By: Siphesihle Jele
The Prudential Authority (PA) and its predecessor has over the past 10 years placed three black insurance companies under curatorship and three of them are in the process of liquidation, the only exception is New Era which was acquired by Limpopo Development Cooperation and is is no longer a black owned insurance company. It may appear that curatorship is used to liquidate these companies and end black participation in the insurance industry.
The other companies that are being liquidated are Bophelo Life and Nest Life. This flies against all the talk of transformation and inclusion of black people in the financial sector. Ironically the FSCA which is a Twin to the PA has published a transformation draft document for transformation in the financial sector, a document that Khandani Msibi, Executive Chairman and GCEO of 3Sixty Global Solutions characterised as mere window dressing to keep the black people on a permanent hope.
The modus operandi of the PA in executing the reversal of transformation is the same with all companies. The PA goes to court on an exparte bases and removes the ability of the black shareholders to oppose the application. Having lost access to the bank account the shareholders are unable to mount a challenge to curatorship, therefore the court only hears one narrative, that of the PA.
It is not surprising that during these proceedings the PA is questioning the standing of Khandani Msibi in opposing the curatorship being made permanent despite the Rule Nisi allowing such an opposition. The PA was hoping to have its own narrative as the only narrative heard by the Judge like it happened in all other cases..
The PA ignored the recapitalization of 3Sixty Life by the Group to transfer R130M of unencumbered real estate of Doves Group into 3Sixty Life. This offer was ignored and they proceeded to apply for curatorship without explaining to the court that there is a recapitalization plan they did not consider.
The PA acted recklessly and unprofessionally in its attempt to conflate the accounting solvency with the actuarial solvency. The Provisional Curator accepted the properties after consulting specialists in property valuation and actuarial science but the PA is raising problems for every solution to get to their desired end.
What normally happens with companies are placed under curatorship is that they are first prohibited from taking new business and start losing clients, 3Sixty Life lost 20% of its revenue due to termination because of curatorship.
This is normal as clients would want certainty from an insurer and curatorship creates uncertainty. Fortunately for 3Sixty Life it is reliant on the internal channels that sell its products and therefore 80% of the revenue has remained intact despite premium increases. Sadly for other insurance companies they would ordinarily lose more than 40% of revenue and were unable to pass premium increases to improve performance and consequently correct solvency.
Finally, the time the court meets on the return date the insurer would have become insolvent because of the loss of business and curatorship costs. 3Sixty Life has turned a corner and has become profitable again despite curatorship, but the PA remains adamant that it must be kept under curatorship and with one end in mind; liquidation.
An insurance company that is prohibited from taking new business, is losing clients, is in a strategic quagmire due to curatorship and overladen with excessive and uncontrolled curatorship costs is heading to liquidation fast, that road has been masterfully created.
The plan to eliminate black insurance companies is in motion and 3Sixty Life is the targeted despite the capitalization being offered, ordinarily the regulator should upon receipt of a capitalization plan retreat and allow it to be fairly considered and implemented but when there is an objective all capitalization will be frustrated.
*Siphesihle Jele is Chairperson of ILAWU, Independent Liberation and Allied Workers Union.