South African insurance GWP is set to decline in 2020 as businesses shut up shop, and the country’s faltering economy will struggle to cope, according to GlobalData, a leading data and analytics company.

GlobalData’s revised post-COVID-19 forecasts see the total value of GWP in the South African market declining by 3.1% in 2020 (from a 3.4% increase in original forecasts. The industry is then expected to recover, recording growth of 1.6% compound annual growth rate (CAGR) up to 2023.

Deblina Mitra, Insurance Analyst at GlobalData, comments: “South Africa responded early to the pandemic, and entering lockdown before there were many cases will help its recovery. However, the country had already experienced a recession in 2019, so this will further weaken its economy. Considering the adverse economical impact, insurers need to brace for not just potential claims but also a general decline in business.”

Most businesses, especially small and medium-sized enterprises, face a standstill in activity. This will cause a slowdown for insurers in terms of a lapse in policies or rise in cancellations.

Mitra continues: “A large number of businesses will not be able to claim for business interruption policies, and many will be vulnerable because of this. These policies available on the South African market tend to only cover losses arising from physical damage.

“One area for growth will be in cyber insurance. The potential threat associated with cyber incidents during the pandemic is expected to promote the need for cyber insurance products in the country. This, combined with the physical distancing rules will support the rise in online sales of insurance policies and online claims management processes.”