South African insurers are strengthening their defence against potential new waves of coronavirus infections as worse-than-expected mortality claims emerge from the ongoing pandemic.
Old Mutual has bulked up its Covid-19 provisions by R2 billion to account for an ongoing surge and a potential fourth spike in cases, according to a statement on Wednesday. Smaller peer Momentum is also adding more to its reserves, while Absa saw first-half insurance revenue fall after setting aside provisions and paying out more claims.
“Our mortality experience has been worse than anticipated,” Old Mutual said. “The provisions have been updated to take into account the additional available data to date as well as the anticipated impact of the proposed vaccination rollout plan.”
South Africa may experience a fourth wave in December that lasts for 75 days, according to Salim Abdool Karim, former chair of the government’s ministerial advisory committee on Covid-19.
While vaccinations were first made available to the general public in mid-May, just 10% of the adult population is fully inoculated and there is concern that demand for shots is slowing.
As insurers make plans to shield their businesses from steeper payouts, the country’s financial regulator has warned some operators against resorting to stringent funeral-policy premium increases.
“The Financial Sector Conduct Authority has received complaints that some insurers are increasing premiums more than once for the same policy within a 12-month period,” it said. “This would result in unfair outcomes for policyholders.”
© 2021 Bloomberg L.P.