How South African insurance leaders can navigate uncertainty and find opportunity in a changing market.
If the past few years have taught us anything, it’s this: calm seas are the exception, not the rule.
For South Africa’s (re)insurance market – and particularly for UMAs (Underwriting Management Agencies) – volatility isn’t some distant global headline. It’s right here, woven into the fabric of daily operations. Prices fluctuate. Risks evolve. Capacity tightens. And just when you think you’ve got a handle on things… something else changes.
But here’s the thing about volatility: while it creates challenges, it also opens doors. The UMAs who will win the next decade aren’t the ones wishing for the good old days. They’re the ones adapting, moving decisively, and seeing opportunity where others see chaos.
Let’s talk about how to be one of them.
What’s Driving Volatility in South Africa’s Insurance Market?
We’re not immune to global trends, but South Africa has its own special mix of factors turning up the heat.
Inflation (The Silent Margin Killer)
Material costs, vehicle parts, labour rates, medical expenses… all creeping upwards. And often faster than premiums are adjusted.
Exchange Rate Madness
A volatile Rand directly impacts claims costs, especially where parts or products are imported. It also complicates reinsurance treaty pricing.
Political and Regulatory Shifts
2024’s election cycle, the unstable GNU, evolving FSCA regulations, and increasing governance demands are creating a more complex operating environment for UMAs.
Load Shedding & Infrastructure Risks
Beyond being an operational headache, energy instability and infrastructure failures add layers of risk – and claims.
Climate and Weather Events
From the KZN floods to prolonged droughts, climate volatility is no longer an emerging risk. It’s here, and it’s expensive.
What This Means for UMAs on the Ground
Let’s not sugar-coat it – the impact is real:
- Claims costs are rising faster than expected.
- Reinsurance is harder (and more expensive) to secure.
- Pricing accuracy is under pressure.
- Operational inefficiencies get brutally exposed.
- Insurers and regulators expect more data, governance, and transparency.
The margin for error? Getting smaller by the day.
Reinsurance Matters More in a Volatile Market
Volatility doesn’t just affect underwriting on the ground, it ripples all the way through to reinsurance. As reinsurers face global capital shifts, inflation exposure, and portfolio stress, their appetite for certain risks can tighten fast. For South African UMAs, this means:
- Treaty negotiations may become tougher or more expensive.
- Reinsurers may demand better risk data, pricing discipline, and portfolio hygiene.
- Capacity might shrink in lines most exposed to volatility – think property, casualty, or business interruption.
UMAs who want to maintain access to stable, cost-effective reinsurance support need to show they’re on top of their game. The more strategically a portfolio is managed, the more attractive it becomes to reinsurers looking for smart, disciplined partners in a choppy market.
6 Smart Moves for South African UMAs Navigating Volatility
The good news? This isn’t uncharted territory for Oak Tree. We’ve seen UMAs thrive in tough markets, and here’s what sets them apart.
1. Tighten Up Pricing Discipline
- Review rating models regularly, not just at renewal.
- Factor inflation assumptions into every quote.
- Watch for underinsurance creeping in (it’s happening everywhere).
2. Stress-Test Your Portfolio
- Run scenarios: What happens if parts costs spike another 20%?
- Where are your biggest claims exposures?
- How vulnerable are you to currency swings?
Being surprised in this market is optional.
3. Invest in Clean, Current Data
- Garbage in = garbage out
- No more “best guess” bordereaux.
- Accurate, up-to-date data is non-negotiable for claims, pricing, and reinsurance negotiations.
Bad data is expensive. Good data is a competitive edge.
4. Strengthen Your Reinsurer Relationships
- This is not the time to be faceless.
- Transparency builds trust. Collaboration gets capacity.
- Show you understand your risks and how you’re managing them.
Reinsurers have choices. Make sure you’re their easy choice.
5. Diversify – But Stay Strategic
- Product lines. Distribution channels. Partnerships.
- Diversification spreads risk, but don’t overcomplicate your business without the systems to back it up.
Simple, scalable, sensible beats flashy and fragile every time.
6. Build Operational Resilience
Automate what you can.
Review your disaster recovery plans (yes, including load shedding scenarios).
Upskill your people for agility, not just technical knowledge.
In volatile markets, speed of response often beats size.
Volatility Isn’t The Problem. Standing Still Is.
Volatility isn’t going anywhere. But panic is not a strategy.
South African UMAs have always operated in a world of shifting risks. The difference now is the speed and complexity of change.
The UMAs who succeed from here aren’t the ones trying to predict the future. They’re the ones building businesses resilient enough to handle whatever the future throws at them and agile enough to seize the opportunities volatility creates.
Oak Tree was built for this world. If you’re ready to talk about how to future-proof your UMA – and thrive in a changing market – we’re ready to talk.
