Insurance brokers navigate the onshore-offshore placement riddle
Access to international capital and underwriting capacity is non-negotiable for South African brokers and insurers seeking to underwrite niche or mega risks. It is a reality that African governments and regulators cannot ignore, despite their policy preference for local capacity.
International insurance placements
Your writer gained some insights into the complex world of international insurance placements while attending the latest round of the popular InsureTalk webinar series. Simon Dougall, CEO of Crawford Dougall Insurance Brokers, presented a retail broker’s perspective on the topic. He kicked off by reminding the audience of the broker’s fiduciary duty to understand and meet each client’s unique insurance needs.
“There are many different facets to consider when placing international or local insurance,” Dougall explained, rattling off some words and phrases quite familiar to FAnews readers, including capacity options; market cycles; pricing; regulatory frameworks; and underwriting appetite. To navigate this complexity, brokers must build and maintain strong relationships with various role players, notably underwriters.
According to Dougall, accessing international insurance capacity begins with local insurers ceding part of their risk to global reinsurers. “Large brands like Santam, Hollard, Old Mutual or Bryte have reinsurance structures that sit behind their local participation and risk, utilised and accessed via their dedicated reinsurance brokers,” he said. A retail broker wanting to access international markets plays a hybrid role spanning advice and the regulatory and technical aspects of international risk transfer.
The presenter offered a quick overview of local and offshore insurance markets. He said that South Africa boasts around R700 billion in combined life and non-life premium annually, with the non-life category weighing in with gross written premium (GWP) of around R200 billion.
That is modest beside the scale of offshore markets. Swiss Re has pegged the global property and casualty market at around USD2.4 trillion, while Lloyd’s, the London-based global insurance and reinsurance marketplace, reported GBP57.9 billion in GWP for 2025. The London non-life insurance market is worth around GBP105 billion.
Navigating London and Lloyd’s markets
“Our company has been a Lloyd’s affiliate since the early 1990s, and that is commonly where we transact; they are the premier specialist insurance market in the world,” Dougall said. He described Lloyd’s as “a global insurance marketplace where multiple syndicates managed by professional underwriting firms come together and share and insure complex risk.” South African brokers are estimated to place around GBP400-500 million premium with Lloyd’s annually.
“There are many different facets as to the need, necessity or wish to transact with an international insurance provider,” Dougall said, promising to focus on just three. The first point spans capacity, risk appetite and availability.
Each insurer has its own local capacity and risk appetite, guided by factors such as own capital, reinsurance support and statutory solvency capital requirements (SCR). Brokers would look offshore after exhausting available capacity among their local underwriting partners, meaning a particular risk cannot be placed through their usual local markets.
“If you have gone to the market to as many players as you can to ensure that you have procured as much insurance as your client needs and you still do not have enough capacity, then it warrants going to an international market to shore up the difference,” Dougall said. Turning to risk appetite, the presenter noted there were a range of industries that local insurers were reluctant to cover, citing explosives, paint and plastics manufacturers. “Insurers do not jump out of bed in the morning wanting to write those types of risks, so, appetite is low,” he said.
Examining reinsurance treaties
If these risks fall within the capacity available from local insurers, including capacity supported by their reinsurance treaties, the broker can simply place the risk locally. In that scenario, the business remains a local placement, even if the insurer later cedes part of the risk and premium to an offshore reinsurer. Only where the risk falls outside local capacity or appetite would brokers have to seek support from international markets directly.
Brokers might also consider the international route if a solution is not available in the domestic market, for whatever reason. “Parametric insurance is a derivative insurance which is not offered in the South African market, but a market leader like Swiss Re offers it globally,” Dougall explained.
The second point stems from credit rating mismatches between domestic and offshore markets. An insurer’s credit rating is constrained by the country’s sovereign rating, meaning local insurers cannot ordinarily be rated above South Africa’s BB-. “Although our insurance companies are incredibly financially sound … we cannot beat the country’s sovereign rating,” Dougall said. He pointed out that banks and financiers often made cover from AAA-rated insurers or equivalent insurance security a condition of complex risk placements.
The third point is price, which was described as important but never the only decision driver. “Managing insurance market cycles is an integral part of accessing international capacity and its interaction with local capacity providers,” Dougall said. Before deciding to go offshore, and if so, deciding how much of a risk to place there, brokers must weigh up claims processing, compliance and turnaround times, to mention a few. “Balancing your relationships with clients and local and international insurers is paramount,” he said.
The AAA versus BB- gap
Dougall warned that lower-rated offshore insurance and reinsurance capacity was increasingly finding its way into the South African market. One example involves so-called fronting arrangements, where a local insurer writes 100% of a large risk and then cedes all or substantially all of it to an offshore reinsurer. In such cases, brokers and cedants need to interrogate the quality of the underlying security and be upfront with the client about how the risk is being underwritten and where the ultimate claims-paying security sits.
Commenting from an operational perspective, Dougall noted that domestic brokers representing large national and multi-national clients had been accessing the Lloyd’s market for decades. “International insurance is an integral part of insuring large and complex risks [for the likes of] Glencore, MTN, Pick ‘n Pay, Shoprite and Vodacom,” he said. “The local market, whilst doing their best to insure as much as they possibly can, may run out of capacity given the size and scale of such risks.”
Local is lekker
Dougall concluded that brokers had an important role to play in sourcing offshore capacity, particularly where complexity, size or specialist requirements stretched local capacity. He argued that offshore placement should never be the default. The guiding principle, he said, was to let the client’s interests inform placement decisions and to support local insurers wherever they could accommodate the risk.
Writer’s thoughts:
Placing large and complex risks can present challenges for South African brokers. Do you agree, and are you aligned with the main reasons offered in this write-up for seeking international insurance placements? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].
