The Financial Sector Charter seeks to transform the insurance sector so that all South Africans can share in its benefits. While progress has been made, much still needs to be done.

The parliamentary hearings on transformation in the financial sector in 2017 showed that the imperative for radical transformation of the financial sector is stronger than ever. Now industry and government are going back to the drawing board. The four NEDLAC constituencies have started to convene in the build-up to the Financial Sector Summit expected in the third quarter of 2018. There is a sense of urgency on the need to accelerate the transformation of the sector.

In the insurance industry, some targets have been met, but others are still lagging behind. So, what options does the insurance industry have to accelerate transformation?

Part of the answer rests on remaining regulatory uncertainties about the future of cell captives. Cell captives are a proudly South African construct – now entrenched in the Insurance Act of 2017 – which enables smaller businesses to participate in the insurance sector through buying a special class of shares from an existing insurer who has been licensed to offer cell captives. Owners of third-party cells can then offer insurance to clients and earn dividends on their investment into the cell structure, thereby sharing in the economic benefits of insurance. It is also a nimble space, outside of corporate culture, in which to innovate; and it allows autonomy in tailoring the product offering to the particular target market.

On paper, cell captive structures offer a stepping stone into the insurance market for small black businesses or community-based organisations that serve the underserved market. This is a “quick win” for black-owned insurance market participation to complement the broader transformation of the industry’s ownership structure. In addition, it holds promise for important skills transfer and enterprise development opportunities.

But cell captives are not a panacea. The structure as such does not guarantee transformation, and some regulatory concerns remain – notably around what conflicts of interest could arise if the cell owner receives both a profit from underwriting and commission from intermediation. Further, it is not always possible for black entrepreneurs to obtain the operational capital required to start up a cell.

The potential of cell captives to contribute to transformation in the insurance sector will be debated at an upcoming workshop, to be hosted in Johannesburg on 23 May and in Cape Town on 30 May. The workshops draw on a review by Cenfri of the potential for cell captives as an enabler of transformation, commissioned by Guardrisk and with the support of SAIA and ASISA.

The panellists for the Johannesburg workshop are:

• Jo-Ann Ferreira, Lead policy specialist, Prudential Authority
• Lesego Mashigo, Acting Director of Financial Inclusion, National Treasury
• Peter Jennett, CEO, Centriq
• Maroba Maduma, Group Communications and Campaigns Executive, SA Taxi (a cell owner)

Doubell Chamberlain, who will be facilitating the workshop for Cenfri, said:

“Cell captives are an example of a locally grown, innovative solution to support the transformation of the financial sector in South Africa. While it is not a panacea for transformation, it can be an important piece of the puzzle, as industry and government go into the financial sector summit negotiations this year”.

To tune into the workshop follow us on twitter at @cenfri_org or #cellcaptives