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Sunday, January 1, 1989
Strong competition

Lloyd’s has been somewhat in the spotlight lately, under fire from the local short term insurance industry. In fact, it seems local insurers are bitter over the amount of business going overseas. Says one, “I don’t think Lloyd’s is our friend. They are here to make profits and, when it suits them, they will leave.”
Adds another industry spokesman, “I feel very strongly about this. We are not being able to build up our financial strength so that we can give the South African industrialist support in the future. Lloyd’s is not only to blame, of course, because business also goes to other overseas markets.”
Many in the local industry feel the loss of business is leading to a drain of underwriters from the country. They say. “What is there left to underwrite locally once all the decent business has gone overseas? People no longer want to be underwriters.”
Others worry that with business going overseas, local jobs will have to be reduced because there will be insufficient underwriting business in South Africa.
So just how great is the threat from Lloyd’s? According to 1987 figures the following is evident: total premium income was R4 800m; offshore premiums came to slightly over R1 000m. This was just 22% of the total. Of this R740m was the total reinsurance figure, R283m was Lloyd’s premium and R42m was premium going to “fringe” markets.
Much of the Lloyd’s and fringe market premium was from the corporate sector, namely fire, liability, marine and aviation. In total, therefore, less than 6% of total premium income went to Lloyd’s and other markets.
This makes one wonder why all the panic, especially in the light of the healthy profits many local short-term insurers have recently made?
Ronald Napier, Lloyd’s representative for South Africa, says in defence of Lloyd’s, “We will not disrupt the local market but we have every right to compete because we are recognised in the South African insurer.”
He adds that Lloyd’s has had a fairly stable share of the local market for some time. “Our market share is approximately 5%-6% and it is not increasing dramatically. This shows that we are not trying to become bigger in South Africa.
“Most of the business which goes to Lloyd’s is either specialised or the larger risks. The South African market either does not have the capacity or the expertise to handle it.
Examples of such business are marine insurance, SAA, and professional indemnity. Besides having the capacity for such cover, these are also areas in which Lloyd’s specialises.”
Ken Saggers, MD of Mutual & Federal, has expressed his concern at the amount of business going out of the country on more than one occasion.  “Although it is approximately 10%, this figure has doubled in only seven or eight years.
“Lloyd’s should not be in a privileged position in terms of its financial situation. 1 am not against Lloyd’s at all. In fact I believe it does play a part in our market but we just want level playing fields.”
Tileman Fischer, MD of Allianz, is wary of government regulation because “it snowballs and leads to too much control. I feel we need some instrument to measure just what business can be handled locally. This would stop unnecessary premium leaving the country.
“We must remember that access to the whole world when spreading risk, but South Africa is limited in this respect. So obviously some of the larger risks must go overseas.
“It is tough out there, but we can’t have it both ways. Either we face the competition or we put up with over-regulation.”
Mr Napier says that many of the rumours circulating about Lloyd’s taking business from the local insurers are grossly over- exaggerated.
“Recently I investigated a rumour that Lloyd’s had managed to gain an account from a local insurer by undercutting the rate by as much as 40% and offering wider cover.
On investigation only a proportion of the account had actually gone to Lloyd’s at a fair, not ridiculously low rate. “So Lloyd’s is really not upsetting the market as people seem to think they are. In fact Lloyd’s has recently joined the SA Insurance Association (SAIA) because it is part of the South African market. Hopefully this will improve relationships on the local front somewhat.”

Copyright © Insurance Times and Investments® Vol:2.1 1st January, 1989
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