Guidance Manual:
Completion of the
SHORT-TERM INSURANCE
Statutory Return (ST2015)
ii
Table of contents
INTRODUCTION ............................................................................................................................................... 5
INFORMATION REGARDING THE RETURN .................................................................................................. 6
EXCEL FUNCTIONALITY ............................................................................................................................... 10
Statement A1 - REGISTRATION INFORMATION ......................................................................................... 11
Statement A2 - ADDRESSES AND PARTICULARS OF KEY PERSONS ................................................... 12
Statement A3 - DIRECTORS, MANAGEMENT EXECUTIVES AND MEMBERS OF AUDIT COMMITEE .. 12
B STATEMENTS ............................................................................................................................................. 14
Statement B1 - GROSS UNDERWRITING RESULTS .................................................................................. 14
Statement B2 - REINSURANCE UNDERWRITING RESULTS..................................................................... 14
Statement B4 - GROSS AND REINSURANCE PREMIUM ANALYSIS ........................................................ 14
Statement B5 - NET UNDERWRITING RESULTS ........................................................................................ 15
Statement B6 - SUMMARY OF BUSINESS COMPOSITION........................................................................ 15
Statement B7 - INFORMATION RELATING TO CLAIMS, CREDIT INSURANCE AND DISTRIBUTION
CHANNELS ..................................................................................................................................................... 16
Statement C1 and C2 - STATEMENT OF COMPREHENSIVE INCOME AND STATEMENT OF FINANCIAL
POSITION ........................................................................................................................................................ 17
Statement C3 - COMPARISON OF STATUTORY UNDERWRITING RESULTS AND
PUBLISHED UNDERWRITING ACCOUNT ................................................................................................... 17
Statement C3.1 - BUDGETED UNDERWRITNG RESULT PROJECTIONS FOR THE NEXT FINANCIAL
YEAR ............................................................................................................................................................... 17
Statement C4 - ANALYSIS OF ISSUED PREFERENCE SHARES & DEBENTURES ................................ 17
Statement C5 - CASH FLOW STATEMENT.................................................................................................. 17
Statement D1 - RESERVING DEVELOPMENT (Including Statements D1.1 to D1.8) ............................... 18
Statement D2 - UNEARNED PREMIUM PROVISIONS (“UPP”) .................................................................. 29
Statement D3 - SUMMARY OF TECHINCAL PROVISIONS (INCLUDING STATEMENT D3.1) ................. 30
Statement D3.2 – INCURRED BUT NOT YET REPORTED RESERVE ....................................................... 30
Statement E1 - CASH & BALANCES & DEPOSITS ..................................................................................... 33
Statement E2 - SECURITIES & LOANS ........................................................................................................ 33
Statement E3 - DEBENTURES, LOAN STOCK & OTHER SECURITIES .................................................... 33
Statement E4 - DEBTORS (CLAIMS AGAINST PERSONS AND ENTITIES) .............................................. 34
Statement E4.2 - DEBTORS (Claims against persons & entities) ............................................................. 34
Statement E5 - SHARES, UNITS & DEPOSITORY RECEIPTS ................................................................... 34
Statement E6 - LAND AND BUILDINGS – FREEHOLD ONLY .................................................................... 35
Statement E7 - FIXED ASSETS & SUMMARIES OF OTHER ASSETS ....................................................... 35
Statement E8 – DERIVATIVES ...................................................................................................................... 36
Statement E9 (total) - ASSETS AND LIABILITIES: COMPARISON OF STATUTORY TO
SHAREHOLDERS’ VALUES .......................................................................................................................... 36
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Statement E11 - BANKING INSTITUTION EXPOSURE ............................................................................... 36
Statement E12 - OTHER INSTITUTION EXPOSURE ................................................................................... 36
Statement F1 – CAPITAL ADEQUACY REQUIREMENT, SURPLUS ASSETS, NET ASSET RATIO AND
SOLVENCY ..................................................................................................................................................... 38
Statement F1.1 – ASSETS BACKING TOTAL LIABILITIES ........................................................................ 38
Statement F1.2 – MARKET RISK CAPITAL CHARGE ................................................................................. 39
Statement F1.3 – CREDIT RISK CAPITAL CHARGE ................................................................................... 39
Statement F1.4 – INSURANCE RISK CAPITAL CHARGE ........................................................................... 40
Statement F1.5 – BASIC SOLVENCY CAPITAL REQUIREMENT AND OPERATIONAL RISK CAPITAL
CHARGE ......................................................................................................................................................... 40
Statement F2 - SPREAD OF DOMESTIC ASSETS ...................................................................................... 42
Statement H - ASSURANCE REPORT BY THE INDEPENDENT AUDITOR ............................................... 42
Statement I - CELL CAPTIVE INSURERS .................................................................................................... 44
Statement J 1 – SHORT-TERM REINSURANCE SUPERVISION QUESTIONNAIRE ................................. 45
Statement J2 – SPREAD OF REINSURERS................................................................................................. 45
Statement J3 – CATASTROPHE REINSURANCE ....................................................................................... 46
Statement J4 to J11 ....................................................................................................................................... 47
Statement K1 - SINGLE FACTOR STRESS TEST ON STATUTORY SURPLUS – INSURANCE RISK .... 49
Statement K2 - SINGLE FACTOR STRESS TEST ON STATUTORY SURPLUS – SCENARIO & MARKET
RISK ................................................................................................................................................................ 50
Statement G1 – GENERAL INFORMATION ................................................................................................. 52
Statement G2- RISK REPORT BY DIRECTORS .......................................................................................... 52
Statement G3- GOVERNANCE AND RISK MANAGEMENT ........................................................................ 52
Statement G4 - Cross Border Insurance operations .................................................................................. 53
DEFINITIONS .................................................................................................................................................. 54
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INTRODUCTION
These notes have been compiled by the Financial Services Board (“FSB”) to provide assistance to those
responsible for completing the annual short –term insurance statutory return (ST2015).
It is important to note that every statement that is applicable to the insurer in question must be completed.
The majority of FSB’s queries relate to statements that have not been fully completed. All information,
however inconsequential it may appear, is relevant for a full assessment from the Regulators' point of view.
The return can be downloaded from the FSB official website, http://www.fsb.co.za (Departments –
Insurance –Forms: Applications, Notifications, Returns and Complaints – 2015 Short-Term Returns–
ST2015). The printout made of your final return will be regarded as the official return to the FSB after being
signed by the responsible parties. The signed return should be submitted in duplicate (only one need to be
signed as an original) together with an electronic version of the completed return and two sets of the
published annual financial statement. It will be appreciated if the certified copy contains only public
statements with any supporting documents.
Statutory return, short-term return, statutory short-term return and return all refer to the official statutory
return for all short-term insurers.
The ST2015 is split into two returns, namely quantitative and qualitative returns. The split was necessary
due to the size of the statutory returns became unmanageable for certain insurers due to the different
formatting requirements as well as the different versions of Excel being used..
Please note that Schedule 2 part II of the Act is deleted and replaced by a Board Notice
(169 of 2011) on the requirements for the calculation of assets, liabilities and capital
adequacy requirement of short-term insurer (“requirements”) issued under paragraph 2
of part I of schedule 2 of the Short-term insurance Act.
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INFORMATION REGARDING THE RETURN
This return will be completed using audited figures.
Some of the statements are available for public scrutiny. Those statements that are not available to the
public are clearly marked in the right hand top corner "CONFIDENTIAL STATEMENT NOT AVAILABLE TO
PUBLIC".
Two indices are available:
Index 1: Statements available to the public, and
Index 2: Statements not available to the public.
“ After an insurer submitted its statutory return, a public version of the return will be created by
removing all statements marked ”CONFIDENTIAL STATEMENTS NOT AVAILABLE TO PUBLIC”
from the submitted return. Only the public version of an insurer’s return is available to the
public.”
.
VALIDATION TOOL
The statutory return includes a worksheet entitled “Validation”. This is not a worksheet that needs
completion; the validation tool draws values from the completed short-term statutory return and performs
some basic data validity checks (see column I). Section 1 is a “General Checks” section and aims to verify
the completeness of important fields in Statement A1. Section 2 up to Section 9 contains checks pertaining
to the rest of the return and each block in column I will return either an “OK” or an “Error” message. The
“Error” message will be returned if the relevant totals within the block do not tie up. The “Error” message
will also be returned where rounding errors occur.
The Registrar will reject returns where an error message is present within the Validation
worksheet and if no satisfactory explanation is given for any error messages. Please note that
such a rejection will be done in terms of the Short-Term Insurance Act, in terms of section 35(2).
A rejection will be regarded as a non-submission of the return.
COMPLETION OF THE STATEMENTS
The insurer should only start to complete the electronic workbook from Statement A onwards. The return
covers the latest financial period. Value added tax (VAT) should be treated in the same manner as in the
published annual financial statements.
Only shaded areas require figures or information to be entered where applicable.
All other areas (non shaded) are protected cells and contain automatic calculations, information or data or
must remain blank or reflected as zero. No changes may be done to these protected areas (cells). No
structural changes can be made to the return as each worksheet is protected.
Please note: No links, with reference to any spread sheet of the insurer, should be inserted
into the statutory return. Remove all links before the return is submitted.
Supporting statements
Each statement is designed on a separate worksheet. Where additional detail is required but the
statement does not have adequate space (e.g. statement E), a supporting statement is provided in the
same format (i.e. statement E.1).
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The supporting statement will not be protected which means that the user will be able to customise the
supporting statement, e.g.E1.1 add and delete rows as required. Please note that the values from the
supporting statement will not automatically be transferred to the principle statement.
The supporting statement will be treated as part of the main statement for signature purposes.
Additional documentation
Any other documents, submitted to the registrar, must if it is:
 an original, be accompanied by one copy; and
 a copy, be accompanied by one copy, one of which has been certified as correct by an officer of the
insurer.
The additional documents will be treated as part of the return for signature purposes.
Consistency & Completeness
All figures must be rounded off to the nearest thousand rand.
For the sake of consistency and completeness of statistical information compiled from the return and the
statements, it is essential that the insurer complete all items that should or can be completed. With the
exception of the "supporting statements", no item may be deleted or inserted.
Please note: although it is possible to create a copy of a worksheet to be able to change some
of the protected cells, when doing so, you will lose the hidden reference numbers that are
needed to extract the data to our central database. If the data is not in the original format, the
return will be rejected.
SUBMISSION OF THE RETURN
The statutory return is requested in terms of section 35 of the Act in respect of the medium and form,
containing the information and by the date or within the period prescribed by the Registrar. If the return
is incomplete or incorrect the return can be rejected in terms of section 35(2) of the Act. Further to this, if
a statement submitted as part of the statutory return requires further investigation a request to the shortterm insurer in terms of section 35(3) of the Act to provide more information can be made. The return
must be printed and submitted even if nil.
Submission time & extension
The return must be submitted within 4 months of the end of the financial period to which it relates.
Extension for the completion of the return can be applied for under Section 4(1) of the Act.
Please note that any request for an extension to submit the return should be lodged before
the due date of the return.
Where the auditors submitted any other report or statement to the shareholders and/or policyholders
concerning the financial position of the short-term insurer, a copy must be submitted to the Registrar
without any delay. Please refer to section 28(3) of the Act.
Submission procedure & address
The 2015 returns should be uploaded via the Insurance Upload facility and no emailed returns will be
accepted.
2015 – Quantitative Return
 Only 1 return should be uploaded – if an uploaded version needs to be replaced, this can be
done by deleting the uploaded document and uploading a new one.
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In the case of composite reinsurers you will be required and allowed to submit a total of 2
returns.
If any changes are made to a return the previous return should be deleted. When changing a
specific sheet in a return the entire electronic return needs to be resubmitted
If more than the required number of returns is uploaded, the submission will be deemed to be
invalid.
Any annexures or additional documentation to the returns should be uploaded under the “Other
Documents” section
2015 – Qualitative Return
 Only 1 return should be uploaded – if an uploaded version needs to be replaced, this can be
done by deleting the uploaded document and uploading a new one.
 In the case of composite reinsurers you will be required and allowed to submit a total of 2
returns.
 If any changes are made to a return the previous return should be deleted. When changing a
specific sheet in a return the entire electronic return needs to be resubmitted
 If more than the required number of returns is uploaded, the submission will be deemed to be
invalid.
 Any annexures or additional documentation to the returns should be uploaded under the “Other
Documents” section
2015 – Other Documentation
 This includes all documentation submitted with the hard copy return. Any annexures submitted
in hard copy should also be uploaded here electronically.
Things to consider when completing and submitting the return:
 No external links should remain in the submitted return.
 Do not override/change any of the standard protections or formulae’s.
 If you encounter any “Errors” on the validation sheet please contact the responsible analyst
before submitting the returns in order to resolve the issue before submission.
 The electronic documents submitted should be a “mirrored” copy of the hard copies submitted.
The original signed copy of the statutory return must be sent to:
The Registrar of Short-term Insurance
Insurance Prudential Department
PO Box 35655
Menlo Park
Pretoria
0102
The return can also be delivered to:
The Registrar of Short-term Insurance
Insurance Prudential Department
Riverwalk Office Park, Block B
41 Matroosberg Road (Corner Garsfontein and Matroosberg Roads)
Ashlea Gardens, Extension 6
Menlo Park
Pretoria
0081
VERSION CONTROL
Each new version issued by the FSB will be available on the official website: http://www.fsb.co.za
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GENERAL
Declaration by the Auditor(s)
The declaration by the auditor appears in the bottom right-hand corner of each statement.
AUDITORS (initial)
If
appears, the auditor only needs to initial the statement
to confirm that this is the final statement that forms part of the submitted statutory return.
AUDITORS
If
appears, the auditor has to sign-off certain aspects of or
the whole of the specific statement. In this regard, please refer to the declaration by the Auditors in
Statement H.
Additional information
The Registrar may direct an insurer to furnish the Registrar with such additional information and
documents as may be necessary for purposes of the Act. (Refer to section 4(2) of the Act.)
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EXCEL FUNCTIONALITY
PAGE NUMBERING
Each statement is numbered in the top right-hand corner.
PAGE SET-UP
Even though the various worksheets are “protected”, one is still able to change the page set-up for
printing purposes:
 Page orientation, scaling, size and print quality can be changed,
 Margins can be changed,
 Page breaks can be added and deleted, and
 Printing colour can be changed (default setting: black & white).
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QUANTITATIVE STATEMENTS
Statement A1 - REGISTRATION INFORMATION
DESCRIPTION
Registrar of Short-term Insurance Reference number
This number refers to the unique number that is allocated to each insurer at registration and used by the
FSB in all correspondence with the insurer. This number will be displayed as 10/10/1/xxxx/8.
The name of the insurer can be chosen from the drop-down box (the reference number will be inserted
automatically) or the name of the insurer can be typed in, in which case the reference number will also
need to be typed in. The dropdown box will be updated annually with each version of the return.
The types of policies listed are defined in the Act as short-term insurance policies, i.e. property,
transportation, motor, accident and health, guarantee, liability, engineering and miscellaneous. Tick the
appropriate boxes to indicate which types of policies the insurer is authorised to underwrite.
Registration conditions
Conditions imposed on an insurer are shown on the reverse side of the registration certificate, which the
Registrar issued when the company was registered under the Short-term Insurance Act, 1998.
Although all insurers are registered to do short-term insurance business, a condition of registration may
include types of policies that an insurer may issue and can include other specific conditions provided for
in section 10 of the Act.
If any other person, company or legal entity requires a copy of the conditions of registration imposed on
an insurer, they can contact the Registrar.
Certificate number
The number on the certificate (that the Registrar issued) will change if the conditions imposed on the
insurer's registration are changed. Conditions of registration may vary or new conditions can be imposed
by the Registrar or on request from the insurer in terms of section 11 of the Act. Please note that the
reference number mentioned above will remain unchanged.
NAMES OF CONTACT PERSONS
Refer to sections 16 and 18 to 21 of the Act.
The public officer and auditor(s)’ details and where applicable the details of the statutory actuary must be
provided. The Act requires that the Registrar be informed of the appointment/change in appointment of the
public officer. The Registrar also needs to approve the appointment of the auditor(s) and where applicable
the appointment of the statutory actuary. All these people have to complete and submit a personal
questionnaire to the Registrar. The questionnaires are available on the FSB website: www.fsb.co.za
In addition, it is requested that any change in the persons' contact details or change to appointments, are
forwarded to the Registrar.
Public Officer
A public officer must be appointed in terms of section 16 of the Act. Where the public officer has
changed, the insurer must notify the Registrar within 30 days.
Auditor
Where only one firm of auditors is employed, please insert “N/A” under each of the headings provided
for the second firm of auditors.
Statutory Actuary
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Where insurer appoints a statutory actuary(ies),and or alternate statutory actuary, his/her details must
be provided. The Act specifies that the Registrar approves the appointment of the statutory actuary(ies)
and that person will have to complete and submit a personal questionnaire to the Registrar.
If the insurer does not have an alternate statutory actuary, “N/A” should be filled in under each of the
lines related to the alternate statutory actuary.
Shareholders
Refer to sections 25 and 26 of the Act.
Statement A2 - ADDRESSES AND PARTICULARS OF KEY PERSONS
If a key person does not have an e-mail address, please insert “N/A”.
HEAD OFFICE AND PUBLIC OFFICER
Refer to section 16 of the Act. In terms of section 16(1)(d) of the Act, insurers must notify the Registrar of
any changes to the head office or public officer within 30 days of the change.
AUDITORS
Furnish particulars of the Responsible Partner.
Where only one firm of auditors is employed, please insert “N/A” under each of the headings provided for
the second firm of auditors.
STATUTORY ACTUARY
An insurer is not required to appoint a statutory actuary or an alternate statutory actuary but in certain
cases, the Registrar may direct an insurer to appoint a statutory actuary or alternate statutory actuary.. If
the insurer does not have a statutory or an alternate statutory actuary, “N/A” should be filled in under each
of the lines related to the statutory actuary and alternate statutory actuary.
CONSUMER COMPLAINTS PERSON
The Registrar regularly receives complaints from policyholders regarding poor service or claims
repudiations. The Registrar usually refers these complaints to the insurer for comment. To simplify matters
the Registrar needs the contact details of the responsible person within the insurance company dealing with
consumer related complaints. The insurer should notify the Registrar of any changes.
Statement A3 - DIRECTORS, MANAGEMENT EXECUTIVES AND MEMBERS OF
AUDIT COMMITEE
DIRECTORS
It is important in relation to each and every director to complete the full requirements of the statement.
Appointment & resignations
If a director resigned during the year, details should still be included on the statement. The date of
resignation should be stated. Notification of appointments and terminations must be done within 30 days
after the appointment or termination, together with a reason for the termination in terms of section 18 of
the Act.
Managing Executive – As indicated under the definitions
MANAGING EXECUTIVE
The Act defines managing executive under section 1 as meaning the chief executive officer of a shortterm insurer and every manager of the short-term insurer who reports directly to that chief executive
officer.
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AUDIT COMMITTEE
Refer to Section 22 of the Act.
Position held
Examples include Chairman, Vice-chairman, Non-executive, Managing Director, etc.
Appointment & resignations
If a member of the audit committee resigned during the year, details should still be included on the
statement. The date of resignation should be stated.
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B STATEMENTS
The B-statements contain financial information relating to income and expenses.
Please note that statements B1 to B6 needs to be completed according to the requirements of
the Act i.e. all premiums received and claims paid in respect of investment contracts and
insurance contracts must be reflected as such.
Furthermore the technical provision (unearned premium provision, outstanding claims provision and
Incurred but not report provision) should be calculated in accordance with section 32 read with Board Notice
169 of 2011 issued under the Act.
Statement B1 - GROSS UNDERWRITING RESULTS
This statement shows the gross underwriting results per class of business. Reinsurance Premium Inwards
is shown as a separate item and split between proportional and non-proportional. Refund premiums include
a rebate in premiums.
Claims paid include claims handling costs and is reflected after recoveries, salvages, etc.
Please note that salvages can only be taken into account in respect of a particular outstanding
claim it relates to and cannot be deducted in general from the outstanding claims amount.
Gross commission should be split in respect of direct premium and reinsurance premium inwards. Kindly
refer to Regulation 5.3 under the Act in respect of the maximum commission payable.
Inwards reinsurance and foreign business are not subject to the commission rate limitations.
Line item 5 and line 11 – “Other”, if an amount is reflected under this item it needs to be explained in a
covering note to the return. The “Other” should also reflect premiums and claims in respect of Portfolio
Transfers.
Statement B2 - REINSURANCE UNDERWRITING RESULTS
This statement shows the reinsurance underwriting results of the insurer. Reinsurance is split between
proportional and non-proportional.
For proportional reinsurance the period over which the reinsurance premiums are earned is normally
consistent with the period of the risk of the underlying direct insurance policies.
For non-proportional reinsurance the period over which the premium is earned takes into account the period
of the reinsurance agreement.
Please take note that the technical provisions should be calculated as per the statutory requirements.
Line item 3 and 9 – “Other”, if an amount is reflected under these items, it needs to be explained in a
covering note to the return. The “Other” should also reflect reinsurance premiums and claims in respect of
Portfolio Transfers.
Statement B4 - GROSS AND REINSURANCE PREMIUM ANALYSIS
This statement shows the gross premiums according to the risk periods and types of risk.
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Statement B5 - NET UNDERWRITING RESULTS
The values in this statement are calculated automatically.
This statement calculates the net underwriting results per class of business arrived at by deducting
reinsurance results as shown in statement B2 from gross results shown in statement B1.
Estimate of Ultimate Loss Ratio
The figure should be representative of the company’s best estimate, per business class and in total, of the
loss ratio expected by the time all claims have been paid in respect of all policies in-force during the
reporting period. This is just an estimate and it is hence expected to change from one year to the next as
more data becomes available. For a new product /business class, this estimate will closely resemble the
initial loss ratio estimate emerging from a pricing analysis
Statement B6 - SUMMARY OF BUSINESS COMPOSITION
This statement excludes all inwards reinsurance contracts, meaning that registered re-insurers and
registered primary insurers should not complete this statement in respect of their business reflected as
“Reinsurance Premiums Inwards”, refer to Statement B1 – Line item 3.
Line items
This statement reflects all eight statutory business classes and further sub-categorises it into “Personal
lines, Corporate and Commercial business groupings. No amount may be applied to more than one
business class or sub-category. If a single policy was issued that includes multiple statutory classes or
where a single policy includes both corporate and commercial types the insurer must reflect the business
under the dominant class.
Column descriptions
Gross premiums on policies renewed and new policies
Gross premiums on policies renewed relates to policies that is already “on the books” of the insurer at the
beginning of the financial year of the insurer. Additions on existing policies should still be reflected as a
renewed policy.
Gross premiums on new policies relates to policies that were incepted during the current financial year. The
full premium received in respect of these policies must be reflected under the “gross premium on new
policies” column
Examples:
1. An insurer with a 31 December 2011 year end incepted a monthly policy on the 1st of April 2011
with a premium of R500 per month; for completion purposes of this statement all 9 months will be
reflected as a new policy. In the subsequent financial year (2012) the policy would be reflected as a
renewed policy.
2. An insurer with a 30 June 2011 year end incepted an annual policy on the 1st of March 2011 with a
premium of R10,000, the full premium would be reflected under a “new policy” for the 30 June 2011
financial year
Average gross premium per policy
This should be a simple average of the total gross premiums received or receivable divided by the number
of policies in force.
Average contract period per policy
This is also a simple average of the sum of all the policy contract durations (non -monthly policies must be
translated into months) divided by the number of policies in force.
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Number of policies at the beginning of the year and Number of policies at the end of the year
This refers to the actual number of polices that is on the books of the insurer at the respective reporting
period.
Number of claims reported
This is the actual claims reported to the insurer during the financial year.
Average gross claim amount
This is a simple average of the total gross amount (before reinsurance) of reported claims, divided by the
number of reported claims.
Average net claim amount
This also a simple average of the total net amount (after reinsurance) of reported claims, divided by the
number of reported claims.
Statement B7 - INFORMATION RELATING TO CLAIMS, CREDIT INSURANCE AND
DISTRIBUTION CHANNELS
This statement deals with credit protection insurance, micro-insurance and distribution channels.
Net Benefits
Information relating to business sold to the low income market (i.e. LSM1-5) need to be submitted on an
annual basis in respect of % contribution of gross premiums for each of the classes of business.
Micro Insurance
Where information relating to claims outstanding is not readily available please provide a best estimate.
Please note the table need to reflect the percentage of gross premium written relating to micro-insurance
business split amongst the different business classes.
Credit Life
The information on claims rejected, claims outstanding and claims paid should equal claims received.
Where information relating to claims outstanding is not readily available please provide a best estimate.
Claims
The information on claims rejected, claims outstanding and claims paid should equal claims received.
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C STATEMENTS - SHAREHOLDERS’ FINANCIAL STATEMENTS
Statement C1 and C2 - STATEMENT OF COMPREHENSIVE INCOME AND
STATEMENT OF FINANCIAL POSITION
This statement has been designed to reconcile in total with the income statement and balance sheet as
audited and presented in the published annual financial statements of the insurer. The sub-headings within
this statement will in some cases not be as detailed as in the audited financial statements.
Please note that losses must be entered as negative figures.
Statement C3 - COMPARISON OF STATUTORY UNDERWRITING RESULTS AND
PUBLISHED UNDERWRITING ACCOUNT
This statement must only be completed if there is a difference between statement B5 line item 16 “Net
result: Profit/(loss)” and statement 6.1 line 1 “Net underwriting result – profit/(loss)”.
The purpose of this comparison statement is to identify and explain differences between the statutory
underwriting result and the accounting underwriting result.
The statutory underwriting result must be determined in accordance with the various requirements as set
out in the Act. On the other hand the accounting underwriting results should be determined in accordance
with financial reporting standards applicable to widely-held companies.
Any differences should be fully explained and particular reference should be made to various parts of the
Act and financial reporting standards.
Statement C3.1 - BUDGETED UNDERWRITNG RESULT PROJECTIONS FOR THE
NEXT FINANCIAL YEAR
This statement must be completed by all insurers. The statement shows the budgeted underwriting result
projections for the next financial year. This statement is confidential.
Statement C4 - ANALYSIS OF ISSUED PREFERENCE SHARES & DEBENTURES
All insurers must complete this statement as at the end of the financial period except if the insurer is
incorporated without share capital.
Preference shares
Refer to section 23(a)(ii),(iii) of the Act.
Debentures
Refer to section 23(a)(i) and (v) of the Act.
Dividend/Interest-in future
Enter the net present value of dividend or interest to be paid in future.
Statement C5 - CASH FLOW STATEMENT
This statement must be completed and must agree to the shareholders published annual financial
statements.
Please insert additional lines if required.
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D STATEMENTS
Statement D1 - RESERVING DEVELOPMENT (Including Statements D1.1 to D1.8)
Please note that primary insurers are required to complete sections 1 to 4 of the run-off statements for each
class of business underwritten. Primary insurers should group claims by the date of occurrence.
Reinsurers are required to complete sections 1, 2 and 4 of the run-off statements for each class of business
underwritten. Where reinsurers have limited data, reinsurers should group claims by the underwriting year
and include Incurred But Not Reported (”IBNR”) provisions with their Outstanding Claims Provision.
However, should reinsurers receive detailed portfolio information from insurers, we request reinsurers to
complete the statement in a similar fashion to that for direct insurers (see previous paragraph).
The purpose of these statements is to assess the actual development of claims with the original provisions
established. To illustrate the intended purpose of this statement, consider a block of business written with
the following development of claims illustrated below:
IBNR
IBNR
OCR
Claims
paid
Claims
paid
OCR
Claims
paid
Early on
Later years
All claims settled
The statement would compare the total claims estimate initially with revised estimates over time and
establish the reserving sufficiency.
If completed correctly, the insurer needs only to calculate the breakdown for the last financial year and copy
the previous financial years' breakdown from previous statutory returns.
Comparison with other statements
The information for “earlier years” is only required on a total basis and not per development quarter.
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The outstanding claims provision (total for all years) reflected in item 4 (Cell Q121, excel format) on
this statement should agree to Statement E9 Cell H42 (OCR as per shareholders’ statements).
The IBNR provision (total for all years) reflected in item 6 (Cell Q125, excel format) on this statement
should agree to Statement E9 Cell H43 (IBNR as per shareholders’ statements).
The technical reserves in Statement D1 will differ to the reserves in Statement B5 and D3. This is due to the
fact that Statement D1 reflects all reinsurance and Statement B5 and D3’s provisions are determined in
accordance with Section 32 (read with paragraph 4 of the requirements for the calculation of assets,
liabilities and capital adequacy requirement of short-term insurer (“requirements”) issued under paragraph 2
of part i of schedule 2) of the short-term insurance act (which only takes approved reinsurance into
consideration).
18
Clarification of Origin and Development quarters
The rows reflect the quarters of the financial year during which the claim occurred. For instance, for an
insurer with a 30 June year-end a claim that occurred in November 2007 will be reflected in the row for
2007, quarter 2.
The columns reflect the development period of the claim in relation to the time when the claim occurred.
Development quarter 1 refers to the same period as the origin quarter. For the same example as in the
previous paragraph, if a claim payment was made in December 2007, the payment will be reflected in the
row for 2007 quarter 2, in development quarter 1. If a further payment is made in April 2008, that will be
reflected in the row for 2007 quarter 2, in development quarter 3. This is further illustrated by the table
below – for each development quarter the entry refers to when the claim occurred (e.g. 2004 – Q4 refers to
DEVELOPMENT QUARTER
Quarter 1
R'000
Quarter 2
R'000
Quarter 3
R'000
Quarter 4
R'000
Quarter 5
R'000
Quarter 6
R'000
Quarter 7
R'000
Quarter 8
R'000
Quarter 9
R'000
Quarter 10 Quarter 11 Quarter 12 Quarter 13 Quarter 14 Quarter 15 Quarter 16 Qua
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R
1
2003 - Q1
2003 - Q2
2003 - Q3
2003 - Q4
2004 - Q1
2004 - Q2
2004 - Q3
2004 - Q4
2005 - Q1
2005 - Q2
2005 - Q3
2005 - Q4
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
200
2
2003 - Q2
2003 - Q3
2003 - Q4
2004 - Q1
2004 - Q2
2004 - Q3
2004 - Q4
2005 - Q1
2005 - Q2
2005 - Q3
2005 - Q4
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
200
3
2003 - Q3
2003 - Q4
2004 - Q1
2004 - Q2
2004 - Q3
2004 - Q4
2005 - Q1
2005 - Q2
2005 - Q3
2005 - Q4
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
2007 - Q2
200
4
2003 - Q4
2004 - Q1
2004 - Q2
2004 - Q3
2004 - Q4
2005 - Q1
2005 - Q2
2005 - Q3
2005 - Q4
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
2007 - Q2
2007 - Q3
200
1
2004 - Q1
2004 - Q2
2004 - Q3
2004 - Q4
2005 - Q1
2005 - Q2
2005 - Q3
2005 - Q4
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
2007 - Q2
2007 - Q3
2007 - Q4
200
2
2004 - Q2
2004 - Q3
2004 - Q4
2005 - Q1
2005 - Q2
2005 - Q3
2005 - Q4
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
200
3
2004 - Q3
2004 - Q4
2005 - Q1
2005 - Q2
2005 - Q3
2005 - Q4
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
200
4
2004 - Q4
2005 - Q1
2005 - Q2
2005 - Q3
2005 - Q4
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
2008 - Q3
200
1
2005 - Q1
2005 - Q2
2005 - Q3
2005 - Q4
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
2008 - Q3
2008 - Q4
2
2005 - Q2
2005 - Q3
2005 - Q4
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
2008 - Q3
2008 - Q4
3
2005 - Q3
2005 - Q4
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
2008 - Q3
2008 - Q4
4
2005 - Q4
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
2008 - Q3
2008 - Q4
1
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
2008 - Q3
2008 - Q4
2
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
2008 - Q3
2008 - Q4
3
2006 - Q3
2006 - Q4
2007 - Q1
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
2008 - Q3
2008 - Q4
4
2006 - Q4
2007 - Q1
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
2008 - Q3
2008 - Q4
1
2007 - Q1
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
2008 - Q3
2008 - Q4
2
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
2008 - Q3
2008 - Q4
3
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
2008 - Q3
2008 - Q4
4
2007 - Q4
2008 - Q1
2008 - Q2
2008 - Q3
2008 - Q4
1
2008 - Q1
2008 - Q2
2008 - Q3
2008 - Q4
2
2008 - Q2
2008 - Q3
2008 - Q4
3
2008 - Q3
2008 - Q4
4
2008 - Q4
INSURERS - FINANCIAL YEAR CLAIMS OCCURRED (QUARTERLY) REINSURERS UNDERWRITING YEAR CLAIMS OCCURRED (QUARTERLY)
Year
Quarter
Earlier years
2003
2004
2005
2006
2007
2008
From 2003's return
From 2004's return
From 2005's return
From 2006's return
From 2007's return
Insert 2008's figures
19
Section 1 – Payment development net of reinsurance
The rows relate to the origin years of the claim (where the origin year will be based on the financial year
when claims occurred for direct insurers and underwriting year when claims occurred for reinsurers). The
data are split into quarters, the columns reflect the delay between the quarter of origin and the payment
quarter. The amounts in the triangle reflect the net incremental claims paid. Payments refer to actual claim
payments made, reinsurance recoveries and salvages/recoveries.
The figures are not cumulative. The figures should allow for all reinsurance, whether approved or not. If one
uses this information to estimate future values, the result would be an estimate of the combined net OCR
and IBNR of the insurer.
“Net earned premium per quarter” column
Ideally, the entry within each cell of the “Net earned premium per quarter” column should represent the
premium earned per accident quarter, net of all reinsurance. If this granularity of data is not available, then
the annual net earned premium figure, as reflected in statement B5, should be split up between the various
accident quarters, using an appropriate driver.
Section 2 – Claims incurred development net of reinsurance
This is a new section.
The rows relate to the origin years of the claim (where the origin year will be based on the financial year
when claims occurred for direct insurers and underwriting year when claims occurred for reinsurers). The
data are split into quarters, the columns reflect the delay between the quarter of origin and the movement
quarter. The amounts in the triangle reflect the movement in the incurred claims.
A movement in incurred claims includes the following:




the initial outstanding claims estimate when a claim is submitted as well as any subsequent changes
to this estimate;
payments made;
recoveries;
salvages, etc.
The figures are not cumulative. The figures should allow for all reinsurance, whether approved or not. If one
uses this information to estimate future values, the result would be an estimate of the combined net IBNR
and IBNER (Incurred But Not Enough Reported) of the insurer.
Section 3 – Reporting development net of reinsurance
Reinsurers are not required to complete this section.
The rows relate to the origin years of the claim (where the origin year will be based on the financial year
when claims occurred). The data are split into quarters, the columns reflect the delay between the quarter of
origin and the quarter the claim was reported. The amounts in the triangle reflect the original estimate when
the claim was first reported ignoring any subsequent adjustments to estimates.
The figures are not cumulative. The figures should allow for all reinsurance, whether approved or not. If one
uses this information to estimate future values, the result would be an estimate of the total net IBNR of the
insurer.
To make the differences between sections 1 to 3 clearer, they are best illustrated by the examples at the end
of this section.
Section 4 – Reserving development
This section calculates an adjusted estimate for outstanding claims based on section 1’s development,
together with an adjusted estimate for IBNR based on section 3’s development.
Example 1:
The insurer’s financial year runs from 1 January to 31 December.
A claim occurred on the 5th of December 2005 and was reported on the 20th of May 2006
On the 20th of May 2006 a claims estimate of R50,000 was raised
Triangle 2, Origin year 2005 Quarter 4, 3rd development quarter, +50
Triangle 3, Origin year 2005 Quarter 4, 3rd development quarter, +50
On the 12th of July 2006 this estimate was adjusted down to R49,000
Triangle 2, Origin year 2005 Quarter 4, 4th development quarter, -1
On the 2nd of September 2006 a payment was made for the full and final settlement of the claim of R42,000
Triangle 1, Origin year 2005 Quarter 4, 4th development quarter, +42
Triangle 2, Origin year 2005 Quarter 4, 4th development quarter, -7 (= 42 – 49)
On the 22nd of October 2006 the insurer received a salvage recovery of R2,000
Triangle 1, Origin year 2005 Quarter 4, 5th development quarter, -2
Triangle 2, Origin year 2005 Quarter 4, 5th development quarter, -2
Section 1 - Payment development (Net of all Reinsurances)
FINANCIAL YEAR CLAIMS
OCCURRED
(QUARTERLY)
DEVELOPMENT QUARTER DURING WHICH CLAIMS WERE PAID
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
Quarter 7
Quarter 8
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R'000
1
2005
2
3
4
42
-2
1
2006
2
3
4
FINANCIAL YEAR CLAIMS
OCCURRED
(QUARTERLY)
Section 2 - Claims development (Net of all Reinsurances)
DEVELOPMENT QUARTER DURING WHICH CHANGES OCCURRED IN CLAIMS LIABILITY
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
Quarter 7
Quarter 8
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R'000
1
2005
2
3
4
50
-8
-2
1
2006
2
3
4
FINANCIAL YEAR CLAIMS
OCCURRED
(QUARTERLY)
Section 3 - Reporting development (Reinsurers not to complete)
DEVELOPMENT QUARTER DURING WHICH CLAIMS WERE REPORTED
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
Quarter 7
Quarter 8
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R'000
1
2005
2
3
4
50
1
2006
2
3
4
21
Example 2:
The insurer’s financial year runs from 1 January to 31 December.
A claim occurred on the 5th of June 2006 and was reported to the insurer on the 12th of June 2006
On the 12th of June 2006 a claims estimate of R20,000 was raised
Triangle 2, Origin year 2006 Quarter 2, 1st development quarter, +20
Triangle 3, Origin year 2006 Quarter 2, 1st development quarter, +20
On the 20th of June 2006 R25,000 was paid in full and final settlement of the claim
Triangle 1, Origin year 2006 Quarter 2, 1st development quarter, +25
Triangle 2, Origin year 2006 Quarter 2, 1st development quarter, +5
Section 1 - Payment development (Net of all Reinsurances)
FINANCIAL YEAR CLAIMS
OCCURRED
(QUARTERLY)
DEVELOPMENT QUARTER DURING WHICH CLAIMS WERE PAID
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
Quarter 7
Quarter 8
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R'000
1
2005
2
3
4
1
2006
2
25
3
4
FINANCIAL YEAR CLAIMS
OCCURRED
(QUARTERLY)
Section 2 - Claims development (Net of all Reinsurances)
DEVELOPMENT QUARTER DURING WHICH CHANGES OCCURRED IN CLAIMS LIABILITY
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
Quarter 7
Quarter 8
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R'000
1
2005
2
3
4
1
2006
2
25
3
4
FINANCIAL YEAR CLAIMS
OCCURRED
(QUARTERLY)
Section 3 - Reporting development (Reinsurers not to complete)
DEVELOPMENT QUARTER DURING WHICH CLAIMS WERE REPORTED
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
Quarter 7
Quarter 8
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R'000
1
2005
2
3
4
1
2006
2
20
3
4
22
Example 3:
The insurer’s financial year runs from 1 January to 31 December.
Relating to the claim in this example, the insurer has a quota share arrangement with a reinsurer (Reinsurer
A) where the insurer retains 80% of the risk. In addition, as this claim is one of many claims arising from the
same incident, the insurer expected to receive an additional recovery of R20,000 on this claim as part of its
catastrophe treaty with another reinsurer, Reinsurer B.
A claim occurred on the 12th of January 2006 and was reported to the insurer on the 2nd of July 2006
On the 2nd of July 2006 a gross claims estimate of R80,000 was raised. The net amount, after allowing for
proportional reinsurance is R64,000. After allowing for the catastrophe recovery the net estimate is R44,000.
Triangle 2, Origin year 2006 Quarter 1, 3st development quarter, +44 (=80k*80% – 20k)
Triangle 3, Origin year 2006 Quarter 1, 3st development quarter, +44 (=80k*80% – 20k)
On the 20th of July 2006 a partial claim payment of R40,000 was made. (The revised gross outstanding
claims estimate is therefore R40,000 and net outstanding estimate is R4,000.)
Triangle 1, Origin year 2006 Quarter 1, 3rd development quarter, +40
No change is reflected in triangle 2 as there is no change to the expected incurred claims amount.
On the 3rd of November 2006 the gross outstanding claims estimate was increased by R20,000 to R60,000.
No change is anticipated to the catastrophe reinsurance recovery. (In other words the net outstanding
estimate changes to R20,000(=20k*80% + 4k))
Triangle 2, Origin year 2006 Quarter 1, 4th development quarter, +16 (=20k*80%)
On the 2nd of January 2007 an amount of R65,000 was paid in full and final settlement of the claim
Triangle 1, Origin year 2006 Quarter 1, 5th development quarter, +65
Triangle 2, Origin year 2006 Quarter 1, 5th development quarter, +4 (= total net claims paid to date
(80%*(40k+65k)-20k = 64k) – total expected incurred claims to date (60k))
On the 2nd of April 2007 the insurer receives a recovery from Reinsurer B of R15,000 (compared to the
R20,000 expected)
Triangle 1, Origin year 2006 Quarter 1, 6th development quarter, -15
Triangle 2, Origin year 2006 Quarter 1, 6th development quarter, +5 (=20k – 15k)
On the 10th of July 2007 the insurer receives a recovery from Reinsurer A of R21,000 (=20%*R105k)
Triangle 1, Origin year 2006 Quarter 1, 7th development quarter, -21
Summary of information:
Original gross estimate of R80k was increased to R100k and R105k was eventually paid to the policyholder.
Taking the R15k catastrophe reinsurance recovery into account, the gross impact on the insurer was R90k.
The corresponding original net estimate was R60k (80% of 100k less R20k catastrophe recovery)
The final net effect on the insurer was a claim amount of R69k (since the estimate increased and the
catastrophe reinsurance recovery was less than expected)
From the triangles one can see the following:
The total effect on the insurer, as reflected in triangles 1 and 2, is the same (when one adds up the amounts
in the row for origin year 2006, quarter 1, the totals are the same) however the timing is different. Triangle 1
shows the timing of the cash flows and triangle 2 shows the impact of the various changes made to
estimates as well.
In this particular case, the insurer has under-reserved its original estimate of the claim.
23
Section 1 - Payment development (Net of all Reinsurances)
FINANCIAL YEAR CLAIMS
OCCURRED
(QUARTERLY)
DEVELOPMENT QUARTER DURING WHICH CLAIMS WERE PAID
Year
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
Quarter 7
Quarter 8
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R'000
Quarter
1
2005
2
3
4
1
2006
40
65
-15
-21
2
3
4
FINANCIAL YEAR CLAIMS
OCCURRED
(QUARTERLY)
Section 2 - Claims development (Net of all Reinsurances)
DEVELOPMENT QUARTER DURING WHICH CHANGES OCCURRED IN CLAIMS LIABILITY
Year
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
Quarter 7
Quarter 8
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R'000
Quarter
1
2005
2
3
4
1
2006
44
16
4
5
2
3
4
FINANCIAL YEAR CLAIMS
OCCURRED
(QUARTERLY)
Section 3 - Reporting development (Reinsurers not to complete)
DEVELOPMENT QUARTER DURING WHICH CLAIMS WERE REPORTED
Year
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
Quarter 7
Quarter 8
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R'000
Quarter
1
2005
2
3
4
1
2006
44
2
3
4
Although not required at this stage, the corresponding gross information would be shown as follows:
Section 1 - Payment development (Net of all Reinsurances)
FINANCIAL YEAR CLAIMS
OCCURRED
(QUARTERLY)
DEVELOPMENT QUARTER DURING WHICH CLAIMS WERE PAID
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
Quarter 7
Quarter 8
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R'000
1
2005
2
3
4
1
2006
40
65
2
3
4
FINANCIAL YEAR CLAIMS
OCCURRED
(QUARTERLY)
Section 2 - Claims development (Net of all Reinsurances)
DEVELOPMENT QUARTER DURING WHICH CHANGES OCCURRED IN CLAIMS LIABILITY
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
Quarter 7
Quarter 8
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R'000
1
2005
2
3
4
1
2006
80
20
5
2
3
4
FINANCIAL YEAR CLAIMS
OCCURRED
(QUARTERLY)
Section 3 - Reporting development (Reinsurers not to complete)
DEVELOPMENT QUARTER DURING WHICH CLAIMS WERE REPORTED
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
Quarter 7
Quarter 8
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R'000
1
2005
2
3
4
1
2006
80
2
3
4
24
Section 4 - Reserving development
Section 4 of Statement D1 in the ST2008 statutory returns appears as follows (entries have been included to
aid the examples to follow):
Section 4 - Reserving development
Total for
all years
FINANCIAL YEAR DURING WHICH THE CLAIMS OCCURRED
Earlier
2003
2004
2005
2006
2007
2008
R'000
R'000
R'000
R'000
R'000
R'000
R'000
R'000
Outstanding claims net of all reinsurances
4 Provisions made at end of this year
0
5 Original provisions at year-ends at the top of each column
0
0
0
65
130
240
0
0
0
300
150
240
0
10
50
100
350
500
0
0
0
120
380
500
435
Claims incurred but not reported (IBNR) net of all reinsurances
6 Provisions made at end of this year
0
7 Original provisions at year-ends at the top of each column
1.1.
Outstanding claims net of all reinsurance
1.1.1.
Item 4: Provisions made at the end of this year
1,010
The total outstanding claims reserve (OCR) in the last column represents the reserve held at the end of the
current financial year. This is then split (entries in the preceding columns) to reflect the OCR held in the
current financial year, for the current accident year as well as all prior applicable accident years (if any).
Example:
 The entry with value “240” (2008 accident year) represents the outstanding claim reserve held in 2008 for
accidents which occurred during 2008.
 The entry with value “130” (2007 accident year) represents the outstanding claim reserve held in 2008 for
accidents which occurred during 2007.
 The entry with value “65” (2006 accident year) represents the outstanding claim reserve held in 2008 for
accidents which occurred during 2006, etc.
As a result of the above explanation, it is important to note that the entries in this row should always be
positive or zero.
1.1.2.
Item 5: Original provisions at year-ends at the top of each column
The entries in this row should correspond to original entries, in the last column of item 5, from prior years’
statutory returns. Further explanation is provided in the example below:
Example:
 The entry in the last column (“240”) represents the original reserve in 2008 for accidents which occurred
during 2008. Note that this entry must always correspond to the entry above. In the next statutory return
(ST2009) this entry’s value will remain the same under the 2008 column (i.e. the entry would have been
moved one column to the left).
 The entry in the penultimate column (“150”) represents the original reserve held in 2007 for accidents
which occurred during 2007.
None of the entries should be negative as no adjustments should be made to the original OCR provisions,
which are expected to have been positive.
25
1.2.
Claims incurred but not reported (IBNR) net of all reinsurance
1.2.1.
Item 6: Provisions made at the end of this year
The total incurred but not reported (IBNR) reserve in the last column represents the reserve held at the end
of the current financial year. This is then split (entries in the preceding columns) to reflect the IBNR reserve
held in the current financial year, for the current accident year as well as all prior accident years (if any).
Example:
 The entry with value “500” (2008 accident year) represents the outstanding IBNR reserve held in 2008 for
accidents which occurred during 2008.
 The entry with value “350” (2007 accident year) represents the outstanding IBNR reserve held in 2008 for
accidents which occurred during 2007.
 The entry with value “100” (2006 accident year) represents the outstanding IBNR reserve held in 2008 for
accidents which occurred during 2006, etc.
As a result of the above explanation, it is important to note that the entries in this row should always be
positive or zero.
1.2.2.
Item 7: Original provisions at year-ends at the top of each column
The entries in this row should correspond to original entries, in the last column of item 7, from prior years’
statutory returns. Further explanation is provided in the example below:
Example:
 The entry in the last column (“500”) represents the original IBNR reserve in 2008 for accidents which
occurred during 2008. Note that this entry must always correspond to the entry directly above it. In the
next statutory return (ST2009) this entry’s value will remain the same under the 2008 column (i.e. the
entry would have been moved one column to the left).
 The entry in the penultimate column (“380”) represents the original IBNR reserve held in 2007 for
accidents which occurred during 2007.
Again, none of the entries should be negative as no adjustments should be made to the original IBNR
reserves, which are expected to have been positive.
Guidance specifically relevant for reinsurers:
Clarification of Origin and Development quarters:
For proportional reinsurance business the rows reflect the quarter of inception of the business, within the
reinsurer’s financial year. For instance, if an insurer with a 30 June 2008 year end has business with an
inception date of 1 November 2007 – developments on this business will be reflected in the row for year
2007, quarter 2.
For non-proportional and facultative reinsurance business the rows reflect the underwriting quarter of the
business (the quarter in which the underwriting period starts, within the reinsurer’s financial year), as with
proportional business.
For reinsurance business the columns reflect the development of the underwriting year from inception. The
quarters should coincide with the monthly / quarterly / half-yearly reporting on the claims experience.
Example 1: Proportional - Accounting Year Business
The reinsurer’s financial year runs from 1 January 2008 to 31 December 2008.
The treaty incepts at 1 July 2008 and runs for a period of 12 months and the accounting to the reinsurer is
on a quarterly basis.
On 15 November 2008 the first quarterly account (as at 31 September 2008) is received: This contains an
amount of R1,200,000 for claims paid and an outstanding claims amount of R15,600,000
Triangle 1 – Underwriting year 2008 quarter 3, 1st development quarter +1,200
26
Triangle 2 – Underwriting year 2008 quarter 3, 1st development quarter +16,800
Triangle 3 – No entry for reinsurers
Section 1 - Payment development (Net of all Reinsurances)
UNDERWRITING
QUARTER/YEAR
CLAIMS
OCCURRED
DEVELOPMENT QUARTER DURING WHICH CLAIMS WERE PAID
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
R'000
R'000
R'000
R'000
R'000
R'000
1
2008
2
3
1,200
4
Section 2 - Claims development (Net of all Reinsurances)
UNDERWRITING
QUARTER/YEAR
CLAIMS
OCCURRED
DEVELOPMENT QUARTER DURING WHICH CHANGES OCCURRED IN CLAIMS LIABILITY
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
R'000
R'000
R'000
R'000
R'000
R'000
1
2008
2
3
16,800
4
At year end 2008 the reinsurer would only have received the quarterly accounts for the first quarter of the
contract. The second quarter (as at 31 December 2008, which falls in the 2008 financial year) will be
estimated. On 15 February 2009, when it receives the actual 2nd quarter accounts, the difference between
the estimated and the actual losses booked will need to be placed in underwriting year 2008 quarter 3, 3 rd
development quarter.
On 15 May 2009 the actual third quarter accounts (as at 31 March 2009) will be received. This contains an
amount of R1,500,000 paid and the outstanding claims are R30,000,000. This falls outside the reinsurer’s
2008 financial year and will only be shown in ST2009.
Triangle 1 – Underwriting year 2008 quarter 3, 3rd development quarter +1,500
Triangle 2 – Underwriting year 2008 quarter 3, 3rd development quarter +14,700 (31,500 – 16,800). The
adjustment for the second quarter accounts, mentioned above, will also be added in here.
Triangle 3 – No entry for reinsurers
Section 1 - Payment development (Net of all Reinsurances)
UNDERWRITING
QUARTER/YEAR
CLAIMS
OCCURRED
DEVELOPMENT QUARTER DURING WHICH CLAIMS WERE PAID
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
R'000
R'000
R'000
R'000
R'000
R'000
1
2008
2
3
1,500
4
Section 2 - Claims development (Net of all Reinsurances)
UNDERWRITING
QUARTER/YEAR
CLAIMS
OCCURRED
DEVELOPMENT QUARTER DURING WHICH CHANGES OCCURRED IN CLAIMS LIABILITY
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
R'000
R'000
R'000
R'000
R'000
R'000
1
2008
2
3
14,700
4
Example 2: Proportional – Underwriting Year Business
The reinsurer’s financial year runs from 1 January 2008 to 31 December 2008.
The treaty incepts at 1 January 2008 and runs for a period of 12 months and the accounting to the reinsurer
is on a quarterly basis.
On 15 May 2008 the first quarterly account (as at 31 March 2008) is received: This contains an amount of
27
R1,500,000 for claims paid and an outstanding claims amount of R2,000,000
Triangle 1 – Underwriting year 2008 quarter 1, 1st development quarter +1,500
Triangle 2 – Underwriting year 2008 quarter 1, 1st development quarter +3,500
Triangle 3 – No entry for reinsurers
Section 1 - Payment development (Net of all Reinsurances)
UNDERWRITING
QUARTER/YEAR
CLAIMS
OCCURRED
DEVELOPMENT QUARTER DURING WHICH CLAIMS WERE PAID
Year
Quarter
1
2008
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
R'000
R'000
R'000
R'000
R'000
R'000
1,500
2
3
4
Section 2 - Claims development (Net of all Reinsurances)
UNDERWRITING
QUARTER/YEAR
CLAIMS
OCCURRED
DEVELOPMENT QUARTER DURING WHICH CHANGES OCCURRED IN CLAIMS LIABILITY
Year
Quarter
1
2008
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
R'000
R'000
R'000
R'000
R'000
R'000
3,500
2
3
4
The 2nd, 3rd and 4th quarterly accounts follow the process above. The first difference between accounting
year business and underwriting year business – is that a 5th quarter account (as at 31 March 2009) will be
received. The incremental accounts for this triangle (in ST2009) will be reflected in the Underwriting year
2008 quarter 1, 5th development quarter block. Each subsequent quarterly account will be reflected in the
relevant column until such time as all liabilities are settled in full.
Example 3: Non-proportional and Facultative business
The reinsurer’s financial year runs from 1 January 2008 to 31 December 2008.
The treaty incepts at 1 January 2008 and runs for a period of 12 months.
A claim occurs on 16 August 2008, the initial claims estimate is R1,250,000 for the reinsurance protection (to
the reinsurance layer).
Triangle 1 – No entry for reinsurers
Triangle 2 – Underwriting year 2008 quarter 1, 3rd development quarter +1,250
Triangle 3 – No Entry for reinsurers
On 25 November 2008 the claim is partially settled, for an amount of R250,000 for the reinsurance
protection, but the incurred amount of R1,250,000 has not changed.
Triangle 1 – Underwriting year 2008 quarter 1, 4th development quarter +250
Triangle 2 – Underwriting year 2008 quarter 1, 4th development quarter +0 (incurred claim amount was not
adjusted)
Triangle 3 – No entry for reinsurers
28
Section 1 - Payment development (Net of all Reinsurances)
UNDERWRITING
QUARTER/YEAR
CLAIMS
OCCURRED
DEVELOPMENT QUARTER DURING WHICH CLAIMS WERE PAID
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
R'000
R'000
R'000
R'000
R'000
R'000
1
2008
250
2
3
4
Section 2 - Claims development (Net of all Reinsurances)
UNDERWRITING
QUARTER/YEAR
CLAIMS
OCCURRED
DEVELOPMENT QUARTER DURING WHICH CHANGES OCCURRED IN CLAIMS LIABILITY
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
R'000
R'000
R'000
R'000
R'000
R'000
1
2008
1,250
2
3
4
On 18 February 2009 the claim is settled in full for R1,100,000, this will be part of the ST2009 for the
reinsurer. History will be saved in the triangle and will appear as submitted in ST2008. The following will be
included in ST2009:
Triangle 1 – Underwiting year 2008 quarter 1, 5th development quarter +850
Triangle 2 – Underwriting year 2008 quarter 1, 5th development quarter –150 (1,100 – 1,250)
Triangle 3 – No entry for reinsurers.
Section 1 - Payment development (Net of all Reinsurances)
UNDERWRITING
QUARTER/YEAR
CLAIMS
OCCURRED
DEVELOPMENT QUARTER DURING WHICH CLAIMS WERE PAID
Year
Quarter
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
R'000
R'000
R'000
R'000
R'000
R'000
1
2008
250
850
2
3
4
Section 2 - Claims development (Net of all Reinsurances)
UNDERWRITING
QUARTER/YEAR
CLAIMS
OCCURRED
DEVELOPMENT QUARTER DURING WHICH CHANGES OCCURRED IN CLAIMS LIABILITY
Year
Quarter
1
2008
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 5
Quarter 6
R'000
R'000
R'000
R'000
R'000
R'000
1,250
-150
2
3
4
Statement D2 - UNEARNED PREMIUM PROVISIONS (“UPP”)
Insurers must calculate the UPP according to the method prescribed in paragraph 4.1 of the requirements
for the calculation of the value of assets, liabilities and capital adequacy requirement issued under par 2 of
part I of schedule 2 of the Short-term Act (“Board Notice 169 of 2011”) (in respect of short-term policies other
than short-term reinsurance policies par 4.1.1 would apply and in respect of short-term reinsurance policies
par 4.1.2 would apply), or apply in terms of par 4.1.3 to use an alternative method (that needs to be
approved by the Registrar.) The application form is available on the FSB website. Applications will only be
considered if the incidence of risk is uneven. The application needs to include an actuarial report, signed by
an actuary holding a relevant and valid practising certificate issued by the Actuarial Society of South Africa.
The UPP includes provision for any cash-back reserves and deferred acquisition costs, as defined in Board
Notice 169 of 2011.
The following diagram illustrates the intended overall UPP report:
29
All policies with
unexpired risk
Constant Risks
Increasing Risks
Decreasing
Risks
Uneven Risks
Cash-back
For purposes of calculating the UPP, commission paid is limited to the lesser of actual paid or 12.5% on
motor policies and 20% on other policies. Commission on domestic inwards reinsurance is limited to the
lesser of actual paid or 30%.
Insurers have to calculate their UPP and reflect the results in statement D2 according to the prescribed
groupings. The calculation must be done on a per policy basis and results summarised in the prescribed
format.
The full period of risk is the period of cover purchased by the premium. The expired period of risk is the
period of cover the insurer earned on the policy at the financial year-end. Where possible, insurers should
measure both these variables in days for each policy separately.
Statement D3 - SUMMARY OF TECHINCAL PROVISIONS (INCLUDING STATEMENT
D3.1)
The statement will provide a summary of the technical provisions required.
UPP - The split between domestic and foreign amongst the risk profiles (increase, even, etc.) must be
manually inserted, however the total reflected on statement D2 must agree to the statutory UPP reflected
under line 5 of this statement.
For insurers that use foreign reinsurance, note that the statutory outstanding claims provision and statutory
contingency reserve may only take the amount of the security provided into account and not the anticipated
recoveries from the foreign reinsurer. The security provided by a reinsurer must only be applied to business
reinsured by that specific reinsurer and should be not be utilised under other business.
Where auditors and insurers consider it necessary to establish an Unexpired Risk Provision, please supply
the additional information as requested in the management questionnaire.
Statement D3.2 – INCURRED BUT NOT YET REPORTED RESERVE
Insurers must calculate the IBNR reserve according to the method prescribed in paragraph 4.3 of the
requirements for the calculation of the value of assets, liabilities and capital adequacy requirement issued
under item 2 of schedule 2 of the Short-term Act (“Board Notice 169 of 2011”) or apply in terms of par 4.3.3
to use an alternative method (that needs to be approved by the Registrar.)
Insurers have to calculate their IBNR reserve and reflect the results in statement D3.2 according to the
prescribed groupings. The calculation must be done on a per policy basis and results summarised in the
prescribed format. Where applicable, the amount of security provided by foreign reinsurers need to be
completed per business class.
It is important to note that the net earned premium used for the IBNR calculation should be the net earned
premium after taking into account the movement in the unearned premium provision reserves (“UPP”). The
UPP reserves in turn allow for any cash-back reserves and deferred acquisition cost incurred during the
year. Please note that any deviation (which includes any deviation from any component of the standard
formula as contemplated under paragraphs 4.1.1 of BN 169 of 2011) from the standard calculation of the
unearned premium provision requires Registrar’s approval.
Example:
30
This section illustrates the revised calculation of the IBNR reserve for Motor and Property business as at an
insurer’s 2012 financial year end.
The insurer has the following information regarding earned premiums for the last 6 years:
Earned Premium (R’m)
Year
2012
2011
2010
2009
2008
2007
Motor
Net
150
110
100
90
80
70
Property
Gross
180
125
118
106
95
83
Net
120
100
80
40
-
Gross
130
120
100
50
-
The IBNR for each class of business is calculated by multiplying the relevant earned premium with the
prescribed IBNR percentage as illustrated in the tables below:
Motor Business
Factors per development period (𝒇𝒌,𝒊 )
Year
Factor per development
period (from the table in
paragraph 4.3.1 of the
Board Notice)
Net Earned Premium
Result (NEP multiplied by
the factor)
0
1
2
3
4
5
2012
2011
2010
2009
2008
2007
3.43%
0.47%
0.09%
0.04%
0.03%
0.03%
150
110
100
90
80
70
5.145
0.517
0.09
0.036
0.024
0.021
The total IBNR for Motor business is the sum of the values in the last row, which is R5.833m.
Property Business
Factors per development period (𝒇𝒌,𝒊 )
Year
Factor per development
period (from the table in
paragraph 4.3.1 of the
Board Notice)
Net Earned Premium
Result (NEP multiplied by
the factor)
0
1
2
3
4
5
2012
2011
2010
2009
2008
2007
5.98%
0.88%
0.15%
0.04%
0.03%
0.02%
120
100
80
40
-
-
7.176
0.88
0.12
0.016
-
-
The total IBNR for Motor business is the sum of the values in the last row, which is R8.192. The total net
IBNR is therefore R14.025 (add the values for Motor and Property together).
Following the 2012 year end, a calculation of the IBNR reserve as at the insurer’s 2013 year end would be
required. The updated earned premiums information for the same insurer is given below:
Earned Premium (R’m)
Year
2013
2012
Motor
Net
200
150
Property
Gross
250
180
Net
140
120
Gross
150
130
31
2011
2010
2009
2008
2007
110
100
90
80
70
125
118
106
95
83
100
80
40
-
120
100
50
-
To illustrate, only the calculation of the motor business’ IBNR is given below:
Motor Business
Factors per development period (𝒇𝒌,𝒊 )
0
1
2
3
4
5
2013
2012
2011
2010
2009
2008
3.43%
0.47%
0.09%
0.04%
0.03%
0.03%
Net Earned Premium
200
150
110
100
90
80
Result (NEP multiplied
by the factor)
6.86
0.71
0.10
0.04
0.03
0.02
Year
Factor per development
period (from the table in
paragraph 4.3.1 of the
Board Notice)
The net earned premium figures from 2012 and prior are carried forward (unaltered) along the development
periods. The net earned premium of 2007 is not needed anymore and the latest information for 2013 is
added to the current (i.e. “0”) development period.
The total IBNR for Motor business is again the sum of the values in the last row, which is R7.76m.
32
E STATEMENTS
In the case of an unlisted investment, a copy of the latest audited financial statements of the company or
institution must be submitted, where the total value of the unlisted investment is equal to or greater than
0.5% of the total domestic liabilities. Refer to paragraph 1 of Schedule 2 for amounts to be disregarded.
Despite the requirement that an asset must be valued at fair value, if the Registrar is satisfied that the value
of an asset when calculated in accordance with financial reporting standards does not reflect a reasonable
value for purposes of this Act,
a.
the Registrar may appoint another person to place a reasonable value on that asset that
will be deemed to be the value of the asset
b.
direct a long-term insurer to calculate the value in a manner determined by the Registrar
that will be deemed to be the value of the asset
Statement E1 - CASH & BALANCES & DEPOSITS
All banks in the RSA (as reflected in column 3) should be registered in terms of the Banks Act. (A list is
available on www.reservebank.co.za / bank supervision / South African registered banks and representative
offices)
(Use the dropdown box as a tool to assist you with completing statement E1.1. When the statutory return is
updated, we will update this dropdown box as well, but the version you work with might include banks that
are not registered at the time. If the bank you are using is not on the list, please type it in.)
Column 2, description of investment, will only include investments in current accounts, fixed deposits,
banker’s acceptances, negotiable certificates of deposit and promissory notes issued by banks.
Promissory notes issued by institutions other than banks are excluded. Refer to statement E3.
Investments in money market collective schemes should be reflected in statement E5.
All investments in banks outside the RSA are deemed to be domestic. Please refer to par 16(5)(b) of
Schedule 1 of the Act.
Statement E2 - SECURITIES & LOANS
In this statement all investments in bills, bonds and securities (so called gilts) issued by government or
statutory bodies should be shown.
The following specific instruments had difficulties in interpretation in the past and should be dealt in the
following manner:
 Semi-gilts issued by the Development Bank – included under item 1: Securities and loans issued or
guaranteed by a Minister of the Republic.
 Bonds issued by Telkom – included under item 1: Securities and loans issued or guaranteed by a
Minister of the Republic.
 NHFC bonds – included under item 1: Securities and loans issued or guaranteed by a Minister of the
Republic.
 Inca bonds – should be included on statement E3
 Transkei, Lebowa, Boputhatswana and all other former TBVC government gilts – included under
item 1: Securities and loans issued or guaranteed by the Central Government of the Republic.
 SABC gilts – included under item 2: Securities and loans approved by Registrar.
 Currently nothing should be included under “Other utilities of the Republic”.
In this statement corporate bonds are excluded (See statement E3)
Statement E3 - DEBENTURES, LOAN STOCK & OTHER SECURITIES
33
Promissory notes issued by an institution other than a banking institution should be reflected in this
statement.
In addition, investments in any corporate bonds even if issued by registered banks should be reflected in this
statement as the characteristics of these instruments are the same as capital market instruments.
Credit link notes (CRN) and floating rate notes (FRN) must be reflected in this statement.
Inca bonds – should be included under item 4 “other companies”.
Statement E4 - DEBTORS (CLAIMS AGAINST PERSONS AND ENTITIES)
This statement shows all debtors. Debtors outstanding for longer than 12 months must be excluded from this
statement.
Investments in trusts must be reflected in this statement.
In the case of a script lending transaction, where script was lent out, a claim against the borrower must be
reflected in this statement.
Other debtors will include the fair value of OTC (over the counter) derivative instruments.
A Hedge fund is not a legal entity but rather an investment strategy which can be done off balance sheet in
terms of limited liability partnership or in terms of share investments in a company. In the case of the limited
liability partnership it should be reflected as a claim against a person.
Income must be stated and must be added to the Total Fair Value if the income is not shown in statements
E1, E2, E3, E5 and E7. Income refers to accrued and outstanding income.
Claims against an insurer in terms of a policy refer to item 20(a) of the Table to Schedule 1 to the Act should
be reflected in this statement..
Schedule 1 paragraph 1 of the Act stipulates the requirements for claim to be asset - For the purpose of this
Schedule and section 29 a claim qualifies as an asset in the Republic only if it is enforceable in accordance
with the law of the Republic and is realisable in the Republic. In light of this recognition criteria the FSB will
disregard a deferred tax asset as an insurance asset for the purposes of section 29 of the Act.
For disregarded assets, please refer to part 1 of schedule 2 of the Act.
Statement E4.2 - DEBTORS (Claims against persons & entities)
This statement provides for the breakdown and age analysis of debtors and outstanding premiums. The
completion of this statement can be aligned with the IFRS split, but where information is available a further
split should be done. Approximations in respect of the different splits may be done where information is not
readily available.
Statement E5 - SHARES, UNITS & DEPOSITORY RECEIPTS
All investments in listed shares outside the RSA are deemed to be domestic. Refer to item 16(5) of the Table
to Schedule 1 of the Act.
Listed Ordinary Shares
The classification is based on the sectors as classified by the Industry Classification Benchmark created by
the FTSE and Dow Jones Indexes. Please note that subsector classifications into main sectors must be
consistent from year to year.
Dual listed shares (shares listed in RSA as well as on an international exchange) must be reflected in RSA.
34
A hedge fund is not a legal entity but rather an investment strategy which can be done off balance sheet in
terms of a limited liability partnership or in terms of a share investment in a company. In the case of an
investment in the shares of a company it should be reflected in this statement.
Depository receipts – A depository receipt is a type of negotiable financial security that is traded on a local
stock exchange but represents a security usually in the form of equity that is issued by a foreign publiclylisted company.
Statement E6 - LAND AND BUILDINGS – FREEHOLD ONLY
Only immovable properties owned directly by the insurer should be disclosed in this statement.
WHOLLY OWNER OCCUPIES
The insurer directly owns and occupies the property.
WHOLLY LET
The insurer directly owns the property but lets it out to a third party.
PARTIALLY OWNER OCCUPIES AND PARTLY LET
The insurer directly owns the property, occupies part of the property and lets out part of the property.
IMPUTED RENTAL VALUE OF SPACE OCCUPIED
This amount should represent the gross rental value of space occupied by the insurer during the period
under review. This should be calculated as the estimated value of rental the insurer would have had to pay
if it was not the owner of the property but only leasing the property.
Where any immovable property has been re-valued, a supporting annexure shall be furnished showing:
 In respect of each such asset the value before and after each valuation.
 The purpose of the revaluation.
 The basis used in determining the new value.
 Sufficient details to enable an independent valuator to judge the soundness of the basis employed.
Statement E7 - FIXED ASSETS & SUMMARIES OF OTHER ASSETS
This statement shows fixed assets and summaries of property investments, and investments in related
parties.
All property investments and investments in related parties / companies are also included and grouped for
purposes of statement F2 – Spread of domestic assets. These items have been referred to in preceding
statements E3 to E6 and are cross-referenced to this statement.
IAS 38 on intangible assets provides criteria for the recognition of internally generated intangible assets
(internally developed software) as an asset.
An intangible asset arising from development shall be recognised if and only if an entity can demonstrate all
of the following:
(a)
(b)
(c)
(d)
(e)
(f)
The technical feasibility of completing the intangible asset so that it will be available for use
or sale.
The intention to complete the intangible asset and use or sell it.
Its ability to use or sell the intangible asset
How the intangible asset will generate probable future economic benefits. Among other
things the entity can demonstrate the existence of a market for the output of the intangible
asset or the intangible asset itself or if it is to be used internally, the usefulness of the
intangible asset.
The availability of adequate technical, financial and other resources to complete the
development and to use or sell the intangible asset.
Its ability to measure reliably the expenditure attributable to the intangible asset during its
development.
If the internally developed software demonstrates the above, it can be reflected as an insurance asset.
35
Internally developed software should be classified as computer equipment
Statement E8 – DERIVATIVES
This statement provides an indication of the insurer’s net exposure to derivatives, by asset class, instrument
type, counterparty and by objective or strategy.
Column 2 is the fair value of the assets underlying the derivatives.
Column 3 is the fair value of the derivatives.
The totals per subcategory will be total sum of all the physical exposures of all derivatives.
Column 4: is the derivative profit and loss. It should be completed as the actual mark to market profit and
losses on all derivative exposures on the date of the return, covering the period of the return.
Statement E9 (total) - ASSETS AND LIABILITIES: COMPARISON OF STATUTORY TO
SHAREHOLDERS’ VALUES
This statement is a summary of related party transactions that is reflected in statements E3, E4 & E5
PERCENTAGE HOLDING
The actual percentage held by the insurer in the share capital of the subsidiary, associate, holding company
or other related parties.
NET ASSET VALUE
If the net asset value is less than 75% of the sum of columns 7, 8 and 9, please attach an explanation.
INTER-COMPANY BALANCES
The balances due to/by the insurer by/to the subsidiary, associate, holding company or other related parties.
TOTAL EXPOSURE
Total exposure is equal to the value of the sum of ordinary shares, preference shares, debentures and intercompany balances.
Statement E11 - BANKING INSTITUTION EXPOSURE
This statement is confidential and not available to the public. This statement tracks banking credit and
concentration risks. The total of this statement will not necessarily agree back to statement E1 as it requests
other investments other than cash balances & deposits.
Banking institutions will be all banks registered in terms of the Banks Act, 1990 and an investment in an
institution incorporated outside the Republic which would have been a bank in terms of the Banks Act, 1990,
if it were incorporated in the Republic.
Statement E12 - OTHER INSTITUTION EXPOSURE
This statement is confidential and not available to the public. This statement tracks credit and concentration
risks for other institutions. Only list counterparty exposures, which in total is greater than 5% of total
insurance assets.
Statement E13 – INWARDS LISTED INSTRUMENTS
This statement is confidential and not available to the public. This statement tracks all inward listed
instruments traded on the JSE Limited, for the purpose of trading are now classified as domestic.
36
South African institutional investors may invest in approved inward listed instruments based on foreign
reference assets or issued by foreign entities listed on the JSE Limited, respectively, using the permissible
foreign portfolio investment allowances. Institutional investors are allowed to invest in inward listed shares
without affecting their permissible foreign portfolio investment allowance.
Set out below is list of institutions that are classified as Inward Listings:
AFRICAN EAGLE RES PLC
ANOORAQ RESOURCES CORPORATION
AQUARIUS PLAT LTD FRSSCB
AQUARIUS PLATINUM LTD
BRAEMORE RESOURCES PLC
BRITISH AM. TOBACCO PLC
CAPITAL & COUNTIES PROP PLC
CENTRAL RAND GOLD LTD
COAL OF AFRICA LTD
DELRAND RESOURCES LTD
DIAMONDCORP PLC
EASTERN PLATINUM LIMITED
FIRESTONE ENERGY LTD
FIRST URANIUM CORPORATION
GOLD ONE INTERNATIONAL LD
GREAT BASIN GOLD LTD
GREAT BASIN GOLD LTD OPT
INVESTEC PLC PREF
IPSA GROUP PLC
JUBILEE PLATINUM PLC
KIWARA PLC
MAS PLC
NET 1 UEPS TECH INC
NEW EUROPE PROP INV PLC
OANDO PLC
PALLINGHURST RES LTD
PAN AFRICAN RESOURCE PLC
PLATMIN LTD
RESOURCE GENERATION LTD
ROCKWELL DIAMONDS INCOR
TAWANA RESOURCES OPT
TAWANA RESOURCES OPTNS
TEAL EXPLORE AND MIN INC
URANIUM ONE INC
WILDERNESS HLDGS LTD
37
F STATEMENTS
Statement F1 – CAPITAL ADEQUACY REQUIREMENT, SURPLUS ASSETS, NET
ASSET RATIO AND SOLVENCY
Insurers must calculate their capital adequacy requirement (‘CAR’) according to the method prescribed in
paragraph 5 of the requirements for the calculation of the value of assets, liabilities and capital adequacy
requirement issued under item 2 of schedule 2 of the Short-term Act (“Board Notice 169 of 2011”).
Item 1(i) is the calculation of the Minimum Capital Requirement (‘MCR’). The MCR is calculated according to
the method prescribed in paragraph 5.1.1 and 5.2.1 of Board Notice 169 of 2011. Item 1(i) also makes
allowance to enter an MCR which is approved by the Registrar to be calculated differently than prescribed.
Item 1(ii) is the Solvency Capital Requirement (‘SCR’). The SCR is calculated according to the method
prescribed in paragraph 5.1.2 and 5.2.2 of Board Notice 169 of 2011. The value of the SCR is calculated in
statement F1.5 and transferred to this summary statement.
Item 1(iii) is the Capital Adequacy Requirement (CAR) and is the maximum of the MCR and SCR.
SURPLUS ASSETS
Refer to sections 28 of the Act. A shortfall of assets must be explained in a separate note to this statement
and the auditors must qualify it in the auditor’s attestation.
Statement F1.1 – ASSETS BACKING TOTAL LIABILITIES
Insurers must enter the value of all their admissible statutory assets (in and outside the Republic of South
Africa) per asset class in column F.
In column G insurers must enter the portion (as an amount) of those statutory assets used to back their
liabilities per asset class. The admissible assets have to be allocated to liabilities where liabilities include
current, other and technical liabilities. The assets allocated should be the actual assets held and not notional
assets as per an investment mandate or other method.
Line 58 verifies that the total in column F ties up with the total statutory assets as in statement E9.
The values of assets in this statement (column G) are used to calculate the market and credit risk capital
charges in statements F1.2 and F1.3. The same allocation of assets are used for both calculations –
different allocations for the two capital charges are not allowed.
Example:
The table below indicates the market and statutory values of an insurer’s assets (in broad categories as
detailed in Annexure A of the Board Notice) for the year ended 2012. The insurer has total liabilities of
R109.5m and chose the asset mix shown in the last column to back the liabilities. (Any mix can be chosen
as long as the value for each asset type is equal or less to the admissible statutory value, and the total adds
up to the total liability value.) The values in the table will be used in examples to follow.
Asset Classes
Cash and near cash
Fixed and variable securities with an
outstanding duration of less than (or
including) 4 years
Fixed and variable securities with an
outstanding duration of more than 4
Market Value
(R’m)
Admissible
Statutory Value
(R’m)
66.00
22.00
66.00
22.00
Assets
Backing total
Liabilities
(R’m)
66.00
22.00
20.00
20.00
20.00
38
years
Property
Equity
Other
Total
30.00
50.00
188.00
25.00
30.00
163.00
1.50
109.5
Statement F1.2 – MARKET RISK CAPITAL CHARGE
This statement calculates the market risk capital charge per asset category as set out in Annexure A and A1
of Board Notice 169 of 2011.
The values per asset category are referenced from statement F1.1. No input is needed - the calculation is
done automatically. Cell H20 contains the total market risk capital charge.
Example:
Assume the insurer has assets as set out above under statement F1.1. The calculation of the market risk
capital charge is based on the amount of the admissible assets that are backing the liabilities. Assume that
the insurer had the following liabilities for the year ended 2012:
Gross (R’m)
135.97
15.00
15.59
84.93
20.44
20.00
6.70
162.67
Liabilities
Technical liabilities
UPP
IBNR
OCR
URP
Other liabilities
Current liabilities
Total
Net (R’m)
82.80
10.00
14.02
41.00
17.77
20.00
6.70
109.50
The market risk capital charge is then calculated by multiplying the allocated asset amount from each asset
type by the applicable factor given in the table in Annexure A1 of the Board Notice.
Asset Category
1
2
3
4
5
6
Total
Cash and near cash
Fixed and variable securities
with an outstanding duration of
less than (or including) 4 years
Fixed and variable securities
with an outstanding duration of
more than 4 years
Property
Equity
Other
Amount (R’m)
Factor
66.00
22.00
0%
5%
Market Risk
Capital Charge
(R’m)
1.10
20.00
11.3%
2.26
1.50
109.5
24.6%
38.0%
38.0%
0.57
3.93
Statement F1.3 – CREDIT RISK CAPITAL CHARGE
This statement calculates the credit risk capital charge per asset category, as set out in Annexure A and A2
of Board Notice 169 of 2011.
The values need to be entered manually by the insurer. The first distinction that needs to be made is to
allocate the total assets backing liabilities (i.e. R109.5m in the examples above) between assets that are
subject to credit risk and those not subject to credit risk. The total asset value must therefore tie up with the
value in column G of statement F1.1.
39
Section 2 contains the values of assets subject to credit risk. Allowance was made for all the broad asset
categories, this does not mean that it is generally expected that assets such as equities and property will
necessarily be subject to credit risk. Refer to annexure A2 of Board Notice 169 of 2011 for details regarding
the types of asset that need to be included.
The values in section 2 needs to be split firstly according to the mean term (distinguish between assets with
a mean term a) less than or b) equal to or larger than one year) as different credit risk capital charges apply.
Secondly the values must be split depending on the credit rating of the particular asset.
Where there is no rating for an instrument, or the credit counterparty has not been rated, the minimum factor
that can be used for unrated exposures is that as for a BB rated instrument (13.6% for a mean term ≥ 1
year). This is a minimum, and the credit quality of the counterparty should be considered before applying this
minimum.
Once the asset values have been entered, the credit risk capital charge is calculated automatically.
Statement F1.4 – INSURANCE RISK CAPITAL CHARGE
This statement calculates the insurance risk capital charge, as set out in Annexure A of Board Notice 169 of
2011. The calculation is done automatically and no input is needed.
Example:
Suppose an insurer had the following net written premiums (NWP) for the 2012 and 2011 financial years:
Year
Motor
170
120
2012
2011
Net Written Premium (R’m)
Property
150
125
Total
320
245
The insurance risk capital charge is calculated as the NWP of each business class multiplied by the
applicable factor given in the table below (as per Annexure A of the Board Notice):
Business Class
Capital Charge
Factors
1
Accident and health
33%
2
Engineering
25%
3
Guarantee
50%
4
Liability
32%
5
Miscellaneous
33%
6
Motor
20%
7
Property
25%
8
Transportation
38%
For this insurer, the insurance risk capital charge will be (170 × 20%) + (150 × 25%) = 34 + 37.5 = R71.5m.
Statement F1.5 – BASIC SOLVENCY CAPITAL REQUIREMENT AND OPERATIONAL
RISK CAPITAL CHARGE
This statement calculates the operational risk capital charge, as set out in Annexure B of Board Notice 169
of 2011.
To perform this calculation, the basic solvency capital requirement (‘BSCR’), as set out in Annexure A of
Board Notice 169 of 2011, needs to be calculated. The insurer needs to complete the premium income
section as well as the value gross technical liabilities, then the calculation of the operational risk capital
40
charge follows automatically. If the insurer does not hold an URP, the value of the gross technical liabilities
should correspond with the total value of technical liabilities as given in statement B1.
Example:
The operational risk capital charge is calculated as:
𝑶𝑷 = 𝐦𝐢𝐧⁡(𝟎. 𝟑 ∗ 𝑩𝑺𝑪𝑹; 𝑩𝒂𝒔𝒊𝒄𝑶𝑷)
Two components, BSCR and BasicOP need to be computed before OP can be calculated. The calculations
below are shown in R’m and uses values from the previous examples in the sections on statements D3.2
and F1.2.
OPpremium ⁡ = 0.03 ∗ GEP + max⁡(0; 0.03 ∗ (GEP − 1.1 ∗ GEPprev )
=⁡0.03 ∗ (180 + 130) + max⁡(0; 0.03 ∗ (310 − 1.1 ∗ (125 + 120))
= 9.3 + 1.215
= 10.515
OPprovisions = 0.03 ∗ max⁡(0; GTL)
= 0.03 * 135.97
= 4.079
Where
GEP
=
GEPprev
=
GTL
=
Gross Earned Premium during the period of 12 months immediately preceding the day
on which the calculation is made
Gross Earned Premium during the period of 12 months immediately preceding the day
on which the previous financial year ended
(Note if the calculation is done on a date other the financial year-end, please use the
gross earned premium during the period of 12 months immediately preceding the time
period on which GEP is based, to avoid an overlap op time periods.)
Total gross technical liabilities
Then
BasicOP⁡⁡⁡⁡⁡⁡ = max⁡(OPpremium ; OPprovisions )
= max (10.515; 4.079)
= 10.515
The Basic OP in this example is thus R10.515m.
The basic solvency capital requirement (BSCR) is calculated as follows, as explained in Annexure A of the
Board Notice:
BSCR
= √(IC 2 + MC 2 + CC 2 )
=⁡√(71.52 + 3.9312 + 0.7452 )
= 71.61
OP is thus calculated as follows:
OP⁡⁡⁡⁡⁡⁡⁡⁡⁡⁡⁡⁡⁡ = min⁡(0.3 ∗ BSCR; BasicOP)
= min (21.48; 10.515)
= 10.515
The operational risk capital charge is therefore R10.515m.
41
Statement F2 - SPREAD OF DOMESTIC ASSETS
The asset spreading regulations contained in the Act must be continuously monitored. Insurers are required
to comply with these regulations daily.
This statement assesses whether the admitted domestic assets of insurers exceed the domestic aggregate
liabilities after applying the prescribed investment limitations as set out in Part 3 of the Regulations under the
Act.
The statement is set up listing the different kinds of assets and then limiting the admitted value of these
assets according to the statutory regulations – Regulation 3.2 issued under the Act.
Please note that all assets must be reflected at fair value. Disregarded assets to be excluded.
The aggregate limitations for each kind of asset are enforced by the use of formulas.
The insurer should manually apply the individual limitations and enter the individual excesses to be
disregarded.
There are a number of assets where no limits exist (refer to the Act).
The effect of the asset spreading limitations is that the Registrar requires insurers to spread their investment
over a number of asset categories in order to reduce concentration risk and to match the liability profile of
the insurer.
The percentages allowed differ according to the risk profile of the investment product. The specific limitations
can be found in the Table to Part 3 of the Regulations to the Act.
The statement concludes by calculating the overall admitted assets as well as the surplus or deficit of overall
total domestic liabilities.
Any shortfall of overall admitted assets over total domestic liabilities must be explained in a letter to the
Registrar and the auditor’s attestation in statement H should be qualified.
The amounts reflected in column 3 will exclude investments made in a linked policy as well as investments
in an asset holding intermediary. The see through principle (as referred per regulation 3.5) is applied to
these investments and the underlying assets and in the case of an asset holding intermediary the liabilities
must be included in column 4.
Item 4 includes listed units, loan stocks and depository receipts.
An insurer must get approval for dispensation(s) for any of the individual and group limits as set out in
Regulation 3 of the Regulations under the Act.
Please note the amendment under Section 30(3) of the Act which contemplates the following:
“Despite the requirements in subsection (1) that an asset must be value at fair value, if the Registrar is
satisfied that the value of an asset when calculated in accordance with financial reporting standards does
not reflect a reasonable value for purposes of this Act, the Registrar may –
(a)
(b)
appoint another person at the cost of the insurer, to place a reasonable value on that asset,
which value so determined will be deemed to be the value of the asset; or
direct the short-term insurer to calculate the value in a manner which the Registrar
determines, which value so calculated will be deemed to be the value of the assets.
Statement H - ASSURANCE REPORT BY THE INDEPENDENT AUDITOR
INDEPENDENT AUDITOR’S REPORT OF [INSERT NAME OF SHORT-TERM
INSURER] TO THE REGISTRAR OF SHORT-TERM INSURANCE
We have audited the following statements of the Short-term Insurance Statutory Return (the Return) of
42
[insert name of short-term insurer] (the Insurer) for the year ended [insert date], in compliance with section
19(7) of the Short-term Insurance Act, 1998 (the Act):








Statements B1 to B5 (total columns only)
Statements C1 to C3
Statement C4
Statement D1 (total only)
Statements D2 to D3
Statements E1 to E10
Statements F1 to F2
Statement I
Our opinion on the Return extends only to that information and those statements included in the return as
indicated above. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone,
other than the Registrar of Short-term Insurance, for our work, for this report, or for our opinion expressed.
Director’s Responsibility for the Return
The directors are responsible for the preparation of the Return derived from information contained in the
accounting records of the Insurer. This responsibility includes: ensuring that the Return is prepared in terms
of the Act, related Regulations and Board Notices; in terms of the guidance manual for the completion of the
Return; as well as applicable Directives issued by the Financial Services Board.
Auditor’s Responsibility
Our responsibility is to express an opinion on the Return based on our audit. We conducted our audit in
accordance with International Standards on Auditing. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain sufficient appropriate audit evidence that the amounts
and disclosures in the statements of the Return listed in the first paragraph of this report are in compliance
with the provisions of the Act, related Regulations and Board Notices; the guidance manual for the
completion of the Return; as well as the applicable
Directives issued by the Financial Services Board.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
Return. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the Return, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and presentation of the Return in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as
evaluating the presentation of the Return.
For the purposes of clarity we confirm that our audit included the following procedures and such other
procedures as we considered necessary in the circumstances:

Agreed the information contained in the statements of the Return listed in the first paragraph of this
report to the books and records of the insurer.

Determined, through inspection of appropriate documentation and enquiry of management of the
Insurer, whether the information contained in the statements of the Return listed in the first
paragraph of this report was prepared in accordance with the provisions of sections 29, 30, 31, 32,
33; Schedules 1, 2 and Board Notice 169 of 2011; as well as Regulations 2 and 3 to the Act.
We believe that the audit evidence we have obtained as part of our audit of the annual financial statements
for the year ended [insert date], together with additional evidence obtained as part of our audit of the Return
is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the above information and Schedules included in the Return of [insert name of short-term
insurer] has been properly prepared, in all material respects, in accordance with the provisions of the Act,
43
related Regulations and Board Notices; the guidance manual for the completion of the Return; as well as the
applicable Directives issued by the Financial Services Board.
Regulatory Matters
We have complied with the provisions of section 19(5) of the Act.*
Restriction on Distribution or Use of the Auditor’s Report
Our report is presented solely for the purposes set out in the first paragraph of the report and for the
information of the Registrar of Short Term Insurance, and is not to be used for any other purpose, nor to be
distributed to any other parties without our prior written permission. Our report relates only to the information
and statements included in the Return specified above, and does not extend to the annual financial
statements of the insurer, taken as a whole.
[Name of registered audit firm]
[Individual Registered Auditor’s name and signature]
Registered Auditor
[Date of the registered auditor’s report]
[Registered Auditor’s address]
* Section 19(5) of the Act refers to a material irregularity as defined in the Public
Accountants and Auditors Act, 1991, Act 80 of 1991. This Act has been repealed by the
Auditing Profession Act, 2005, Act 26 of 2005, which replaces Section 20(5) of the
Public Accountants and Auditors Act with a new Section 45 dealing with Reportable
Irregularities. Guidance on reporting a Reportable Irregularity can be found in the
Independent Regulatory Board for Auditors Guide, Reportable Irregularities: A guide for
Registered Auditors, issued on 30 June 2006.
Statement I - CELL CAPTIVE INSURERS
All insurers conducting cell captive business must complete the statement.
All figures required have to be completed manually.
Please indicate if any requests to recapitalise any of the cells have not been complied with during the year.
Full details should be provided.
The size of the five biggest 3rd party cells will be determined by the amount of gross premiums written.
44
J STATEMENTS
Statement J 1 – SHORT-TERM REINSURANCE SUPERVISION QUESTIONNAIRE
OVERALL REINSURANCE STRATEGY
The company must have a clearly thought through and very specific reinsurance strategy that has been
approved by the board. The board and senior management must spend time on and be involved in the
reinsurance purchasing decision-making process.
ADDITIONAL QUESTIONS
Some of the additional questions may be covered by the company’s reinsurance strategy, therefore
companies may refer to their strategy where appropriate. The additional questions consist of four main
sections, namely:
 Reinsurance exposure
 Reinsurance system and control
 Catastrophe reinsurance
 Reinsurance program as a whole
CURRENT REINSURANCE POSITION
These questionnaires gather high-level information on the company’s:



Spread of reinsurance on their programme as a whole (Statement J2).
Spread of business across cresta zones and the amount of catastrophe cover purchased and
retained.
Maximum net retention, automatic capacity and peak exposures on each of the classes
(Statements J4 to J11).
Statement J2 – SPREAD OF REINSURERS
The statement should give an overview of the spread of reinsurers used, together with an indication of the
split between domestic and foreign reinsurers used, the supervisory authority of the foreign reinsurer as well
as type of security and amount held against reinsurance assets
(Use the dropdown box as a tool to assist you with completing statement J2. If the name of insurer you are
using is not on the list, please type it in.)
45
Statement J3 – CATASTROPHE REINSURANCE
Most reinsurers already require insurers to provide a geographical overview of their risks by CRESTA zones.
In similar fashion, insurers should complete this statement using the CRESTA zone classification provided in
the following map:
46
Statement J4 to J11
These statements require specific reinsurance information for each class of business separately.
Below please find basic examples to assist you in completing J statements:
PROPORTIONAL SURPLUS COVER
Proportional Cover:
The company has a surplus with the following details:
Best class risk retention
R20million
Number of lines
10
Minimum EML
30%
Maximum capacity on the proportional program
on an EML basis
R200million
Commission
30%
Profit Commission
20%
Per Risk non-proportional cover:
The company has a risk excess of loss protecting their retention under the surplus the details of which are
set out in the table below:
Layer1
Cover
R5million xs R5million
Reinstatements
3 reinstatements @100%
Layer2
Cover
R10million xs R10million
Reinstatements
2 reinstatements @100%
Layer3
Cover
R47million xs R20million
Reinstatements
1 reinstatements @100%
Catastrophe cover:
The company then has a catastrophe program that protects them in the event of a catastrophe.
Layer1
Cover
R20million xs R10million
Reinstatements
2 reinstatements @100%
Layer2
Cover
R20million xs R30million
Reinstatements
2 reinstatements @100%
Layer3
Cover
R50million xs R50million
Reinstatements
1 reinstatements @100%
Layer4
Cover
R100million xs R100million
Reinstatements
1 reinstatements @100%
Layer5
Cover
R200million xs R200million
Reinstatements
1 reinstatements @100%
Gross net premium
Assume the gross premium written by the company on their property book is R100million. Of this amount
R40million is paid over to the reinsurer for their surplus facility. They then pay an amount of R4million to the
reinsurer for their per risk non-proportional cover and an amount of R6million for their catastrophe program
The insurer’s gross net premium will then be R60million i.e. the gross written premium less any amounts
paid over to the insurer in respect of proportional treaty capacity ( in this example R100million less
R40million)
47
Statement J3
Maximum unprotected net retention per event
Total amount of catastrophe cover purchased
R10million
R390million
Statement J4
A. EXPOSURE TO THE NET ACCOUNT
Maximum Unprotected Net Retention Per Risk
Maximum Protected Net Retention Per Risk
B. AUTOMATIC CAPACITY
Maximum Amount of Non-Proportional Risk
Capacity Purchased
Maximum Amount of Proportional Treaty
Capacity Automatically available (incl. Auto
Fac)
Nature of this Proportional Capacity (Surplus,
Quota Share or AutoFac)
Minimum EML % without reference to the lead
reinsurer
R5million
R20million
R62million
R220million
Surplus
30%
PROPORTIONAL QUOTA SHARE COVER
Assume the company had the following quota share treaty in place and all other programs remain as is set
above:
Maximum capacity
R400million
Company retention
10%
Minimum EML
60%
Commission
30%
Profit Commission
20%
In this example only statement J4 will differ from that set out above.
Statement J4
A. EXPOSURE TO THE NET ACCOUNT
Maximum Unprotected Net Retention Per Risk
Maximum Protected Net Retention Per Risk
B. AUTOMATIC CAPACITY
Maximum Amount of Non-Proportional Risk
Capacity Purchased
Maximum Amount of Proportional Treaty
Capacity Automatically available (incl. Auto
Fac)
Nature of this Proportional Capacity (Surplus,
Quota Share or AutoFac)
Minimum EML % without reference to the lead
reinsurer
R5million
R40million
R62million
R400million
Quota share
60%
48
K STATEMENTS
These statements compare the changes in the value of the assets, liabilities, premium income and capital
adequacy requirement per stressed item.
The stress tests need to be applied to insurance entities only. Thus a company with investments in related
parties (even where the related parties are regulated entities) should only apply the stresses to the value of
the shares in those related parties in the balance sheet.
In general all second order effects should be ignored, for example it is not necessary to adjust debtors after
an upwards shift in the yield curve or to adjust bank balances after an exchange rate movement that will
cause expenses to increase.
Where a stress test results in a deferred tax asset, this asset should be disregarded.
Where simplifications or approximations are used, these should be disclosed.
In both statements K1 and K2 the relevant part(s) of the capital adequacy requirement needs to be
recalculated after applying the stress. For example in the case of the equity shock, the market risk
component of the capital requirement needs to be recalculated (but not the components that are not affected
e.g. insurance or operational risk). In addition the impact of the stress on the total capital requirement (i.e.
putting all the components together) needs to be recalculated. For example the stress might cause the
BSCR to be larger than the MCR where the MCR might have been the larger component in the base case.
Statement K1 - SINGLE FACTOR STRESS TEST ON STATUTORY SURPLUS –
INSURANCE RISK
For the insurance risk stress test, all the stresses in the table below should be applied separately.
The single factor stresses are as follows:
Gross Written Premium
Gross Expense
20% increase
20% decrease
20% increase
Gross Claims
Reinsurance
30% increase
100% default by the largest reinsurer
100% default by the largest reinsurer on
MER event
The Maximum Event Retention (MER) is the largest potential loss to which an insurer will be exposed over
the 12 months following calculation date. The MER should be calculated as an accumulation of losses
arising out of a single event due to a concentration of risks, after netting out any reinsurance recoveries. This
is calculated in total, and not separately per business class.
Return period is the expected average period within which a particular catastrophic event will re-occur. For
the purposes of this calculation, insurers will be required to assume a return period of 1 in 200 years, or
greater.
Issues affecting the level of MER
In determining the level of MER the insurer must consider:
a. the classes of business in which the insurer is engaged;
b. the types of catastrophic risk which need to be addressed;
c. reinstatement premiums payable in respect of reinsurance treaties;
d. the geographical zones in which the insurer transacts business;
e. the effects of combined risks, e.g. where an insurer provides coverage for both workers’ compensation
business and building insurance in the same geographical area;
49
f. how the geographical zones will be grouped for calculation purposes; and
g. Board policy in respect of risk exposures as reflected in risk management processes.
Determining the level of the MER
The insurer must base the calculation of its MER on:
a. the relevant area of concentration (e.g. geographic region);
b. which peril produces the greatest MER;
c. all classes of cover that will be affected by the peril;
d. results produced by modelling the insurer’s own past experience; and
e. any external, commercially available data and modelling facilities, bearing in mind the appropriateness of
these data to the insurer’s portfolio of risks.
The MER must be calculated in a manner consistent with the processes for setting, monitoring and altering
the MER in the insurer’s reinsurance program. The insurer should consider the return period of the
assumed catastrophe as well as the sensitivity of the MER calculation to model assumptions.
Statement K2 - SINGLE FACTOR STRESS TEST ON STATUTORY SURPLUS –
SCENARIO & MARKET RISK
This statement determines the impact of a prescribed scenario test and single factor market stresses on the
solvency position of the insurer.
Where insurers have investments in foreign equities, for the equity stress test the foreign exchange
component can be ignored (i.e. assume the exchange rate is unchanged) and for the foreign exchange
stress, the equity is not shocked again.
Interest rate shock: the same proportionate shock should be applied to both real and nominal yields.
The stresses on the 30% appreciation / depreciation in exchange rates need clarification. The methodology
of applying the stress on the depreciation of the currency is as follows: if the current exchange rate is say R7
to the $, then after the stress it will be (1+0.3) * 7 = R9.10 to the $. On the appreciation stress, if the
exchange rate is R7 to the $, it will be (1-0.3) * 7 = R4.90 to the $ after the stress.
Call and fixed interest deposits should not be adjusted in stresses related to changes in the yield curve.
However, NCD’s should be adjusted.
Fixed rate preference shares: both the equity and interest rate shocks should be applied.
Variable rate preference shares: the interest rate shocks should be applied and not the equity shock.
Hedged positions: the stress test results should show the change in value of both the hedge position and the
underlying asset separately (i.e. it should be viewed as two transactions and not as a single position).
Scenario Test
For the economic scenario stress test, all the stresses in the table below should be applied simultaneously.
The following parameters are to be used:
Shift in the yield curve
Ordinary shares
Preference shares (fixed rate)
Preference shares (variable rate)
Use either the 50% upwards of 35% downwards shift;
depending on which alternative (when stressed on its own)
decreases the solvency margin the most.
Indicate in cell G10 (select from the drop-down box)
which stress was used.
50% down
30% down
10% down
50
Property prices
30% down
Exchange rate
Use either the 30% depreciation or 30% appreciation test;
depending on which alternative (when stressed on its own)
decreases the solvency margin the most.
Indicate in cell G12 (select from the drop-down box)
which stress was used.
51
QUALITATIVE STATEMENTS
These statements contain general information in questionnaire format. All insurers must complete all
statements in full.
Statement G1 – GENERAL INFORMATION
Question 20 – Share –Based Schemes:
Share based payments must be accounted for in the published balance sheet and income statement in
terms of the treatment specified by IFRS2. According to section 7(1) of Schedule 2 to the Act, “The liabilities
of a short-term insurer, other than those referred to in paragraphs 5 and 6, shall be determined in
accordance with financial reporting standards.”
However, additional information regarding the liability for cash settled schemes is required to enable the
Registrar to assess the size of this liability. For cash settled schemes, the full fair value (allowing for
expected take-up) of the options as a financial liability must be shown. For equity settled schemes, no
liability need to be reflected in the statutory balance sheet.
Statement G2- RISK REPORT BY DIRECTORS
This statement was repealed.
Statement G3- GOVERNANCE AND RISK MANAGEMENT
This statement will assist the FSB in its prudential risk-based supervisory framework and risk assessment of
all insurer.
The different sections will assist the FSB to assess the main risk areas of the insurer.
Depending on the answers to certain questions in this statement, additional information might have to be
disclosed. When additional information is disclosed on separate sheets, these sheets should accompany the
electronic copy of the statutory return.
CREDIT DERIVATIVES
Financial stability issues can be associated with Credit Risk Transfer in particular:
• whether the instruments / transactions accomplish a clean risk transfer;
• the degree to which Credit Risk Transfers market participants understand the risk involved and
• whether the Credit Risk Transfer activities are leading to undue concentrations of credit risk inside or
outside the regulated financial sector.
The definition of credit derivatives:
A derivative instrument is a security or contract whose value is dependent on or derived from the value of
some underlying asset. A credit derivative is a bilateral contract. In the contract the two parties agree to a
future transaction based on the possibility of default or bankruptcy by a third party. Credit derivatives are in
essence designed to protect one of the signing parties against the risk of default. Similar to other derivative
contracts credit derivatives fill the need to buy / sell credit exposure without buying / selling the underlying
financial obligations.
Examples of such transactions might be – credit default swaps or total return swaps or credit link notes.
Internationally mainly banks and insurance companies trade in these instruments to allow them to hedge
away unwanted exposure or to build on desirable credit risk. This reduces the overall risk profile and
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increases the return on a portfolio. It also enables them to uptake or offloads credit exposure without actually
buying or selling assets and also allows them to remove assets from their balance sheets reducing the
amount of regulatory capital they need to hold.
Credit risk management is therefore very similar to an insurance policy against credit quality default
therefore the reasoning behind including the questions to ascertain the level of use of these instruments in
the South-African market.
Outsourcing
Outsourcing refers to those functions material to insurance related operations e.g. underwriting, claims, and
information technology. This would not include outsourcing for e.g. security or catering services.
Statement G4 - Cross Border Insurance operations
This statement is confidential and is not available for public inspection.
In this statement insurance companies are required to provide information on their off-shore insurance
operations, such as branches and subsidiaries conducting insurance business in other jurisdictions and also
the provision of other cross border insurance services e.g. outsourcing of the administration of an insurer,
joint ventures and brokerage operations.
The information provided must include reinsurance business that is conducted on a cross border basis.
The purpose of the statement is for the Registrar to establish the full extent of all cross border activities of
insurers.
The Registrar has the following specific objectives in mind regarding the requisite information


To monitor the group operations of insurance companies;
To identify those jurisdictions with which the FSB may need to co-operate; and
To identify, assess, prioritise, mitigate and monitor those key risks to insurance companies,
which may adversely impact the said overall objective.”
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DEFINITIONS
Act
Short-term Insurance Act, (Act No. 53 of 1998)
Approved reinsurance policy
Defined in section 1 of the Act
Asset-holding intermediary
Defined in paragraph 2.1 of Part 2 of the Regulations under the Act.
Associates
As defined in the Regulations to the Act
Auditor
Defined in Section 1 of the Act.
Auditing Profession Act
As defined in Section 1 of the Act.
Claims handling expenses
Expenses incurred in connection with the negotiation and settlement of
claims. They include all internal and external expenses incurred in the
handling of claims. Internal expenses include all direct expenses of the
claims department and any part of the general administration expenses
attributable to the claims function.
Claims incurred
A Claim is incurred when the event, giving rise to the claim occurs. Claims
incurred include paid claims and movements in outstanding claims. Refer to
section 32(1)(a)(i) of the Act
Claims incurred but not reported (claims IBNR)
Claims arising out of events that have occurred by the balance sheet
date but have not been reported to the undertaking at that date. Refer to
section 32(1)(a)(ii) of the Act
Claims outstanding
Amounts provided to cover the estimated ultimate cost of settling claims
arising out of events that have occurred by the balance sheet date
including IBNR and claims handling expenses, less amounts already
paid in respect of those claims.
Class of business
Classes of business as defined in section 1 of the Act
Collective investment scheme
Defined in the Collective Investment Schemes Act, 45 of 2002
Combined party cell
A cell where the shares issued to the cell participants ( owners) provide
the cell owners the ability to underwrite their own risks as well as the
risks of third party’s
Commercial insurance
A contract of insurance entered into in respect of the assets and
liabilities of business enterprises.
company
As defined in Section 1 of the Act. Also refer to the definitions of public
company and widely-held company as per section 1 of the Act
Constant risks
A risk contract that do not exhibit significant increases or reductions in
associated risk for the period of cover purchased by the premium
Contract for differences
Defined in paragraph 1 of Schedule 1 to the Act
Control
Control is usually synonymous with ownership. Refer to section 25 of the
Act.
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Corporate business
A contract of insurance entered into in respect of the assets and
liabilities of business enterprises as applied internally by each insurance
company.
Cresta Zone
South Africa has been divided into 16 Cresta zones based on our postal
code system. The allocation of postal codes to Cresta zones can be
found on www. cresta.com
Decreasing risks
A risk contract that show significant decreases in associated risk for the
period of cover purchased by the premium.
Deemed to be in the RSA
An asset of the kind specified in item 13, 16(2), (3) or (5) or 20 (c) of the
Table to Schedule 1, shall subject to paragraph (b), be deemed to be in
the Republic.
Deferred Acquisition Cost- DAC
When an insurance company defers the expenses that are associated
with acquiring new insurance policies or the renewal of existing policies.
This include commissions paid and costs of processing proposals
Derivatives
Defined in Schedule 1 of the Act
Direct premiums
All premiums (less return premiums) arising from policies issued to
provide insurance on a particular risk.
Director
Defined in Section 1 of the Act
Discounting
The reduction to present value at a given date of a future cash
transaction at an assumed date by the application of an appropriate
discount factor reflecting the time value of money.
Domestic business
Business will be regarded as domestic business , if the obligations are
discharged in South Africa
Earned premium
The proportion of premium attributable to the periods of risk that relate to
the current accounting period. It represents written premium adjusted by
the unearned premium provision and portfolio premium adjustments at
the beginning and end of the accounting period. Calculation of earned
premium: Opening UPP plus Premium written less Closing UPP.
EML- Estimated Maximum Loss
An estimate of the maximum loss which could reasonably be sustained
from the contingencies under consideration, as a result of a single
incident considered to be within the realms of probability taking into
account all factors likely to increase or lessen the extent of the loss, but
excluding such coincidences and catastrophes which may be possible
but remain unlikely.
Event limits
Limits the amount that can be claimed under a proportional treaty due to
losses suffered by the insurer, arising out of one event.
Excess of loss treaty
An arrangement that allows the insurer to reinsure against risks from one
event or for each loss exceeding a specific amount. The premium is
negotiated between the cedent and the reinsurer. There is no
commission payable under this type of arrangement
Facultative reinsurance
A type of arrangement in which the insurer can choose whether to cede
and the reinsurer can choose to accept a specific individual risk. The
premium is negotiated on a risk-by-risk basis.
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Fair value
As defined in Section 1 of the Act
Financial reporting standards
as defined in Section 1 of the Act
Financial statements
as defined in Section 1 of the Act
First party cell
A cell where, the shares issued to cell participants provide the cell
owners with the ability to underwrite their own risk and that of their
subsidiaries. The cell participant is responsible for the funding of the cell
and the cell should be maintained at such levels as may be required by
the shareholders’ agreement entered into
Foreign business
Business will be regarded as foreign if the obligations are discharged
outside South Africa
Foreign reinsurance/business
In South Africa, a (re)/insurer situated outside the Republic of South
Africa
Foreign reinsurer
Any reinsurer that is not registered in South Africa or that is not Lloyds.
FSB
Financial Services Board
Futures contract
As defined in schedule 1 to the Act
Gross account
Underwriting result in respect of all of its insurance business or a class of
insurance business before taking into account the effect of reinsurance
ceded. Statement B1 reflects the statutory gross account.
Gross Claims
The aggregate of claim payments made without deductions for credits
(subrogation, salvage, etc.) or reinsurance during a given period.
Gross net premium income
premium income before of any premium ceded to proportional
reinsurance cover
Holding company
As define in the Companies Act.
home jurisdiction
Means the jurisdiction in which the parent insurer is incorporated.
host jurisdiction
Means the foreign jurisdiction in which a branch of a local registered
insurer is located, or in which a subsidiary of the local registered insurer
is incorporated.
In the RSA
An asset of the kind specified in Table to Schedule 1 of the Act.
Increasing risks
Significant increase in associated risk for the period of cover purchased
by the premium.
Insurance contract
A contract under which one party (the insurer) accepts significant
insurance risk from another party (the policyholder) by agreeing to
compensate the policyholder if a specified uncertain future event ( the
insured event ) adversely affects the policyholder
Insurer
A "short-term insurer" as defined in section 1of the Act
Inter-company balances
Balance due to/by the insurer by/to subsidiary, associate, holding
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company or other related parties.
Investment income
Comprises of interest, dividends and rents received or receivable.
Listed
Defined in paragraph 1 of Schedule 1 to the Act
Long-tail insurance
Short-term insurance business under which claims are typically not
intimated or settled within one year of the occurrence of the event giving
rise to claims. It includes product liability, marine and professional
indemnity insurance.
Managing executive
Defined in Section 1 of the Act
Margin deposit
A margin with SAFEX and a stock exchange referred to in item 16(5)(a)
of the Table to Schedule 1 of the Act. Margin deposits are split between
SAFEX and other approved foreign derivatives. Margin with SAFEX
means the margin as defined in the rules of the South African Futures
Exchange referred to in section 17 of the Financial Markets Control Act
1989. Margin with other means the margin as defined in the rules of
other (including foreign) Futures Exchanges.
Maximum unprotected net retention per event
The maximum amount that the company will retain for its own account,
after all reinsurance recoveries, due to a loss arising from a single event.
Maximum unprotected net retention per risk
The maximum amount that the company will retain on a loss suffered on
any one risk, after the operation of its proportional reinsurance programs
only (i.e. ignoring any non-proportional reinsurance programs). Thus, if
no proportional reinsurance is purchased the amount will be the
maximum underwriting limit on any one risk for that specific class of
business.
Net liabilities
Gross liabilities after allowance for approved reinsurance only. Refer to
Part II of Schedule 2 to the Act.
Net premium income
Gross premium income less premiums payable in terms of a reinsurance
arrangement
Non-proportional reinsurance
A contract of reinsurance whereby the reinsurer accepts the whole or a
portion of the liability for an individual claim or group of claims incurred
by the cedent in excess of an agreed amount, normally also subject to
an upper limit
Options contract
As defined in schedule 1 to the Act
OTC
An over-the-counter derivative instrument. Refer to paragraph 2 of
Schedule 1 to the Act
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Outside the RSA
If there is documentary evidence of the title of a short-term insurer to an
asset, that asset shall be deemed not to be in the Republic unless the
documentary evidence is in the Republic or is held outside the Republic
in such a manner and subject to such conditions as the Registrar may
determine.
Percentage holding
the actual percentage held by the insurer in the share capital of the
subsidiary, associate, holding company or other related parties.
Personal lines insurance
Generic term referring to insurance of individuals and their personal
property. The term is used in short-term insurance
Pipeline premiums
Premiums written but not reported to the undertaking by the balance
sheet date
Portfolio premium
Amounts payable by an insurer to another insurer in consideration for a
contract whereby the latter agrees to assume responsibility for the
claims arising on a portfolio of in force business written by the former
from a future date until the expiry of the policies.
Portfolio transfer
Amounts payable in respect of the transfer between two insurers of the
liability for the unexpired portions of the premiums at a date. Refer to
section 36 of the Act
Premium income
Includes money received in respect of insurance contracts and
investment contracts
Premium refund
A refund of a part of the premium on an insurance policy reflecting the
difference between the premium charged and earned
Promoters cell
Represents the following in respect of the insurance company itself and
will exclude all those belonging to the first or third party cell owners:
 Issued share capital including share premium account;
 Non-distributable reserves
 Distributable reserves
 Policy liabilities
 Current liabilities
 Capital Adequacy Requirements
 All assets covering the above
Property company
Defined in paragraph 2.1 of Part 2 of the Regulations under the Act.
Proportional reinsurance
A contract of reinsurance under which, in return for a proportion of the
original premium, the reinsurer accepts liability for the same proportion
of each related claim against the cedent
Quasi government
A government-owned corporation, state-owned enterprise, state
enterprise, government business enterprise, or parastatal is a legal entity
created by a government to undertake commercial activities on behalf of
an owner government.
Quota share treaty
Is a contract whereby the ceding company is bound to cede and the
reinsurer is bound to accept a fixed proportion of every risk accepted by
the ceding company. The reinsurer thus shares proportionally in all
losses and receives the same proportion of all premiums less
commission
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Related party
As defined in section 25(5) of the Act.
Retrocession
A cession of reinsurance by a reinsurer to another
Return premium
A premium refund due to the insured arising from an endorsement or
cancellation
Risk renewed
The continuation of an existing contract of insurance (risk) at a premium
that may or may not be at the same rate as in the previous period.*
Run-off experience
The difference (before any reduction in respect of discounting) between
the claims provisions made at the beginning of the accounting period for
outstanding claims incurred in previous accounting periods, and the
payments made during the accounting period on account of claims
incurred in previous accounting periods and the claims provisions at the
end of the accounting period for such outstanding claims.
Securities
Defined in paragraph 1 of Schedule 1 to the Act
Short-tail insurance
Short term insurance under which claims are typically settled within one
year of the occurrence of the event giving rise to the claim.
Solvency margin
A measurement of the financial strength of a short-term insurer. It
represents the shareholders’ funds, expressed as a percentage of net
premium income.
Subsidiaries
Defined in section 1(3) of the Companies Act no. 61 of 1973
Supervisory authority
Means the national authority or the national authorities empowered by
law or regulation to supervise insurance or reinsurance undertakings.
Technical provisions
Include the unearned premium provisions, unexpired risk provision,
claims outstanding intimated but not finalised and claims incurred but not
reported.
Third party cell
A cell where, the shares issued to cell participants (owners) provide the
cell owners the ability to underwrite the risks of third party’s.
Total exposure
Total exposure is equal to the value of the sum of ordinary shares,
preference shares, debentures and inter-company balances.
Unearned premium provision (UPP)
The portions of premiums attributable to the period of the risk which
relate to subsequent accounting periods and which are carried forward
to such subsequent accounting periods. Refer to section 32(1)(b) of the
Act.
Uneven risks
Exhibit fluctuating risk levels for the period of cover purchased by the
premium.
Unexpired risk provision (URP)
The excess of the estimated value of claims and expenses likely to arise
after the end of the financial year from contracts concluded before that
date, in so far as their estimated value exceeds the provision for
unearned premiums ( after deduction of any acquisition costs deferred ),
and any premiums receivable under those contracts. Refer to section 32
(2) of the Act
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Written premiums
are premiums that an insurer is contractually entitled to receive from the
insured in relation to contracts of insurance. These are premiums on
contracts entered into during the accounting period and adjustments
arising in the accounting period to premiums receivable in respect of
contracts entered into in prior accounting periods.
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