admin
Business Reporter
Short-term insurance players gross written premium (GPW) increased by 880 percent to $292,50 billion in the half-year ended June 30, 2023, from $29,84 billion in the same period last year, largely driven by premium reviews as insurers sought to align with inflation and exchange rate developments.
According to the Insurance and Pensions Commission’s (IPEC) second quarter 2023 short-term insurance report, motor and fire insurance maintained their dominance as the major sources of business, contributing a combined 68 percent of the combined GPW.
“Given the continued dominance of the motor insurance business as a mandatory class of insurance business, it is critical that all stakeholders coordinate their efforts to address legacy issues that undermine public confidence in the insurance industry.
“Increasing understanding of the value of insurance as a tool for risk management rather than as a burden on business operations is one aspect of this,” Ipec said.
According to the report, the absolute Zimbabwe dollar gross premium written by short-term insurers for the half-year period amounted to $66,48 billion.
This accounted for 23 percent of the total business written, down from 35 percent recorded during the first quarter of 2023, and the remaining 77 percent was written in foreign currency.
Ipec said that while 77 percent of the combined business written by the short-term insurance industry was foreign currency denominated when most of the business comes from motor insurance, which is mostly third-party (Zim dollar business), it should be noted that motor insurance contributed 39 percent of forex business vis-à-vis 68 percent in absolute Zim dollar business.
“The high contribution of forex as compared to the absolute Zim dollar business is on account of exchange rate distortions,” reads part of the report.
GPW in foreign currency for the half-year period increased by 33 percent from US$66,68 million reported in the comparative period in 2022 to US$88,94 million, contributing 77 percent of the total business written by short-term underwriters.
During the period under review, all twenty short-term insurers reported capital positions above the minimum capital requirement of $37,5 million.
Ipec said all players are reminded to adequately prepare for the implementation of the risk-based capital regime under the auspices of the Zimbabwe Integrating Risk and Capital Programme.
The report noted that one out of the twenty short-term insurers was not compliant with the minimum solvency margin of 25 percent as stipulated in Section 24(1a)(ii) of the Insurance Act [Chapter 24:07].
The industry’s total assets for the period increased by 1,427 percent to $889,2 billion from $58,25 billion reported as of June 30, 2022, with investment property constituting the largest portion of total assets at 24 percent.
Premium debtors increased by 1,097 percent to $180,40 billion from $15,07 billion. In this regard, Ipec said industry players are encouraged to operationalise the No Premium, No Cover regulations gazetted through Statutory Instrument (SI) 83 of 2023.
“The Commission expects all players to be working on the clearance of all legacy premium debtors to ensure clearance of the same by December 31, 2023,” it said.
Investments in prescribed assets for the period under review increased by 2,711 percent from $1,94 billion as of June 30, 2022, to $54,53 billion.
“Despite the increase in prescribed asset investments, only eight of the twenty short-term insurers were compliant with the minimum prescribed asset ratio of 10 percent,” reads the report.
Ipec said compliance with prescribed asset requirements remains very low; however, the commission has started engaging entities with prescribed asset ratios below the minimum threshold to submit compliance road maps.
During the period under review, investment property and premium debtors were the two major asset classes, accounting for 44 percent of total assets.
Investment property alone constituted 24 percent against a limit of 10 percent, while premium debtors and other assets contributed 20 percent and 13 percent, respectively, against limits of 5 percent as stipulated in the Ipec Investment Guidelines issued in terms of Circular 2 of 2013.
Ipec urged short-term insurance players to structure their investment portfolios in ways that enable not only the preservation of policyholder value but also promote a balanced investment mix in line with the Commission’s investment limits and asset/liability profiles.
Online Reporter