Section 1 Section 2 Section 3 Section 4
2.10
Solvency levels The solvency ratio is the level of reserves (accumulated funds) that a medical scheme needs to hold as a percentage of gross annualised contributions. Regulation 29 promulgated in terms of the Medical Schemes Act prescribes that medical schemes maintain a minimum solvency ratio of 25%.
In 2020 the average solvency for all schemes increased to 40.7% (2019: 31.6%). The solvency ratio of open schemes increased from 28.8% in 2019 to 38.1% in 2020. The overall solvency level for restricted schemes increased from 36.3% in 2019 to 44.9% in 2020.
The graph below shows the solvency levels of open and restricted schemes against the statutory level over the past 21 years. The increase in industry solvency levels from 2000 to 2004 is primarily attributable to the calculated efforts of medical schemes to build reserves to the prescribed minimum solvency level that was required by 31 December 2004.
At the end of 2020, the medical scheme industry had a year end reserve positon of R97.9 billion (2019: R73.3 billion). The year end reserve position for open schemes and closed schemes increased by R13.9 billion and R24.6 billion, respectively.
On average, restricted schemes have maintained higher solvency compared with open schemes. From 2006, the solvency level for all restricted schemes has declined because of rapid membership growth in GEMS. The average solvency of open schemes has remained relatively stable since 2006.
Trend in solvency levels 70%
60%
Solvency
50%
40%
30%
20%
10%
0% 2000
36
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Prescribed minimum solvency
All medical schemes
All restricted medical schemes
Restricted medical schemes (excluding GEMS)
2011
2012
All open medical schemes
2013
2014
2015
2016
2017
2018
2019
2020
