There are no reinsurers listed on the JSE. Instead, the SA market is dominated by subsidiaries of European majors. But their actions profoundly affect the profitability of domestic short-term insurers.
To some extent, reinsurers spoilt what should have been an excellent year for the short-term insurers by increasing their premiums sharply. Local insurers use the foreigners to transfer extra-large risks, like catastrophe insurance.
Reinsurance rates have risen, not only because of catastrophes such as September 11, but also because of the explosion in professional liability exposure after the problems of Enron and Arthur Andersen.
Professional indemnity premiums have hit insurance brokers' results - they recently took a big chunk of Glenrand MIB's profits.
Prices for reinsurance, particularly catastrophe cover, are set globally.
Swiss Re (SA) MD Alexander Weissleder says global reinsurers can tolerate a certain amount of underwriting losses as long as they are showing capital gains on their equity markets, but in a bear market it is critical that underwriting surpluses are shown.
Former Munich Re Africa MD Steffen Gilbert, who has since joined Santam, says that as well as increasing prices, reinsurers have reassessed the scope of coverage and tightened up conditions.
He says Munich Re's global climate research team predicts an increase in catastrophes as global warming will lead to floods, droughts and other freak weather conditions. Reinsurance premiums can only go up.
Inevitably, insurers have to take a greater proportion of risk to their own account as they cannot reinsure risk on favourable terms.
Reinsurers also play a role in the life and health market, though this is far smaller. Munich Re, for example, has R2bn in nonlife premium income and R400m in life income.
There is more limited scope for reinsurance in medical aid companies since Discovery Health's settlement with the registrar of medical schemes, which allowed it to sit on greater risks, but medical aid remains a growth area for reinsurers.
Life assurance companies make less use of reinsurance, limiting it to larger policies, usually above R5m/month.
But reinsurers have played a critical role in group life, in which Aids-related claims are typically reinsured. Gilbert says claims have been in line with expectations.
The reinsurers were in the news when Weissleder said some reinsurers might leave SA rather than take on empowerment partners. It is unusual for a reinsurer to take on local equity partners.
