The Gauteng Division of the High Court has interdicted Fusion Guarantees (Pty) Ltd from issuing construction guarantees and confirmed that such instruments constitute insurance business on the facts of this case under the Insurance Act 18 of 2017, even where the provider is registered under the National Credit Act 34 of 2005 (NCA).
The judgment was delivered on 23 March 2026 in Elasah Risk Consultants (Pty) Ltd v National Credit Regulator and Others.
Guarantees found to be insurance
The court dismissed an application by Fusion Guarantees and Elasah Risk Consultants (Pty) Ltd for declaratory relief that the guarantees they issued do not constitute insurance.
The applicants had argued that the guarantees were credit agreements regulated under the NCA, but this was rejected.
The court found that the guarantees meet the definition of non-life insurance and constitute insurance policies, including:
- the payment of premiums;
- an undertaking to meet specified obligations on the occurrence of an uncertain event;
- indemnification of loss suffered by a beneficiary; and
- reliance on the occurrence of an uncertain future event, typically contractor default.
The court also rejected Fusion’s argument that the guarantees were merely credit facilities, finding that their structure and function extended beyond a simple credit arrangement or overdraft-type facility.
It confirmed that whether a guarantee falls within the Insurance Act depends on the facts of each case, with the court finding that the guarantees in this matter fall within the Act, assessed against the definition of insurance business.
The court reaffirmed earlier decisions in Becker (2017) and Fern Finance (2022), holding that the repeal of the Short-term Insurance Act did not alter the position that the NCA does not exclude the application of insurance legislation. It found no material difference between the repealed Act and the current Insurance Act, and recorded that Fusion had been an applicant in the Becker matter.
The court stated: “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.”
Interdict and regulatory breach
The application was dismissed, and Elasah was found to lack legal standing, with the court holding that its interest was indirect and insufficient as it does not issue guarantees.
The FSCA’s counter-application was granted, with the court ordering that:
- Fusion’s guarantees are declared to be non-life insurance policies;
- the issuing of those guarantees constitutes unlicensed insurance business, in breach of section 5(1) of the Insurance Act;
- Fusion is interdicted from issuing construction guarantees;
- the guarantees referenced by Elasah are similarly declared to be insurance policies; and
- costs are awarded against Fusion and Elasah.
FSCA warning preceded judgment
The outcome aligns with the FSCA’s stated position that registration under the NCA or as a financial services provider does not make the conduct of insurance business lawful.
In a media statement issued on 9 June 2025, the Authority warned contractors, municipalities, and state entities to exercise caution when accepting performance guarantees from unlicensed entities.
It indicated that numerous complaints had been received and investigations conducted, which found that several entities were conducting unauthorised insurance business.
The FSCA cautioned that:
- guarantees falling within the Insurance Act and issued by unlicensed entities may not be enforceable;
- beneficiaries do not have the protection associated with prudentially regulated insurers;
- registration under the NCA or as a financial services provider is not sufficient to render insurance business lawful.
Market participants were advised to verify whether entities issuing guarantees are licensed insurers and to obtain independent legal advice where necessary.
Pre-judgment context
The matter was noted in the Annual Banking Law Update 2025 before judgment was delivered.
The publication recorded that the case concerned whether construction guarantee policies meet the statutory and jurisprudential definitions of an insurance contract.
It highlighted that, in these arrangements, the party paying the premium is typically not the party indemnified or the recipient of payment, with the benefit flowing to a third-party beneficiary.
The publication also pointed to the multi-party structure of guarantee policies and the legal questions this raises, including their possible construction as a stipulatio alteri.
It noted that these features create tension with the traditional concept of indemnity in insurance law.
The publication further recorded differences between historical legal approaches and current statutory, regulatory, and accounting frameworks, and observed that guarantee insurance operates at the margins of the existing insurance framework.
Earlier litigation involving Fusion
The latest judgment follows earlier High Court litigation involving Fusion Guarantees concerning its regulatory status.
Read: High Court dismisses constitutional challenge to sections of the Financial Sector Regulation Act
In 2022, the Gauteng High Court dismissed, with costs, an application by Fusion Guarantees and its directors challenging the constitutionality of sections 154, 167 and 231 of the Financial Sector Regulation Act.
The application was brought against the FSCA, the Minister of Finance and the National Credit Regulator.
Fusion argued that the FSCA’s powers to impose administrative penalties and debar individuals infringed constitutional rights, including the rights to just administrative action, access to courts and freedom of trade.
The court rejected these arguments, finding the challenge not well founded and “speculative in the extreme”.
The judgment did not determine whether Fusion’s guarantees constitute insurance, but addressed whether the applicants had adequate remedies to challenge regulatory action.
The latest judgment confirms that the classification of construction guarantees depends on their substance and features, rather than how they are labelled.
Where such instruments exhibit the characteristics of insurance, they fall within the Insurance Act and must be issued by licensed insurers.
The FSCA said it will continue to monitor compliance and take action where entities issue insurance products without authorisation.
