Recent media reports, based on a media statement issued by the Competition Commission on 1 August 2024, and an order by the Competition Tribunal on 14 August 2024, have caused some confusion in the market, which warrants clarification.
Essentially, the Competition Commission has recommended that the Competition Tribunal approves Capitec’s intended transfer of the Capitec credit life business, currently underwritten in a cell captive arrangement with Guardrisk Life, to its own insurance licence. This has no impact on the rest of the Guardrisk Life insurance business, which remains robust and operational.
In some quarters, this was interpreted as an “acquisition” of the entire Guardrisk Life business by Capitec; while some have referred to it as a merger. This is incorrect. Capitec is merely transferring the credit life book of insurance business that it already owns (via its cell captive facility with Guardrisk Life), to its own insurance licence.
“No matter the circumstances, it is always unfortunate to bid farewell to a client – especially a long-standing client and one that is a giant in its sector, like Capitec,” says Guardrisk CEO, Lourens Botha.
“However, we are proud of the partnership between ourselves and Capitec that has created such a valuable asset, which now becomes a stand-alone insurance business.”
Botha adds that Guardrisk will continue to establish and build credit life facilities for clients, using its life and microinsurance licences; effectively incubating insurance businesses for companies wishing to move into financial services.
“We’ve been building insurance businesses for many of SA’s best known brands for over two decades, creating insurance products that grow clients’ brands with their own customer bases, while boosting their bottom lines.”
It should be noted that the Competition Commission’s recommendation is only one part of the process of transferring insurance business from one insurer/licence to another. A second, and essential, element of the process is prescribed by section 50 of The Insurance Act. This requires that the Prudential Authority approves the transfer of any or all the assets and liabilities associated with one insurance business/licence to another. In the case of Capitec’s credit life insurance business, the Prudential Authority has not yet approved the section 50 transfer.
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