The Sunday News
Noble Ncube, Business Reporter
THE total premiums on policies issued by non-life insurers for the quarter ended 31 March 2016 amounted to $66,59 million, a six percent drop from $70,89 million reported in the comparative period in 2015.
In a report released last week, the Insurance and Pensions Commission (IPEC) said the volume of business written by the non-life insurance industry shrunk as evidenced by the 6,06 percent decrease in Gross Premium Written (GPW).
Non-life premiums dropped by $4,3 million compared to the same period last year. It said shrinkage in the volume of business was mainly driven by declining business generated from fire and motor insurance. It also said the general sluggish performance of the economy was to blame as the insurance industry performance usually follows the fortunes of the economy.
“Gross premium written amounting to $24,59 million was generated through insurance brokers. On the other hand, total gross premium written by non- life reinsurers increased from $28,82 million for the quarter ended 31 March last year to $35,52 million for the quarter under review.
“The business generated by reinsurance brokers during the quarter under review amounted to $19,46 million. Motor and fire insurance remained the dominant classes of insurance in the non-life insurance sector. All operating underwriters reported capital positions which were compliant with the regulatory minimum of $1,5 million as at 31 March this year. Total assets for the insurance industry amounted to $390,30 million reflecting a 5,17 percent increase from $371,12 million reported as at 31 December last year,” read the report.
The report revealed that the industry average prescribed assets ratios for non-life insurers and reinsurers were 10,96 percent and 8,18 percent as at 31 March this year which were above the minimum requirement of five percent.
“Notwithstanding the foregoing observation, only seven direct non-life insurers and five non-life reinsurers out of the 20 and eight operating entities respectively were compliant with the minimum prescribed asset ratio. Owing mainly to the decrease in volume of business written, total profit after tax for non-life insurers decreased from $3,92 million for the quarter ended 31 March last to $2,39 million for the quarter under review.
“On the other hand, non-life reinsurers reported total profit after tax of $3,82 million for the quarter ended 31 March this year compared to $2,34 million reported for the comparative period in last year. The increase in profit after tax for reinsurers was mainly buoyed by increased business volume coupled with a decrease in net incurred claims,” said IPEC.
Non-life insurers reported Gross Premium Written of $4,16 million and reinsurance premium of $2,54 million while reinsurers reported GPW of only $156,802.
The Commission established that the discrepancies were mainly due to differences in business classification as some insurers were classifying all financial lines such as directors’ and officers’ liability, professional indemnity, credit insurance and fidelity guarantee under bonds or guarantees.
IPEC urged insurers and reinsurers to ensure consistency in the classification of business.
“Total profit after tax amounted to $2,39 million for the quarter ended 31 March 2016, reflecting a 38,95 percent decrease from $3,92 million that was reported in the comparative period in 2015. The decrease in the profit after tax was mainly attributable to decrease in business volumes. In addition investment income which was considered low to supplement underwriting income was shrinking. The decrease in the volume of business translated into a deterioration in the industry average return on assets (ROA) and return on equity of (ROE) from 2,16 percent and 5,05 percent for the quarter ended 31 March 2015 to 1,25 percent and 2,89 percent respectively, for the quarter under review,” said the commission.
The sector reported no significant changes in underwriting profitability during the quarter under review.
It said this was evidenced by a negligible change in the combined ratio from 87,79 percent for the quarter ended 31 March last year to 87,75 percent for the quarter under review. The highest loss plus commission ratios were reported under health and personal accident insurance.
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