IN THIS ISSUE

Dear member

The Investment Committee of the ASISA Enterprise and Supplier Development (ESD) initiative knew that Pineapple, a homegrown peer-to-peer digital short-term insurance start-up, had potential when it selected the company for inclusion in the ESD investment portfolio earlier this year. But it still came as a huge surprise when the fledgling company walked away with top honours and a cheque of US$1.5 million at the recent 2019 VentureClash challenge held in Connecticut in the United States. VentureClash invites the most promising early-stage companies worldwide in digital health, fintech, insurtech and industry 4.0 to compete in the challenge.

Pineapple was founded in Johannesburg in 2016 by Matthew Elan Smith, Ndabenhle Junior Ngulube and Marnus van Heerden as part of an innovation competition run by Hannover-Re. Impressed by the team’s ability during the competition and seeing potential in their idea, Hannover-Re decided to provide seed funding to Pineapple via Lireas Holdings, the strategic investment arm of Hannover-Re Group Africa.

In the second quarter of this year, the ASISA ESD initiative provided Pineapple with capital to further unlock the company’s growth potential.

Pineapple is modelled on the traditional South African stokvel approach. Completely digital, the core concept of the model is to use co-insurance pools to connect policyholders who know and trust each other to reduce fraudulent claims and thereby costs.  Since launching in July 2018, Pineapple has seen several thousand members join the platform, converting many to active policies in the home-content items space. According to the Pineapple team, motor insurance is coming next.

At ASISA we are excited for the Pineapple team and proud to be part of this exciting journey. More information on Pineapple can be found here.

The ASISA Nominations Committee met in November and, among other items, also discussed the performance of ASISA’s eight Technical Board Committees, which are chaired by ASISA Board members. We are pleased that the ASISA Nominations Committee is happy with the effectiveness and functioning of the Board Committees in terms of their mandates. However, there are concerns about attendance by some member representatives and we have been asked to monitor and manage this.

The ASISA Board determines the association’s strategic direction, taking into consideration the priorities of our country, our industry, as well as international direction. The strategy is executed by the Board Committees, each chaired by an ASISA Board member and supported by a team of subject matter experts from ASISA as well as member companies.

ASISA took over the collection and collation of statistics for the long-term insurance, Collective Investment Scheme (CIS) and Linked Investment Service Provider (LISP) industries from the previous industry associations in 2008. Over the years, ASISA also commenced the regular collection of various other ASISA member statistics such as claims fraud statistics and death claim benefit statistics for fully underwritten individual life policies.

At the November ASISA Exco meeting it was decided that an ASISA task team will be established early in 2020 to review and assess all of the statistics that ASISA collects from members for collation. The task team has been mandated to ensure the following:

• The purpose for which the statistics are collected should be clearly articulated;
• Assembly of the statistics by members for submission should be practical;
• The exercise should be excellence driven not perfection driven;
• There should be consistency over complexity; and
• The process should take cognisance of member industry statistics collection fatigue.

ASISA will communicate with members in this regard in the new year.

On 8 August 2019, the NHI Bill was introduced to Parliament and is currently under consideration by the National Assembly’s Portfolio Committee on Health. The Bill will go through the stipulated parliamentary processes, which will include a public participation period, which might inform some amendments to the Bill, before it is put before the National Assembly for a vote. Stakeholders and interested parties were invited to make written submissions by 29 November 2019.

ASISA has been integrally involved in working with the health sector through Business Unity South Africa (BUSA) to prepare a submission and engage stakeholders through the National Economic Development and Labour Council (Nedlac).

The NHI Bill establishes a public entity fund with advisory committees on benefits, pricing and stakeholders appointed by the Minister of Health as the main policy instrument to deliver universal health care in South Africa. It is envisaged that the NHI will progressively specify a package of benefits that will be funded from a variety of revenue sources. There are, however, concerns that the Bill eliminates appropriate competition in the health sector and endows the Minister with vast discretion. Providing comment on the Bill is complicated by the fact that no financial modelling has been made available to assess affordability or sustainability.

We expect that Parliamentary hearings will begin in March 2020. Engagement with stakeholders will continue in the meantime.

An ASISA working group prepared and submitted feedback to the Financial Sector Conduct Authority (FSCA) on the draft general exemption facilitating the implementation of an appropriate accounting standard for collective investment scheme managers and portfolios.  The proposed FSCA exemption aims to confirm the application of International Financial Reporting Standards (IFRS) at manager level.  At portfolio level, the exemption will see a fit for purpose application of IFRS.  The ASISA response was submitted by the deadline of 29 November 2019.

The ASISA Valuations Standing Committee had developed a Valuations Guideline to provide ASISA members with guidance on the valuation of securities for pricing and for reporting on holdings within investment portfolios.

The FSCA subsequently requested the use of this guideline in proposed regulation for the NAV calculation and pricing of Collective Investment Scheme (CIS) portfolios. The value for the wider industry would include: 

• Ensuring standard market practice regarding valuation methods conforms to international accounting standards;
• Guidance and standardisation in accounting and auditing of the investment portfolios for clients;
• Assurance to investors that the valuation of their investment portfolios is at fair value;
• Appropriate guidance for the valuation and accounting of all financial assets held on behalf of investors, irrespective of the vehicle or entity managing these assets; and
• The ability to quickly and accurately value financial instruments for purposes of collateral management.

The Guideline will enable the FSCA to comply with international regulatory best practice.

The 25th EFAMA Investment Management Forum was attended by approximately 250 delegates in Brussels, Belgium, on 21 and 22 November. The European Fund and Asset Management Association (EFAMA) is an association of European industry associations similar to ASISA. The following topics covered at the forum may be of interest to ASISA members:

• Representatives from the European Commission and the European Securities and Markets Authority (ESMA) shared insights on regulatory initiatives following the adoption of the European Union Action Plan on Sustainable Finance in March 2018.  The Action Plan is part of a strategy to integrate environmental, social and governance (ESG) considerations into the financial policy framework and mobilise finance for sustainable growth. 
• European authorities are working on creating European Union (EU) labels for green financial products and will require financial firms to address ESG considerations when giving investment advice to make it easier for retail investors to recognise green investments.  Asset managers in attendance reported that clients insist on the integration of ESG considerations.
• Artificial intelligence and behavioural science are increasingly applied to improve products and services to clients but there are regulatory challenges. 
• Concerns around liquidity management of CIS portfolios were debated.  There have been many examples in the EU of funds that could not meet investor requests for redemptions.  The International Organisation of Securities Commissions (IOSCO) issued its Liquidity Risk Management Recommendations in February 2018 and these emphasised a proper alignment of fund assets and redemption terms.
• Consumer financial education remains important for regulators and industry participants.  The Belgian regulator presented its Wikifin initiative, which consists of three pillars: initiatives for the general public, collaboration with schools, and a Wikifin Lab.

The ASISA Academy signed a strategic partnership agreement with the Institute of Retirement Funds Africa (IRFA), which will facilitate access to the Academy’s Retirement Fund Trustee Education (RFTE) workshops  for a greater number of trustees.

In November alone, the Academy delivered nine RFTE workshops to 112 delegates. The workshops are funded by the ASISA Foundation from pooled industry grants, which makes it possible to offer the workshops on a fully funded basis, but independent of the sponsors of the ASISA Foundation.

Since January this year, the Academy has delivered 45 RFTE workshops to more than 600 delegates from over 30 retirement funds.

The Academy is also in the process of developing an additional workshop for retirement fund trustees, which will focus on infrastructure as an asset class. The Academy is a BATSETA Approved CPD Provider, which means that participation in a workshop enables delegates to earn either three or six CPD points depending on the workshop duration.

The ASISA Foundation has successfully completed the first phase of the ASISA Foundation Financial Literacy and Micro-Enterprise (FLAME 2.0) Programme in Philippi near Cape Town, in Diepsloot, Gauteng, and King Williams Town in the Eastern Cape. 

The FLAME Programme empowers micro–enterprise owners to sustainably develop and grow their businesses with confidence, create employment and contribute to the local and national economy through an accredited business development methodology, using financial literacy as a core development tool.

Phase 1 of FLAME 2.0 focused on facilitating the development of personal and business financial literacy skills, personal entrepreneurial skills, as well as key elements of business development skills.  The second phase of the FLAME Programme will focus on the expansion of these skills at a much deeper level.

An added highlight for November was the signing of a co-funding agreement by the Foundation and the Western Cape Department of Economic Development and Tourism, in terms of which the Department will fund 50% of the costs of the FLAME Programme in Philippi. This is the Foundation’s first co-funding partnership at government level.

As 2019 is drawing to a close, we are reflecting on a year that has presented us with a fair share of challenges. It has, however, also been a year of positive change and as ASISA we are well positioned for 2020.

A huge thank you goes to the members of the ASISA Board for their guidance and strategic direction throughout the year. We would also like to thank our ASISA member representatives who volunteered their time and expertise to serve on the various committees and work groups in 2019.

On behalf of everyone at ASISA, we wish you a peaceful holiday season and safe travels if you are planning a trip.

Please note that the ASISA offices will be closed from Monday, 23 December, until Tuesday, 7 January, to allow the ASISA team to take a well-deserved break after a busy year.