Regulatory changes in South Africa and their impact on the short-term insurance environment, 1960–1980

Abstract

Orientation: The South African Insurance Act 18 of 2017 became effective on 01 July 2018 as part of the new Twin Peaks regulatory system. The often stated reason for the new regulatory regime is the 2008 global financial crisis. Regulatory changes in the local environment took place during two distinct periods in history following the Sharpeville and Soweto uprisings in 1960 and 1976. International sanctions combined with an outflow of capital ultimately saw government amending the regulatory framework through new ownership requirements for all insurers in order to secure funds locally. Research purpose: The purpose of this research was to explain how the contextual dynamics impacted regulatory responses, and what was the subsequent effect on the short-term insurance industry. Motivation for the study: The motivation for the study was to explain and understand market dynamics following the regulatory tightening of the insurance industry within a historical framework. Research approach/design and method: This article provides an empirical analysis of how regulatory intervention transformed market characteristics and thus contributed to an understanding of the localisation of a financial industry, namely the short-term insurance industry. This was achieved through a description of the regulation, including the exploration of possible consequences at the time of two major events in history. Main findings: In both cases the findings were that the market size contracted, corrected and expanded within a few years. Practical/managerial implications: This article provides a practical analysis of local industry performance in an environment of legislative changes which may assist managers in a regulated industry. Contribution/value-add: The contribution is an industry analysis over an extended time frame which may add value in the adoption of similar domestication policies in the rest of Africa.

Keywords

• domestication
• foreign insurers
• insurance
• local insurers
• regulation