High Court Interdicts Fusion From Issuing Construction Guarantees

The Financial Sector Conduct Authority (FSCA) welcomes the judgment delivered by the Gauteng Division of the High Court on 23 March 2026, which interdicted Fusion from issuing its construction guarantees and confirmed the FSCA’s longstanding position that registration under the National Credit Act 34 of 2005 (“NCA”) by a party issuing guarantees does not exclude the application of the Insurance Act 18 of 2017 (“Insurance Act”) to those guarantees. Whether a guarantee falls under the Insurance Act depends on the facts of each guarantee, measured against the meaning of insurance business under the Act.

In this matter, before the High Court, Gauteng Decision: Pretoria, Fusion, which had been the subject of various investigations by the FSCA (former FSB) for unregistered insurance business, joined forces with a Financial Services Provider (“FSP”) Elasah Risk Consultants (Pty) Ltd (“Elasah”), to unsuccessfully seek declaratory relief that the construction guarantees issued by Fusion and described by Elasah do not constitute insurance, but rather amount to money-lending or credit agreements under the National Credit Act.

In dismissing the applications, reasons for which will follow, the Court found that Fusion’s application was an attempt to evade the obligations imposed by the Insurance Act.

Court’s reasons for dismissing Fusion & Elasah applications

The Court dismissed the application brought by Elasah and Fusion seeking declaratory orders that their guarantees do not fall under the Insurance Act.

Importantly:

• Elasah was found to lack legal standing, as it only arranges guarantees and does not issue them.
• Fusion’s arguments that its guarantees are credit agreements regulated only under the National Credit Act were rejected.

The Court confirmed that the guarantees issued by Fusion exhibit all essential characteristics of a non-life insurance policy, including:

• the payment of premiums (regardless of terminology used),
• an undertaking to meet insurance obligations,
• indemnification of loss suffered by the employer (beneficiary), and
• reliance on the occurrence of an uncertain event—typically contractor default.

Court confirmed the FSCA’s longstanding position and previous precedents

The Court reaffirmed prior decisions in Becker (2017) and Fern Finance (2022), holding that the repeal of the Short-term Insurance Act did not change the position in Becker (2017) where it was made clear that the NCA does not exclude the ambit of the Insurance Act. In respect of Becker (2017), the Court noted that Fusion was an applicant in that matter, and not a stranger to the issue determined.

The judgment emphasised that:

“Providers of non-life insurance in the form of construction guarantees are required by law to be licensed under the Insurance Act. This is not merely the ‘official view’; it is, in fact, the law.”

Fusion interdicted from issuing guarantees

In granting the FSCA’s counter-application, the Court issued the following orders:

1. Fusion’s guarantees are declared to be non-life insurance policies.
2. Fusion’s issuing of such guarantees constitutes unlicensed insurance business, in breach of section 5(1) of the Insurance Act.
3. Fusion is interdicted from issuing construction guarantees going forward.
4. The guarantees referenced by Elasah are similarly declared to be insurance policies.
5. Costs were awarded against Fusion and Elasah.

FCSA Statement

This press release must be read together with the FSCA’s Press Release issued on 9 June 2025. In that notice (reproduced below), the FSCA warned contractors, state entities, and municipalities to exercise caution when accepting guarantee policies from entities that are not licensed. Before accepting any guarantee, the FSCA advised all parties to ensure that the guarantee complies with FSCA requirements. It also urged them to obtain independent legal advice to determine whether the guarantee offered constitutes insurance business. If it does, the FSCA further recommended verifying on its website whether the entity issuing the guarantee is registered as an insurer.

The FSCA welcomes this judgment, which strengthens regulatory certainty and protects policyholders, contractors, municipalities, and the wider public from the risks associated with unlicensed insurance activities.

This ruling:

• safeguards the integrity of South Africa’s insurance sector,
• ensures fair treatment of customers, and
• upholds the objectives of the Twin Peaks financial regulatory model.

The FSCA will continue to monitor compliance and take action where entities issue insurance products without proper authorisation.

9 June 2025 Notice from FSCA:

During recent years the Financial Sector Conduct Authority (FSCA) has received numerous complaints regarding various entities that were issuing performance guarantees (guarantees). Municipalities and government departments (State Entities) require performance guarantees from successful bidders for infrastructure projects. The performance guarantee is requested by the State Entity in terms of the General Code of Contractors, which is issued by the National Treasury. These entities are often licenced under the National Credit Act and/or holds a financial services provider licence from the FSCA.

Based on these complaints, investigations were conducted, the outcome of which has been that numerous entities were found to have been conducting unauthorised insurance business. A licence issued under the National Credit Act, and a financial services provider licence issued by the FSCA, is not sufficient to render the conduct of insurance business lawful.

The FSCA is concerned about the risk posed in such cases because:

• Guarantees falling within the ambit of the Insurance Act and issued by persons who are not insurers, may not be enforceable in law by the client.
• The object of the Insurance Act is to regulate the insurance market for the benefit and protection of policyholders, and to establish a legal framework for the prudential regulation of insurers and the integrity of the insurance market.
• Beneficiaries of such guarantees also do not have the protection afforded by the prudential regulation of licenced insurers.

For these reasons, the FSCA cautions contractors and State Entities, before accepting performance guarantees, to:

• make certain that these guarantees comply with their requirements;
• obtain independent legal advice as to whether the guarantee offered constitutes insurance business and, if so, to check with the FSCA whether the entity issuing the guarantee is registered as an insurer on the FSCA Website.

The FSCA further points out that there is currently a High Court case pending wherein the applicant seeks a declaratory order to the effect that guarantees described in the application fall under the National Credit Act and do not constitute insurance products under the Insurance Act. The FSCA is opposing the application, which is currently proceeding in the Gauteng Division, Pretoria of the High Court under Case Number: 020740/2023.