Recent changes in the investment landscape, driven by global banking reforms following the 2008 global financial crisis, have introduced Financial Loss Absorbing Capacity (FLAC) instruments into the South African market. While these instruments are designed to strengthen financial system resilience, they have created unintended consequences for medical schemes.
Because FLAC instruments are issued by bank holding companies rather than the banks themselves, they do not align with the current definitions in Annexure B of the Medical Schemes Act Regulations. As traditional bank instruments are replaced, schemes face a shrinking pool of compliant assets — with implications for returns, diversification, and ultimately member contributions.
The Health Funders Association is actively engaging with the Council for Medical Schemes to address this issue and ensure that investment regulations remain fit for purpose in a changing financial environment.
