Investigation into the appropriateness of the South African microinsurance solvency capital regulation

[摘要] ENGLISH ABSTRACT : In South Africa, there are two different regulatory capital requirement options for insurers sellingmicroinsurance products. The first is the capital requirement for traditional insurers under the SAMframework. The second is a simplified requirement that would be applicable to registeredmicroinsurers. This thesis provides a systematic comparison of these two requirements.The nominal value of each requirement is compared using a model microinsurer that has beencalibrated using industry data. It was found that the simplified microinsurance requirementresulted in less capital required than the SAM requirement for traditional insurers. The comparisonwas extended by comparing the change in requirements if the risk profile of the microinsurerchanged. It was found, as would be expected, that the simplified microinsurance requirement wasnot as sensitive to changes in the risk profile.The level of protection under each requirement was also assessed. This was done using variousdeterministic and stochastic tests. The deterministic tests involved stressing variables individuallyand collectively. The stochastic tests involved calculating the probability of insolvency for themodel microinsurer over a one-year period. This showed that both capital requirements resulted,for the model microinsurer, in an insolvency probability of less than 0.5%, as required by SAM.However, it also showed that the lack of risk sensitivity of the simplified microinsurance capitalrequirement could result in significantly higher insolvency rates if the risk profile of themicroinsurer changed.The results of the tests performed also showed that it may, under certain circumstances, beacceptable to reduce the absolute minimum capital requirement under the specialisedmicroinsurance licence. This should assist with lowering barriers to entry for small microinsurers.However, the reduction may not be sufficient to encourage informal funeral insurance providersto register with the regulator which was one of the goals of the microinsurance licence. Thus, it isconcluded that the simplified requirement could be adjusted to be more risk sensitive. This couldresult in a lower absolute minimum and encourage formalisation.

[发布机构] Stellenbosch University