Hello everyone

We start this newsletter with the devastating news that the Libyan eastern coastal town of Derna lost over 5000 of its citizens overnight and a quarter of the city to flooding brought on by Storm Daniel and consequent bursting of dams above the city. As South Africans we can all relate to badly maintained or lack of infrastructure that exacerbates natural disasters. Spare a thought for Libyan citizens who have lost whole families overnight and as mitigators of risk, heed the warning signs of those who do the research on what we should be doing to prepare ourselves for such events.

This week we provide access to a wide range of articles some of which say we (SA) are in trouble and then others showing things are looking up. Look carefully at the framework that is being used to make such judgements. It is like demarcating the scope and limitations of the piece which with practice you will be able to transfer into the exam setting. We often answer outside of the scope of the question for example or do not consider the limit the examiner placed on the question, wasting time and marks when we should have been expanding within the scope of the question.

There are two must reads this week because they are well written and require thinking about financial risks to insurers and broader society and they are (1) Emerging Risks: Could Obesity Lawsuits Become a Major Liability Event? and (2) Why can’t we prevent bank runs? We have also included a link to the Winter Programme Day One, which we cite for the beautifully illustrated product development cycle in Life Assurance. (Start and end times for this part of the video are provided.)

Moving onto you, some of you would have started writing exams and as you prepare for the next one, please take a break and watch the presentation “Get mentally fit for your exams” by Gugu Gigaba a practising clinical psychologist and experienced trauma counsellor. This is available in the About YOU section.

Topically, what with the Rugby World Cup on the go, one of the investment articles speaks about Big Match Temperament or BMT and that it should be a measure applied to investment funds. But closer to home how well do you perform under pressure when the stakes are high? If this is a worry for you then all the more reason to listen to Gugu’s presentation.

Enjoy!

MM Editorial Team

Economic matters

South Africa in deep financial trouble

The National Treasury revealed that South Africa recorded its largest budget deficit since at least 2004, sending the rand crashing and lowering demand for government bonds.

2.5min read

Positive signs for interest rates in South Africa

South African inflation expectations declined for the first time in two years, suggesting price pressures have peaked and the central bank will be able to keep interest rate hikes on hold.

Slightly different angle but supportive of article above. 3min read

Financial Services Industry

Discovery to use its maths skills to match renewable demand and supply

Financial services group Discovery on Wednesday announced the launch of a new renewable energy platform aimed at providing price certainty to SA’s companies while avoiding the fickleness of wind and solar generation.

Discovery diversifying once again to take advantage of the gap in the market. Name three reasons why they would succeed and expand on your rationale. 3min read

The role of political risk insurance in mega energy projects

Insurers play a pivotal role in attracting investment in mega energy projects, particularly through the use of Political risk insurance (PRI). PRI plays a crucial role in mitigating the risks associated with mega energy projects in both international and national markets. These projects often face uncertainties arising from the unpredictable political events, which can negatively impact the profitability of foreign investors. However, the distinction between political and commercial risks can be blurred, making it challenging to determine the exact nature of political risk.

This article is a good complement to the one above. Good example provided. 4min read

SARS boss bemoans state capture, urges single digital ID

Kieswetter made the remarks while addressing the Network of Tax Organisations (NTO) Conference in Cape Town…The NTO is a global network of regional and international organisations of revenue administrations. Events held by the NTO and its members promote the exchange of experiences and peer learning across the world.

Interesting reading. Do you think this is a good idea? 5min read.

Momentum’s mixed bag of results

This article paints a clear picture of the results and shows how recent events have affected and continue to affect growth at Momentum. 3min read

Battle brewing over continued placement of insurer 3Sixty Life under curatorship

Msibi has raised questions about 3Sixty’s continued placement under curatorship for 22 months since the PA was granted provisional curatorship in December 2021.

Interesting to note how detrimental being placed under curatorship can be. 2.5min read

Diversity and Inclusion

Alpha Female Report 2023: Gender parity progress at a standstill

No meaningful progress has been made in increasing the number of female portfolio managers year-on-year, the Citywire Alpha Female Report 2023 has revealed.

This short article will give you access to the report. 2min read

Life Insurance

Add some “BMT” to your clients’ retirement portfolios

In sport, certain players are described as individuals with big match temperament or “BMT”. Players with BMT just seem to have the ability to perform well in high-pressure situations, when it is needed most, … But when your clients are on the big stage, in this case retirement, how does their living annuity perform when they need it most?

This is an interesting analogy. Living annuities have been spoken about quite favourably of late. What would you say the advantages of this product are and for whom? 3min read

Side-stepping the non-disclosure landmine

Nothing better illustrates the impact of life insurance on the domestic economy than a snapshot of the claim pay-out history of one of South Africa’s big five life insurers. Case in point, Liberty’s Lifestyle Protector solution has paid out more than R46 billion to insureds and their families over the past 20-years.

This is a very good article – a refresher if you like – on the underwriting process. Read the comments made by a compliance officer below the article. 5min read

YuLife South Africa Launches Group Critical Illness Cover

YuLife’s inventive new group critical illness cover is set to shake up the South African insurance industry this quarter. Co-founded in London by South African actuary Jaco Oosthuizen in 2016, the insurtech’s gamified approach to wellness has radically changed the way employees interact with their insurance products.

Read this article and ask yourself how YuLife has managed to enter this market in SA with so many big players. What elements would make it work and what are the risks? 4.5min read

5 Ways Tech is Building Better Customer Experiences in Insurance

The article is a reminder of the tech supporting customer experience and importantly that they should be combined with each other for maximum effect. Integration of tech features is often neglected in designing insurance products.  3.5min read

APD Winter Programme 2023 Innovation and serving society

Password: 2^5MgW71

Learn more about the practice areas in the profession and see specifically how innovation has served each step of the Insurance Value Chain in the panel contribution made by Sphe Msane, member of the ASSA Life Assurance committee. Starts 02:38 and ends 02:52

General Insurance

New Lloyd’s Lab InsurTech cohort to focus on climate, cyber and sustainability in Asia Pacific

Lloyd’s, the world’s leading marketplace for commercial, corporate and speciality risk solutions, today announces the 12 teams that will join the 11th cohort of the Lloyd’s Lab, the InsurTech accelerator hub for developing innovative insurance products in the Lloyd’s market.

Please read this article right to the end to gain insight into new products that integrate knowledge across disciplines to achieve better forecasting and mitigation of risks.  5min read

Emerging Risks: Could Obesity Lawsuits Become a Major Liability Event?

If obesity issues have the makings of a systemic, large-loss liability event, why haven’t we seen it take off yet? And what could it realistically look like if it did take off in the near future?

After noting the parallels between obesity issues and tobacco and opioid issues, Verisk’s Eric Gesick explores these questions, identifying insureds that may be in the crosshairs beyond food and beverage giants.

A well written article based on scientific data, good research and acknowledgement of cultural elements that influence lawsuits. Note you may need to enter your work email address to gain access to the article.  7min read

Health Insurance

Policy progress needed for healthcare sustainability

Phumelele Makatini, CEO of the Health Funders Association, presents an argument for NHI provided the missing pillars of the regulatory framework are installed. She posits that the NHI can be implemented without raising taxes if there is social solidarity and anti-selection is eliminated as a risk for medical aid schemes. 4min read

NHI a complex process as part of wider plan to reform health sector – Crisp

The National Health Insurance (NHI) is not simply about redistributing resources between the public and private health sectors, but one component of the plan to reform the entire health system, writes head of the NHI Nicholas Crisp.

Reassuring 6min read

RAF non-payment in contravention of the law, says CMS

The Road Accident Fund’s (RAF) directive – that no payments be made to claimants if their medical aid scheme has already paid for medical expenses after a road accident – is not in line with the Medical Schemes Act, says the Council for Medical Schemes (CMS).

Nor, said CMS senior manager for legal services John Letsoalo and CMS benefits management senior analyst Mpho Sehloho, is the decision in the interest of scheme beneficiaries, reports MoneyWeb.

Consider how important the term subrogation and risk pools in mitigating risk for medical aid schemes. 4min read

APD Winter Programme 2023 Innovation and serving society

Password: 2^5MgW71

In case you missed it. Listen and watch the presentation given by Roseanne Harris at the Winter Programme on how health products are currently serving society and where medical aid schemes can work together with government to achieve universal health care. Starts 01:00 and ends 02:03

Banking

Why can’t we prevent bank runs?

Extraordinary speed. Not only did the bank runs that led to the recent collapses of US-based Silicon Valley Bank (SVB) and Signature Bank unfold extraordinarily quickly, but the two banks were also extraordinarily fast in travelling their roads to that point.

A must read. It shows how vulnerable a financial institution is to prevailing sentiment when systemic risks are high. 5min read

Investments

Sean Peche: Bad things happen when growth stocks go wrong

COMMENT: There’s real pain for investors in highly rated companies that don’t deliver.

The argument in this article is that “when you’re trading on a price-earnings (PE) ratio of 60 times forecast profits, there’s no margin of safety; meeting or exceeding forecasts is everything.” That’s where the problem lies.

4min read

Optimism grows in SA’s private equity sector as funding increases

South African private equity funds raised R19.6bn in funding in 2022, an increase of 21% from 2021. That was at a time when private equity fundraising declined by 13% globally in 2022 compared to 2021.

This article paints a different picture to earlier articles referring to the economy. Why do you think that is, apart from the date? 3min read

Private equity (PE) firms’ investments are powering up energy opportunities in southern Africa

Chief executive of the Southern African Venture Capital and Private Equity Association (Savca), Tshepiso Kobile, says PE firms have not only achieved decent exits (which grew in value and number) but also helped their investee companies to navigate the volatile environment

You will recall that Discovery is now fully immersed in the renewable energy ecosystem. 3min read

Sanlam: ‘We put a strong emphasis on governance in our EM fund’

From avoiding state-owned enterprises to picking the right Chinese firms, portfolio manager Feroz Basa explains the principles behind the Sanlam Global Emerging Markets fund.

Interesting read and a counterpoint to the blanket sentiment to stay away from investing in China. 4min read

Momentum buys 100% of RMI Investment Managers

Momentum gains increased indirect minority stakes in several local boutique fund managers via the deal.

Learn a bit about the way in which these fund managers are themselves managed. Can you envisage the benefits for stakeholders, especially coming off the back of Momentum’s results till June 2023? 3min read

About YOU

Get mentally fit for your exams!

Pass code: !8n*J#RF

Did you know that any past emotional difficulties we have not dealt with, live in our bodies and can affect the way we think and perform? They may even affect us physically when we try to take on new tasks. This can sometimes explain why when we are under pressure, we can experience a mental block, fail to complete a strenuous task such as an exam or even just blank out in a test despite being well prepared.

This masterclass, presented by clinical psychologist Gugu Gigaba will help you breakdown the anatomy of trauma and grief, and give you the skills to build the mental resilience needed to bring your A-Game to your exams.