South Africa outlook: opening pathways to greater resilience

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. We forecast real GDP growth 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. Over 2027‒2030, real GDP growth could reach 1.8% on average per year, still below the level needed to meaningfully reduce unemployment and improve living standards. We see further reforms and infrastructure investments, including recent multilateral loans, as key to support growth to reach its potential annual rate of 2% and address long-standing socio-economic gaps.

The 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. 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 (ZAR 34.3 trillion or ~USD 2.3 trillion 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.

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.

The former system left only 6% of citizens on track for a comfortable retirement, despite South Africa having large pension assets of an estimated USD 322 billion (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. 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 USD 3.7 billion from the 2022 KwaZulu-Natal floods pushed up the average annual economic loss to USD 846 million for 2015‒2024, from USD 308 million annually in 2005‒2014.

South Africa also has large protection gaps in other secondary perils such as drought, and we 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.

This and Swiss Re Institute's other publications are all available on sigma explorer, our data and research portal for Swiss Re clients.