. Unknown: • Principle of Solvency II: “Actuarial and statistical methodologies applied are proportionate to the nature, scale and complexity of the underlying risks” • Aim not to make the calculation requirements on less complex companies too onerous…. • Simplifications to SCR standard formula allowed…Further guidance still to be issued under SAM….

18. Unknown • Reserve Bank and supervisory style • Results of the Economic Impact Study • Transitional Arrangements • Rand Bands

19. Titel hier presented by John Doe Date here Thank you!