Covid-19 in South Africa: Temporary moratorium on the issuance of new insurance licences
Insurers will not be able to apply for new licences in South Africa as the regulator suspends granting new licences as the Covid-19 pandemic unfolds.
On 10 June 2020, the Prudential Authority published Communication 1 of 2020, wherein the Prudential Authority has stated it is imposing a temporary moratorium on the issuance of new licences for a period of six months, unless there are exceptional circumstances as may be determined by the Prudential Authority.
With regard to the Covid-19 pandemic, the Prudential Authority has determined that the temporary suspension is necessary due to additional challenges that the current economic environment would inevitably pose for new entrants.
The temporary suspension however will not apply to:
- The licensing of controlling companies of insurance groups as contemplated in terms of Section 10(3) of the Insurance Act 2017
- The variation of existing licence conditions as contemplated in terms of Section 26 of the Insurance Act 2017
- The conversion of previously registered insurers as contemplated in terms of Item 6 of Schedule 3 to the Insurance Act 2017.
The approach of the Prudential Authority to suspend new licence applications aligns with the approach taken by the Australian Prudential Regulation Authority, which as early as 8 April 2020 equally imposed a moratorium on new licence applications.
The Prudential Authority has undertaken to monitor global and domestic economic developments for the duration of the suspension period and review the suspension should it become necessary.
Contributed by Ernie Van der Vyer, partner, and Nicole Britten, senior associate, Clyde & Co
