Abstract: The globalisation of the financial services industry and the increasing complexity of insurance products, among other factors, have led to the development of new regulatory systems for insurers globally (and, in particular, in South Africa). The primary intention of these systems is to protect the interests of policyholders by ensuring that insurance companies remain solvent in most foreseeable circumstances. In South Africa, new regulation, known as Solvency Assessment and Management (SAM), is expected in 2015, but this regulation is to apply only to insurance companies and not to medical schemes. This paper considers the implications of the application of capital requirements under Quantitative Impact Study 1 to the measurement of capital adequacy in South African medical schemes. Data from 2006, 2007 and 2008 were used to parameterise the non-SLT health-underwriting risk module (i.e. the risk module relating to health-underwriting risk that is not similar to life techniques), which was then used to determine the level of economic capital that schemes would have been required to hold in 2009. The results showed an overall
reduction in the capital requirements of medical schemes, as compared with the current statutory minimum requirements, and therefore an increase in the proportion of medical schemes that are found to be solvent.