The recession and the global economic crisis have weakened South Africa's economy and as a result the insurance industry is taking strain. This is one of the conclusion of an insurance survey by KPMG.

According to the research, which was compiled from the financial statements of various South African insurers, the gross premiums of the firms that took part in the survey increased 9.2 percent to 51 billion rand last year compared with 2007.

"When the premium growth is compared with consumer price inflation of 11.5 percent and GDP of 3,1 percent in the period, it is clear the short-term insurance market shrank in real terms," said KPMG national insurance industry leader Gerdus Dixon. "This is a worrisome statistic," he said.

The aggregated underwriting profit of 1.1 billion rand for last year was down 35,3 percent.

Apart from the economic situation, there are more reasons behind these developments. These include muted investment results, a large number of industrial property claims and a pressurized motor risk class.

Figures of the KPMG report showed that the insurers surveyed had reported realised and unrealised investment losses of 72.4 billion rand compared with profit of 87.9 billion in 2007. Furthermore, the cash flows from operations for the five largest insurers represented an outflow of 28.1 billion rand. "For an industry with ambitious growth targets, negative cash flows are not good news," said Dixon. Source: Business Day