Fears over insurers' collapse

HARARE - The recent measures by the Insurance and Pension Commission (Ipec) to further tighten regulation of the insurance industry could result in some insurers collapsing, a top industry player said.

Grace Muradzikwa, managing director of Zimbabwe Stock Exchange-listed short term insurer NicozDiamond (Nicoz), said the prevailing liquidity challenges have negatively affected insurance firms, adding that the recent increase in insurance firms’ minimum capital requirements exacerbated the situation.

“There are 23 insurance companies on the market though the new capital requirements might see shrinkages of the market,” she said.

“Competition is still high and pressures on rates are still being exerted,” Muradzikwa said.

This comes as Ipec last week shut down short-term insurer SFG Insurance following investigations which revealed that the company had recorded a huge negative solvency ratio as its capital base fell far short of minimum thresholds required for sound operations.

In September last year, Ipec hiked the minimum capital threshold for insurance companies by ten-fold to $3 million.

The regulator also increased the minimum capital requirements for reinsurance companies to $3 million from $400 000, while that of short-term insurance firms was upped to $2 million.

Funeral assurers minimum capital requirements were increased to $3 million from $500 000.

The players were expected to be 50 percent compliant with the new requirements by December 31, 2012 and fully comply by end of 2013.

Meanwhile, Muradzikwa said Nicoz, as of April 2013, recorded growth levels of 29 percent having written gross premiums of $10,5 million compared to $8 million recorded in 2012.

“Coming from the high claims experiences of 2011, the company was conservative in its reinsurance programme for 2012, resulting in a low retention of 56 percent for 2012,” she said in a trading update, adding that the insurance  programmes have been improved on to ensure efficiency and profitability in 2013 and was at 65 percent.

Muradzikwa said a lot of measures were put in place for 2012 to minimise the cost of claims and to ensure that only authentic claims are paid out.

“This saw the loss ratio improving from 56 percent in 2011 to 51 percent in 2012. The same measures are being intensified in 2013 and so far for April 2013, the loss ratios are at 47 percent,” she said.

The company’s expenses were 26 percent to net premium written at April 2013, a significant improvement from 38 percent of December 2012 and 33 percent of April 2012.

“The profitability of the company is currently in line with the budget expectations given the renewal profiles of the business,” she said.

In March, Nicoz announced plans to establish a Mozambique operation as part of efforts to penetrate regional markets and diversify income streams.

“We are expecting our operating licence in Mozambique this year,” said Muradzikwa.

She said the group had done all the necessary paperwork and was ready to open shop.

Nicoz — which has significant interests in insurance and property locally — already holds risk management and technical services agreements in Malawi, Zambia, Angola and Uganda. - John Kachembere

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