Nimbus Direct Insurance Business Plan › Section 3 › Market Analysis

3.1 Macroeconomic Context

South Africa is the second-largest economy on the African continent,
with a 2024 nominal GDP of approximately USD 405 billion (ZAR 7.3
trillion). The economy is moderately diversified across mining,
manufacturing, financial services, and agriculture, with the services
sector contributing more than 60% of GDP. After a decade of structurally
low growth (2014–2024 average real GDP growth of approximately 0.9% per
annum), the country entered 2025 with cautious recovery signs: GDP
growth of 0.6% in 2024, headline inflation of approximately 4.4%, and
the South African Reserve Bank holding its repurchase rate at 7.25%
through the first half of 2025. The currency, the South African rand
(ZAR), traded in a range of approximately ZAR 17.50–19.00 to the US
dollar over the twelve months to October 2025.

Botswana, by contrast, is among the most stable economies in
Sub-Saharan Africa. The country is rated Bbb+ by Standard & Poor’s —
one notch above South Africa — supported by a diversified diamond-mining
economy, a long-standing fiscal surplus, and one of the highest
GDP-per-capita levels on the continent at approximately USD 7,800. The
Botswana pula (BWP) is managed against a basket dominated by the rand
and the IMF Special Drawing Right, providing relative currency stability
for cross-border operations.

3.2 South African Insurance Market

The South African insurance market is the deepest and most
sophisticated in Africa, with combined life and non-life GWP of
approximately ZAR 768 billion in 2023. The non-life (general /
short-term) market — Nimbus’s primary target segment — generated GWP of
ZAR 153.5 billion in 2023 (approximately USD 9.2 billion) and is
projected to expand at a CAGR of more than 4% through 2028, reaching
approximately ZAR 197 billion in 2028 on a base-case forecast.

Figure 3.1

Insurance Penetration

South Africa exhibits an insurance penetration ratio of 11.54% of GDP
— the highest on the African continent and well above the global average
of 6.8%. The ratio is comparable to those of mature OECD economies such
as the United Kingdom and France, reflecting both the historical
strength of the country’s insurance sector and the entrenched culture of
insurance purchase among middle- and upper-income households. The figure
obscures, however, significant penetration gaps in lower-income
segments, the informal sector, and amongst small and medium-sized
enterprises — segments which present material future-growth
opportunities for digitally-led insurers.

Figure 3.2

Market Growth Drivers

• Climate & catastrophe risk — rising
  frequency and severity of weather-related claims (floods in
  KwaZulu-Natal in 2022, ongoing fire and hailstorm losses in the
  Highveld) are driving premium hardening, which favours sophisticated
  underwriters that can price risk precisely.
• Infrastructure deterioration — load-shedding,
  water supply instability, and inadequately-maintained municipal
  infrastructure are generating elevated property and contents claims,
  accelerating digital adoption among customers seeking faster claim
  resolution.
• Vehicle ownership growth — the South African
  passenger vehicle parc continues to expand (approximately 13 million
  registered vehicles at end-2024), with motor insurance penetration of
  insured vehicles at approximately 35%, leaving substantial growth
  runway.
• Regulatory clarity — the SAM framework
  (effective 2018), Twin Peaks supervision (PA & FSCA), and the
  forthcoming Conduct of Financial Institutions (CoFI) Act provide a
  stable, internationally-aligned regulatory baseline that supports
  investor confidence.

3.3 Non-Life (Short-Term) Insurance Market — Detailed View

The non-life market is segmented across motor, property, accident
& health, liability, and engineering classes. Motor insurance is the
largest single line of business, generating approximately USD 3.4
billion (approximately ZAR 60 billion) in GWP in 2024 according to
Statista Market Forecast. Property insurance is the second largest line,
driven by mandatory bond-linked homeowner cover and high-value asset
cover for affluent households.

Industry-aggregate ratios published by the South African Reserve
Bank’s Prudential Authority for 2023 indicate a non-life sector combined
ratio of approximately 96–98%, with loss ratios of 64–68% and expense
ratios of 28–32%. Direct insurers (OUTsurance, MiWay) operate
consistently below the industry combined ratio by virtue of their lower
distribution-cost base, with OUTsurance’s personal lines combined ratio
reported in the 78–82% range over the five years to 2024.

Motor Insurance Subsegment

Motor insurance is the gateway product for personal lines insurers in
South Africa, accounting for approximately 39% of total non-life GWP.
The market is currently characterised by:

• High dispersion of risk profiles by geography (urban vs rural),
  vehicle make/model, and driver behaviour.
• Strong consumer familiarity with telematics-based and
  behaviour-rated products (Discovery Insure has built a substantial book
  on Vitality Drive).
• Elevated theft and hijack frequencies in certain metropolitan
  areas, requiring sophisticated geographic loading.
• Increasing average claim severity due to vehicle technology costs
  (ADAS, EVs) and parts-supply inflation.

Property & Contents Subsegment

Homeowner and contents cover is the second-largest non-life category.
Demand is driven by mortgage-bond requirements (which mandate building
cover) and by rising household awareness following recent natural
catastrophe events. Property loss ratios spiked materially in 2022 (KZN
floods) and have since normalised, but reinsurance pricing for South
African catastrophe exposures has hardened meaningfully, providing both
an opportunity (price discipline) and a constraint (capacity).

SME & Commercial Lines

South African small and medium enterprises remain under-insured
relative to their European and North American counterparts. SMEs that do
purchase commercial cover typically do so through brokers, creating an
opening for a digitally-led, direct SME proposition with simplified
products and self-service quote-and-bind functionality. This segment is
a Year 2 priority product for Nimbus.

3.4 Distribution Channel Dynamics

The structural shift from broker-led to direct distribution remains
the single most important channel dynamic in the South African non-life
market. Direct channels accounted for approximately 18% of personal
lines GWP in 2015 and an estimated 34% in 2024 — and are projected by
industry analysts to reach 48% by 2030, with the broker channel
continuing to retain its dominance only in commercial lines and
high-value specialty risks.

Figure 3.3

3.5 Botswana Insurance Market

The Botswana insurance market is materially smaller and structurally
less developed than South Africa’s. Total GWP across life and non-life
was approximately BWP 6.8 billion (USD 510 million) in 2023, with
non-life accounting for approximately 38% of the total. Insurance
penetration of approximately 3.5% of GDP is well below South Africa’s
11.5% and below the global average, indicating significant headroom for
growth.

Key features of the Botswana market that support entry by Nimbus:

• A stable and well-supervised regulatory regime under NBFIRA,
  broadly aligned with International Association of Insurance Supervisors
  (IAIS) principles.
• A small number of incumbents (BIHL, Botswana Insurance Company,
  Hollard Botswana, BIC General Insurance) — none operating an aggressive
  direct-to-consumer digital model.
• A digitally literate, urbanised middle class concentrated in
  Gaborone and Francistown.
• Currency stability (BWP–ZAR exchange rate has traded in a narrow
  band over the past decade).
• Customs Union (SACU) and shared regulatory norms with South
  Africa, reducing operational integration costs.

3.6 Target Customer Segmentation

Nimbus has segmented the South African addressable market into five
priority customer cohorts, each with distinct value-proposition
emphasis:

3.7 Market Sizing — Bottom-Up Addressable Market

On a bottom-up basis, Nimbus’s Serviceable Addressable Market (SAM)
in South Africa, comprising the direct-channel personal lines and small
commercial segments, is estimated at approximately ZAR 65 billion of GWP
in 2025, growing to approximately ZAR 89 billion by 2030. The
Serviceable Obtainable Market (SOM) over the five-year plan horizon,
representing the share Nimbus realistically targets, is approximately
ZAR 4.5 billion of GWP in Year 5 — representing approximately 5.0% of
the projected SAM, comparable to the share that MiWay captured over a
12-year period after launch.

Confidential — this business plan is provided to prospective investors and lenders for evaluation purposes only and may not be reproduced or distributed without the written consent of Nimbus Direct Insurance Group (Pty) Ltd.