JOHANNESBURG – Brian Riley, CEO designate of African Bank Good Bank, says the newly established African Insurance Group Limited – a cell captive insurance company underwritten by Guardrisk – represents a big step forward in finalising the restructuring of African Bank for April this year.
“The Guardrisk cell captive commenced providing credit life and other insurance underwriting arrangements for African Bank’s new business with effect from 17 January 2016 and will do so in respect of Good Bank’s new business with effect from the targeted Transaction Effective Date of 4 April 2016,” African Bank said in a statement issued after the JSE’s Monday close.
The April 4 date has been earmarked as the official launch date of African Bank Good Bank.
Cell captive arrangements enable companies, such as Woolworths and Mr Price, to offer branded insurance products to their customers without having to establish their own insurance company, effectively piggybacking off another insurer’s licence and risk assessment expertise.
Following a fallout with BEE shareholders in African Bank Investments Limited (Abil) over the offer price for its subsidiary insurance company, Stangen, African Bank abandoned a planned purchase of Stangen and elected to establish its own cell captive insurance arrangement.
Incorporated into MMI Holdings in March 2014, Guardrisk is the largest cell captive insurance group of its kind in South Africa.
“For various reasons, including lower administrative costs and lower capital requirements due to the relatively larger scale of the Guardrisk business, the cell captive arrangement is more economical than the insurance business previously underwritten by Stangen. This will allow African Bank and in due course, the Good Bank, to pass on this benefit to customers in the form of reduced premiums on all new insurance business for the same customer benefits,” African Bank said.
Last month, Riley told media that African Bank Good Bank had been granted its banking licence on the basis that it diversifies. This diversification will take the form of new products, customers and channels, he said.