HomeBusiness DigestUptake of prescribed assets still low: Ipec

Uptake of prescribed assets still low: Ipec

Uptake of prescribed assets by short-term insurers remains below par despite growth in gross premium written (GPW) to US$120,31 million for the half-year ended June 30 compared to US$116,89 million reported for the comparative period in 2014, a regulator’s report shows.

Bernard Mpofu

Short-term insurance companies are required to invest 5% of their funds in prescribed assets while life assurance companies and pension funds are required to put up 7,5% and 10%, respectively.

Government can prescribe permitted and disallowed assets, maximum and minimum allocation to assets (fixed and liquid) and the quality or type of asset insurers and investment funds.

According to the latest Insurance and Pension Commission (Ipec) report on non-life insurance firms, four registered insurance companies and one reinsurer were not compliant with the regulatory minimum capital requirement of US$1,5 million as at June 30. Brokers contributed US$49,92 million of the GPW, Ipec said.

After-tax profit for the second quarter ending June 30 was down 12% to US$5,23 million compared to the same period last year weighed down by rising claims and operating costs despite strong growth in gross premium written, a regulator’s report has shown.

“All non-life insurers remained non-compliant with the prescribed assets ratio. The industry average prescribed asset ratio was 1,27% as at 30 June 2015 which was significantly below the minimum requirement of 5%. The number of insurers with investments in prescribed assets remained 11,” reads the Ipec report.

Total assets for the non-life insurance sector decreased from US$364,46 million as at March 31 to US$348,07 million as at June 30 owing to a decrease in premium debtors.

Of all the underwriters, Ipec says, only four reinsurance companies were compliant with the minimum prescribed asset ratio of 5% as at 30 June 2015.

“Total profit after tax for non-life insurers amounted to US$5,23 million for the half-year ended 30 June 2015, reflecting a 12,05% decrease from US$5,95 million reported for the comparative period in 2014,” the report says. “The decrease in total profit after tax was mainly attributable to an upsurge in net incurred claims coupled with increasing operational costs.

“On the other hand, total profit after tax for non-life reinsurers increased from US$0,72 million for the half year ended 30 June 2014 to US$3,40 million for the period under review on the back of increased volumes coupled with decreases in net claims incurred.”

The report further shows that out of the registered underwriters, four insurance companies, namely Excellence, Global and KMFS, Export Credit Guarantee Corporation (ECGC), as well as one reinsurer, New Reinsurance Company of Harare, were suspended from both initiating and renewing business as at June 30.

“However, at the time of finalising this report ECGC’s suspension had been lifted after regularising its capital position, among other issues of regulatory concern,” the report says.

Total GPW by non-life reinsurers, according to the report, increased from US$56,25 million for the half-year period ended June 30 2014 to US$60,18 million for the half-year period ended June 30 2015, it says.

“On the other hand, total premium generated by reinsurers through reinsurance brokers during the period under review amounted to $35,83 million. Motor and fire insurance remained the dominant classes of insurance in the non-life insurance sector.”

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