Solvency and Financial Condition Reports (SFCRs) are a mature feature in Europe under the Solvency II regime, providing extensive public disclosures of insurers’ risk management, capital strength, and governance practices. However, in South Africa and many developing markets, public reporting at this depth is currently not a regulatory requirement. South Africa used to have a portion of its insurers regulatory returns publicly available, and originally there was an intention to have an equivalent SFCR report available in South Africa too.

This raises an important question: Should developing markets, including South Africa, adopt SFCR-style public disclosures? How do weigh the costs and benefits, and is this calculus different than in Europe?

The Case for Public SFCR Reporting

Enhancing Industry-Wide Risk Management

• Public disclosures let insurers benchmark themselves against their peers, highlighting best practices and exposing weaknesses.
• Insurers gain valuable insights into what “good” looks like, thus driving overall improvements in industry risk management standards.
• To my own interests, having more detailed information to understand the insurance sector and perform benchmarking would be invaluable. Hopefully my work has some value for individual insurers and maybe even the industry as a whole, but I recognise this point may have less weight for others.

Transparency and Trust

• Detailed reports provide analysts and policyholders with greater clarity into insurers’ operations, solvency, and risk strategies.
• It becomes significantly more challenging for insurers to differently represent (a range from gentle positioning to heavy spin to outright misrepresentation) their financial or risk positions to different stakeholders such as management, control functions, boards, analysts, and regulators when comprehensive information is publicly available.

Better Stakeholder Discipline

• Enhanced transparency makes it more difficult for insurers to conceal emerging solvency or risk issues, thus prompting earlier and more effective regulatory or market intervention.
• Analysts and rating agencies benefit from having direct access to consistent, detailed data, promoting market discipline and investor confidence.

The Downsides and Challenges

Cost and Complexity

• Producing detailed SFCR-style reports is resource-intensive, requiring substantial actuarial expertise, time, and money—resources that are often scarce in developing markets. This is not generally true in South Africa, but is absolutely true across the rest of the continent. Anyway, just because there are resources in South Africa doesn’t automatically mean this is the best use of their time, or that additional demands on these resources won’t impact the supply-demand equating level of salaries and therefore costs for insurers.
• Many insurers in developing markets face significant skills shortages, making it challenging to produce consistently high-quality reports. The level of current internal reporting could benefit from additional resources and time as it is.

Competitive Sensitivities

• Public disclosures risk exposing sensitive strategic insights to competitors, potentially placing companies at a disadvantage in competitive markets. This is often mentioned by insurers – it came out with the original IFRS4 disclosure requirements and again with the IFRS17 disclosure requirements.
• The thing is – I don’t know how many people trawl through competitor financial disclosures to uncover secret strategic source. I’m not dismissing the point, but I am questioning how much of an issue this is. With staff turnover and rotation through industry, there are plenty of mechanisms for more crucial practices to disperse across insurers.

Quality and Utility Concerns

• My experience across large numbers of South African insurers suggests that many insurers already go through the motions, incurring costs without value, in producing ORSA (Own Risk and Solvency Assessment) reports that are not used internally for anything other than compliance.
• Without careful oversight, SFCR-style reports risk becoming tick-box exercises—costly documents that serve regulatory compliance rather than genuine risk management.

Finding the Right Balance

Considering these points, adopting SFCR-style public reporting in South Africa and other developing markets should be approached cautiously:

• Incremental Implementation: Gradually introduce public disclosures, starting with key sections but with a clear roadmap so that insurers know now what they are building towards. There is merit in starting and producing something rather than having endless projects to produce some grand opus in 5 years’ time.
• Proportionality Principle: Ensure reporting requirements align with the insurer’s size and complexity – but this can’t mean that small insurers do nothing. The relevance of risks to each insurers must be considered.
• Standardisation with Flexibility: Provide clear reporting templates to minimise redundancy, enabling insurers to leverage internal reports such as ORSAs, thereby enhancing ongoing risk management practices. There is value in allowing insurers to customise their approach, especially for an ORSA, so that it is most useful for their internal purposes. However, the SFCR is an external document. There is arguably greater merit in standardisation for the reader (ease of navigation, ease of comparability) and for the producer (less time spent changing structure and content and wondering what is expected). Sometimes paint by numbers can great bang for buck.

Final Thoughts

Public SFCR reporting undeniably offers valuable transparency, improves risk management practices, and strengthens market discipline. However, the real challenge is striking a balance—achieving meaningful disclosures without imposing excessive burdens. If implemented thoughtfully, tailored to market realities, and aligned with insurers’ practical capacities, SFCR-style reports could become an essential part of strengthening insurance markets in South Africa and beyond.

In a world where even detailed internal reports like the ORSA are often unread compliance artefacts, is it naïve to think public SFCRs will be any better? Maybe. But transparency has a strange way of forcing people to care. It may be that the SFCR, being publicly available to analysts, regulators, academic researchers, students, and consultants (!) will find more traction and more use than most ORSAs.

The act of writing for an external audience can clean up fuzzy thinking and force clearer articulation of risk positions—something that internal-only reports often fail to achieve. It’s one thing to desire diverse views on a Board, but group-think and anchoring are all too common. I’ve lost track of the number of times the discipline of writing things down has made me realise the ideas in my head weren’t quite as brilliant or even consistent as I’d thought.

Perhaps SFCRs can do that at scale.