In a recent conversation with Derek Vice and Kashmira Naran, KPMG insurance partners, it became clear that South African insurers have just come through a surprisingly strong year, but nobody is relaxing.

The latest KPMG insurance survey, a meaty ±210-page read, paints a picture of an industry that has taken a cautious breather while still juggling more balls than ever.

Kashmira explains that the theme of  this year’s survey, “up in the air”, captures the sheer volume of competing priorities insurers are having to manage at the same time - regulatory expectations around safer business practices keep rising in the public interest, consumers and broader society are demanding more socially responsible behaviours and employees and other stakeholders want to work for, buy from, and invest in companies that reflect their values. Added to this is the unforgiving spotlight shed through social media platforms whereby insurers are operating under constant scrutiny.

What makes the current moment interesting is the tension between favourable results and a tough environment. On the surface, 2024 looks like a “good news” year: solid financial performance across both the life and non-life insurance industries, no major catastrophe events, and strong investment returns. Beneath that, Kashmira says, insurers have been hard at work on a number of strategic initiatives such as climate risk, ESG implementation and technology and people transformation to name a few, with a distinct long-term view.

Climate risk management sits high on that list. Insurers are revisiting their risk models in the wake of local events such as the KZN floods, as well as looking to international events such as the Californian wildfires. The question is no longer whether the environment is changing, but whether existing approaches are still fit for purpose. Linked to that is the drive toward net-zero: ESG reporting, transition plans and strategies that, in South Africa at least, are still catching up with global peers. Insurers, however, cannot afford to wait for these practices to be regulated, as it is more a case of when and not if regulators will begin to sharpen and regulate their expectations.

At the same time, insurers have also been concentrating efforts on areas of focus by the regulatory, such as third-party risk management, the current “flavour of the year”, and IT risk management. The joint standards on cybersecurity and technology risk, and the heightened focus on fraud risk management, have demanded earnest attention. Fraud is evolving in step with technology, and while new tools are helping detect it, they also create fresh vulnerabilities.

Despite this crowded agenda, Derek points out that insurers have delivered good results because they’ve played the long game. Revenue has grown through a mix of strategies: expansion into the rest of Africa and beyond, new life products such as index-linked offerings, genuine growth in the funeral and low-income space as more people are slowly lifted into the formal market, and specialist lines linked to South Africa’s infrastructure challenges, such as solar and other alternative energy risks.

On the non-life side, the absence of major catastrophes and other shock events contributed to this results. Strong investment returns since the formation of the Government of National Unity have further boosted results. On the cost side, years of investment in IT, digitisation and automation are finally paying off, with efficiency gains now feeding through into the bottom line.

However, top-line growth remains difficult in a stressed economy where insurance is still seen as a grudge purchase. Kashmira notes that a lot of apparent growth is churn and replacement business: consumers shopping around for price and insurers buying and selling books of business to refine portfolios. This is fuelling ongoing mergers and acquisitions as smaller, capital-strained players seek shelter with bigger groups, and larger insurers leverage scale, distribution and expertise.

She points to the Telesure–Renasa deal as a standout success story. Since Telesure acquired Renasa in 2023, Renasa swung from a loss of R145 million in 2023 to a profit of R81 million in 2024, with higher insurance revenue, lower insurance service expenses and a robust improvement in profitability. That kind of turnaround illustrates the power of scale, capital and seasoned capability when M&A is carried out with a clear strategy.