Zim insurers rely on foreign markets

HARARE - Zimbabwe’s insurance companies are now relying on foreign markets for survival in the face of worsening economic conditions in the country.

The latest report by the Insurance and Pension Commission (Ipec) shows that non-life reinsurers generated $7,71 million from outside Zimbabwe in the half year to June 2016, indicating a 40,51 percent increase from $5,49 million reported in the prior comparable period.

“Given that the total gross premium written remained largely unchanged — at $60 million — it can be concluded that the decrease in business generated by non-life reinsurers from the local market was neutralised by growth in business generated from outside Zimbabwe,” the insurance regulator said.

This comes at a time when the insurance sector has been ravaged by an accelerating economic decline, with statistics indicating that short-term insurance has a penetration rate of 2,1 percent, one of the lowest in the region.

The industry’s growth is coming under increasing pressure from shrinking disposable incomes, which have been affected by company closures, high unemployment and a tightening liquidity crunch.

Market experts say companies that have survived the deteriorating operating environment have shifted focus to more pressing survival needs than paying insurance premiums.

Meanwhile, the business written by non-life reinsurers remained skewed towards fire, accident and motor insurance.

According to Ipec, the three business classes accounted for a total of 80,71 percent of total gross premium written in the period under review.

“Total profit after tax for non-life reinsurers increased by 38,85 percent from $3,40 million for the half year ended June 2015 to $4,72 million for the half year ended 30 June 2016. The increase in total profit after tax was mainly attributable to the decrease in operating expenses as well as net incurred claims which amounted to $1,98 million and $1,95 million respectively,” read part of the report.

The industry average return on equity and return on assets were 5,96 percent and 3,45 percent for the half year to June reflecting an improvement from 4,45 percent and 2,65 percent respectively reported for the comparative period.

Ipec noted that the major income driver remained the core business of reinsurers such as underwriting, as evidenced by industry average investment income to net premium income which was only 2,33 percent for the half year period under review.

“Income derived from core business is sustainable,” the insurance commission added.

In the six months to June, the industry average loss ratio improved from 37,63 percent for the half year ended June 30, 2015 to 35,20 percent.

On the other hand, the industry average combined ratio improved significantly from 92,73 percent last year to 86,90 percent for the period under review owing to the decrease in net incurred claims and operating expenses.

Reinsurance firms operating in Zimbabwe include Baobab Reinsurance, FBC Reinsurance, Grand Reinsurance, ZB Reinsurance, Colonnade Reinsurance, FMRE Property and Casualty, Tropical Reinsurance and PTA Reinsurance.

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