South Africa's economy and large life insurance sector have an outlook of steady growth and improving resilience, supported by reforms that remove some of the constraints on key sectors such as transportation and pensions, according to a Swiss Re Institute (SRI) report.
In the report, titled “South Africa outlook: Opening pathways to greater resilience”, the authors said that the forecast is that real GDP would grow at 1.4% in 2026, up from 0.9% in 2025, supported by lower borrowing costs; moderate real wage growth, and an improving electricity supply. Uncertainty over the impact of US tariff policy on the economy is heightened since the US introduced a 30% tariff on about 5% of South Africa’s exports in August 2025.
Life insurance sector
South Africa’s life insurance sector is set for moderate growth as the monetary easing cycle leads to lower long-term government bond yields, which will likely make annuity guarantees less attractive in 2026, said the report.
“We expect life premiums to grow by 1.7% (in real terms) in 2026 and by ~2% between 2027?2030, vs. 2.6% estimated growth in 2025. South Africa has one of the highest life insurance penetration rates globally (9.5% in 2024) driven by savings products, yet demand is concentrated in a small base of formally employed households.”
The risk product mix is heavily skewed to funeral policies, but these do not create wealth or enhance financial resilience. South Africa consequently has a large life and disability protection gap (ZAR34.3tn or ~$2.3tn as of 2021).
“We see an opportunity for insurers to shift product uptake into more appropriate and effective simplified life (protection) covers. This could both unlock higher demand and narrow the protection gap,” said the report.
Pension reforms
Pension reforms are expected to strengthen retirement saving rates in South Africa. The new “two-pot” system introduced in September 2024 splits pension contributions into a flexible savings pot that can be accessed easily, and a retirement pot that preserves two thirds of individuals’ pension contributions until retirement.
In contrast, the previous system allowed individuals to withdraw all savings when they left their job, which led to persistent low preservation rates, modest contributions and high leakage. This left only 6% of citizens on track for a comfortable retirement, despite South Africa having large pension assets of an estimated $322bn (85% of GDP) overall.
The shift to a higher rate of long-term fund accumulation may, in the short term, dampen demand for annuity saving products. However, over the long term, it should create opportunities for insurers to offer hybrid products and engage members with more frequent touchpoints. In non-life insurance, we expect premiums to grow by 2% (real terms) in 2026 and also during 2027 to 2030.
Motor (40% share of non-life) is forecast to grow by 2.5% in 2026, as consumer spending and vehicle sales should benefit from lower interest rates.
The report said, “We see Property (32% share of non-life) growing by 2.8% in real terms as exposures grow steadily. Smaller lines of business, such as liability and health, will likely be flat in real terms. They face headwinds such as weak growth in liability exposure, low capex rates, and the 2026 launch of National Health Insurance, which we see limiting private health insurance growth.
“The non-life profitability outlook is robust for 2025 and 2026 given improving claims experience and stable investment yields. South Africa’s natural catastrophe losses are now structurally higher than in previous decades, driven by urbanisation, climate change and coastal vulnerabilities.
“Floods are the most damaging, and highly insured, natural catastrophe peril. The record economic losses of $3.7bn from the 2022 KwaZulu-Natal floods pushed up the average annual economic loss to $846m for 2015?2024, from $308m annually in 2005?2014. South Africa also has large protection gaps in other secondary perils such as drought, and the report’s writers estimate the overall protection gap at 82% as of 2023.
The government and the insurance industry today prioritise climate resilience, risk reduction, and innovative financing such as parametric covers and public-private partnerships, to mitigate future shocks.
The writers of the report are Ashish Dave, team lead IMA Bangalore, Swiss Re Institute; Mahesh H Puttaiah, head, Insurance Market Analysis, Swiss Re Institute; Shambhavi Priya, insurance economist, Swiss Re Institute; and Swaraj Thakare, research analyst at SRI.