Guardrisk awarded South Africa’s first microinsurance cell captive licence

Guardrisk has been granted South Africa’s first microinsurance cell captive licence by the Financial Sector Prudential Authority.

Guardrisk’s microinsurance licence is a composite insurance licence that allows life and non-life insurance products to be written out of the same licence and cell. Microinsurance is intended to offer simple but innovative insurance products in dedicated segments and markets.

Herman Schoeman, chief executive officer (CEO) of Guardrisk, said: “Traditionally, the most significant barrier to entry in the insurance industry has been the minimum capital requirement of R15 million (around $1 million), as well as the significant cost involved in running and managing an insurance company."

For life and non-life cell captives, the required capital is reduced to R1 million, while cells in a microinsurance cell captive licence have been reduced to R250 000, he said.

Xolani Nxanga, executive for market development at Guardrisk, added: “Microinsurance cell owners will also get assistance with risk spreading through access to reinsurance markets, insurance expertise – including compliance and governance in a highly regulated environment – and most importantly, skills will be transferred. Thus, the cell captive becomes an incubator for full black ownership and upskilling.”

The ideal candidate for a microinsurance cell captive would be a funeral parlour that wanted to create a more sophisticated product, formalise its business, and reach more customers, with more products, Guardrisk said. It would mean rather than only selling funeral plans, it could sell household insurance, increasing its penetration into its loyal client base.

Nxanga said microinsurance cell captives are suitable for a wide variety of businesses, whether they are large retailers or fintech companies selling customised insurance products.

“The microinsurance cell captive licence complements our existing life and non-life cell captive businesses,” said Nxanga. “It is particularly suitable to insurance products that provide cover within the specified limits: R300 000 for non-life insurance and R100 000 for life insurance.”