Insurance sector takes a hit on profits

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Tawanda Musarurwa

HARARE – Zimbabwe’s life assurance companies’ profitability dipped 56 percent in 2017 to 55, 9 million from $127, 33 million in the prior year, latest regulator figures show.

According to the Insurance and Pension Commission (IPEC)’s Life Report for 2017, the sector’s profitability was affected by an increase in claims and a rise in costs during the period under review.

“The life sector’s total net claims increased from $148, 6 million as at 31 December

2016 to $197, 9 million as at 31 December 2017. The total costs increased by 42 percent from $219, 38 million as at 31 December 2016 to $312, 0 million as at 31 December 2017,” highlighted IPEC.

The sector’s total assets grew by 35 percent from $1, 84 billion as at 31 December 2016 to

$2, 48 billion as at the close of 2017.

“This growth was largely due to favorable performances in the fixed properties and equities markets which grew by 7 percent and 138 percent respectively over the quarter,” noted the regulator.

Investments in prescribed assets for both life assurance companies and life reassurers rose by 77 percent from $171 million in 2016 to $304 million as at 31 December 2017. 

Notwithstanding the decline in profitability, IPEC maintains that the insurance sector remained stable during the period under review due to an improvement in the micro-economic and social environment in the country.

Average liquidity ratio for the industry stood at 331 percent implying that the industry has sufficient assets to meet claims and other contractual obligations when they fall due. 

Capital to liability ratio was at 188 percent reflecting a growth of 117 percent from the 72 percent, previously.

Total gross premium written for the industry maintained an upward trajectory increasing from $348 million reported last year to $368 million for 2017.

Due to the growth in claims ratio, the combined ratio for life assurance companies increased by 22 percent from 63 percent in 2016 to the current 85 percent, noted IPEC.

Zimbabwe’s life assurance industry was made up of 11 direct life assurance companies, 5 composite reassurance companies and 1613 individual agents as at the end of last year.

And for the period under review, 8 of 11 licensed life companies were capitalised and complied with minimum capital requirements, although IPEC has said it will further engage such players to ensure parity with Statutory Instrument 95 of 2017.

In terms of Statutory Instrument 95 of 2017, the current minimum regulatory capital for life reassures is $5 million and for composite reassurers is $10 million based on adjusted assets and liabilities as prescribed in the Statutory Instrument.

Earlier in March, IPEC announced changes in insurance service provision as provided for by Statutory Instrument 95 of 2017 and intended operational changes aimed at introducing an Insurance Policyholder Protection Fund and an office of the Ombudsman to handle policyholder complaints.

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