Non-life insurers in $35m profit

SHORT term non-life insurers recorded a total profit after tax of $35,89 million for the first nine months of last year, which represents a 264 percent rise, a quarterly report released by the Insurance and Pensions Commission (IPEC) has said.

The surge was mainly due to a major increase in unrealised gains which, according to IPEC, could be a result of a surge in stock value which occurred in the second half of 2017. Underwriting was the major income driver for non-life insurers. The industry average return on assets and return on equity edged up from 5,32 percent and 11,57 percent to 16,59 percent and 32,43 percent, respectively.

According to the report, total gross premium written (GPW) by non-life insurers stood at $169,79 million as at September 30, 2017, from $155,31 million reported for the comparative period in 2016. Growth in motor insurance business contributed 45,51 percent of business written.

“This is partially attributable to reduced leakages to unregistered insurers due to the introduction of automation in motor insurance licensing,” said IPEC.

The distribution of business written in terms of GPW remained skewed towards motor and fire insurance, accounting to 63,54 percent of the total business written during the period under review.

Six of the twenty insurers were not compliant with the minimum capital level of $2,5 million. In terms of assets, there was a considerable growth of $188,01 million, on the back of the bull-run in the equities market and deferred acquisition costs which amounted to $57,58 million.

“Given the susceptibility of nearcash assets to inflationary pressure, the non-life insurance industry reported a decrease of 32 percent in money market investments from $29,78 million for the nine months ended September 30, 2016 to $20,25 million in the comparative period in 2017,” said IPEC.

The Commission noted with concern the significant proportions of assets which were tied up in fixed assets and premium debtors, saying these assets may not be readily available to meet policyholder obligations as and when they fall due. The Commission urged non-life insurers to come up with strategies that will reduce assets in such classes. The industry average prescribed assets ratio stood at 11,21 percent during the comparable period, and was compliant with the minimum requirement of 5 percent.

The report also established that industry average retention ratio rose from 59,36 percent to 61,32 percent as at September 2017, partly demonstrating an improvement in risk appetite among the non-life insurance industry.

The non-life insurance industry reported a slight slowdown in reinsurance premium remittances, with an increase being realised in the average reinsurance creditors to reinsurance premium ratio to 30,12 percent.

“It is important for insurers to settle their reinsurance premiums timeously as non-remittance of reinsurance premiums compromises reinsurance arrangements thereby heightening the insurer’s exposure to underwriting risk,” said IPEC.

In terms of market share, Old Mutual Insurance Company, Nicoz Diamond Insurance Company and Zimnat Lion Insurance Company had a combined market share of 43,14 percent.

Non-life re-insurers wrote business worth $79,73 million for the nine months ended September 30, 2017 which was below the $81,52 million reported in the comparative period of 2016. According to IPEC, the decrease in the gross premium written of 2,20 percent could be due to improved retention levels by primary insurers.

Meanwhile, insurance brokers wrote $72,34 million in business, with a net brokerage commission of $11,97 million being realised since January 1, 2017.

According to the report, insurance brokers reported an 81,22 percent increase in total profit after tax from $0,77 million for the quarter ended September 30, 2016 to $1,40 million for the quarter ended September 30, 2017, as a result of a 10,01 percent increase in other income for the quarter under review.

Reinsurance brokers also reported $58,43 million in gross premium for the period under review, reflecting a decrease of 10,28 percent from the $65,12 million reported for the nine months ended September 30, 2016. The industry average commission ratio for reinsurance brokers was 23,05 percent, representing a 1,55 percent increase from 21,50 percent reported for the same period in 2016.