Short-term insurers report increase in premium

Short-term insurers reported a 30,27% increase to US$109,54 million in Gross Premium Written (GPW) in the six months to June, on the back of growth in motor and engineering insurance, according to the Insurance and Pensions Commission report for the second quarter.

Report by Staff Writer

Gross premium written was US$84,09 million in the same period last year. The Ipec report attributes the significantly higher gross premium written this year to gains of 43,25% and 144,21% respectively in motor and engineering insurance.

This translates into 3,7% and 2,98% respectively in the share of total gross premium written.

The report covers the performance of players in the short term insurance sector, including re-insurers.

During the period under review, the number of registered and operational short- term direct insurers decreased to 24 from 26 following the voluntary surrender of its licence by Suremed Insurance Company and the directive issued by Ipec to Jupiter Insurance Company to stop writing new business.

The number of operational short- term reinsurers remained at nine.
Elsewhere, there was no significant change in the distribution of business, with motor and fire insurance remaining the major sources, accounting for 40,1 and 20,94% of the total GPW.

Fire insurance continued to be one of the dominant classes of the short-term insurance business but its contribution to gross premium written in the period declined to 20,94% from 25,94% last year.

Even though there was an increase in the total volume of business underwritten, short-term direct insurers reported a decrease in total profit after tax to US$6,08 million from US$7,86 million last year.

The decrease in profit was mainly attributable to a drop in unrealised profit from valuation of equities, which amounted to US$2,92 million, coupled with depressed investment income.

Net commission incurred decreased by 21,69%, although the volume of business underwritten increased. The decline was on the back of an increase in commission received by local insurers for the business they facilitate for reinsurers. Ipec says out of the 24 operational direct short-term insurers during the period under review, five reported losses.

Direct short-term insurers reported an average loss ratio of 39,6% for the half-year from 44,6% reported in the comparative period in 2011. The loss ratio compares favourably to an international benchmark of 60%.

The average combined ratio decreased to 83,7% from 92,5%, which reflected an improvement in cost management.

Total assets for operational short-term insurers amounted to US$140.22 million, reflecting a 3,2% increase from US$135,87 million reported in March.

The increase was mainly attributable to growth in technical assets, in particular reinsurers’ share of outstanding claims.

Cell Insurance, Alliance Insurance Company, and Nicoz Diamond Insurance Company remained the top three insurers in terms of GPW, with market shares of 13,36%, 12,23% and 11,64%,respectively.

In terms of net premium written, the market leaders were RM Insurance Company, Alliance Insurance Company, and Nicoz Diamond Insurance Company, with market shares of 13.61%, 13.43% and 12.33%, respectively.

Cell Insurance is retaining a smaller percentage of its GPW compared to the other market leaders. On the other hand, RM Insurance is retaining a larger proportion of its GPW compared to the other market leaders.

Short-term reinsurers reported a 137.09% drop in their bottom-line to a loss of US$1,72 million from a profit of US$4,63 million last year.

The business was mainly affected by claims incurred, management expenses and unrealised losses from valuation of equities.

Claims incurred increased by US$8,08 million while management expenses increased by US$4,73 million. Unrealised income from marking to market of equity portfolios was down 133.09% to a negative US$420 000, from US$1,28 million last year.

Seven of the reinsurers made profits. Baobab Reinsurance Company and PTA Reinsurance Company made losses amounting to US$3,10 million and US$730 000 respectively.