Liquidity challenges hit life assurers

HARARE - New business written by the life assurance sector for both individual life and group business decreased by 26 percent and two percent respectively in the quarter to September 2017 on the back of the deepening liquidity crisis, the Insurance and Pensions Commission (Ipec) has said.

In a report, Ipec pointed out that Zimbabweans were not prioritising life assurance due to increasingly difficult economic conditions.

“During the quarter under review the new business written by the life assurance sector for both individual life and group business decreased by 26 percent and two percent respectively. The liquidity challenge is largely responsible for the decrease,” it said.

“In terms of competing interests, insurance ranks low on the priority list of customers,” Ipec said.

However, an increase of 18 percent was recorded on recurring business for the individual business while a two percent decrease was recorded for group business.

In the period under review, the majority of life assurance institutions are compliant with the minimum capital requirements and prescribed asset status.

“The remaining noncompliant assurers are instituting various measures towards compliance. The life assurance industry was made up of 1 594 agents, 11 direct life assurance companies, four composite reassurance companies and one life reassurer as at September 30, 2017.

“During the period under review the aggregate Zimbabwe life assurance industry gross premiums written totalled $272 million with life assurers accounting for $266 million, an increase of four percent over the 257 million written during the previous reporting period,” said Ipec.

Reassurers accounted for $5,9 million, an increase of one percent over $5,9 million in premiums written during the previous comparative quarter.

“Total assets of life assurers and life reassurance increased by 80 percent from $1,5 billion in the third quarter of 2016 to $2,8 billion in the current comparative quarter,” the watchdog said.

The life assurance sector’s average prudential liquidity ratio was 433 percent during the period under review.

“The ratio implies that the industry has sufficient assets to meet claims when they fall due. The industry also recorded a capital to liability ratio of 181 percent in the current reporting period giving a growth of 113 percent largely as a result of the increase in money markets.

“Investments in prescribed assets for both life assurance companies and life reassurers rose by 33 percent as at 30 September 2017,” Ipec said.

Capital for life assurance companies increased by 139 percent from $218 million to $520 million while that for life reassurers rose by 81 percent from $13 million to $23 million between September 30, 2016 and September 30, 2017.

“The combined ratio for life assurance companies showed no change and stood at 80 percent as at September 30, 2017 against 80 percent recorded as at September 30, 2016,” the regulator said.

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