Life assurers ditch reinsurance

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PHILLIMON MHLANGA

Zimbabwe’s life assurance companies deployed about 1,5 percent of their gross written premiums (GWP) towards reinsurance arrangements during the nine months to September 2018,which has far reaching consequences in the case of failure by firms to shoulder costs of claims. The industry invested $4,5 million out of the gross premium written of $300,69 million reported during the reviewed period.

This means that life assurers are not protecting themselves from the dire consequences. Reinsurance is insurance bought by an insurance or assurance company to cover claims in times of distress.

Consequently, the sector’s overall retention ratio was 98,49 percent, meaning the majority of life assurers in Zimbabwe, which are still bursting with cash from premiums paid by life insurance policy holders, lack prudent reinsurance arrangements. The life assurers sub-sector, which has 11 players, reported a profit after tax amounting to $314,85 million for the nine months to September 2018.

Although this translates to a decrease of 67,85 percent from $979,27 million reported in the corresponding period in 2017, the sector is still awash with cash. But, it has chosen to retain almost 100 percent of earnings. Players in the sector include Old Mutual Life, Nyaradzo Life, CBZ Life, Econet Life, Fidelity Life, First Mutual Life, ZB Life, Zimnat Life and Getsure Life.

In its latest report released this week, the Insurance and Pension Commission (IPEC) raised disquiet on the development saying industry players should “periodically assess their capacity to retain risk and review their reassurance arrangements accordingly so that they are not exposed in times of bad claims experience”.

This, IPEC added, would help improve the industry’s reputation and helps in attracting the much needed investments into the industry.

“Proper management of business risk is of paramount importance for life assurance industry players as this helps to improve reputation of the industry and also in attracting investments into the industry,” IPEC said.

The $300,69 million GPW achieved during the period under review represents a 13,06 percent growth from $265,95 million recorded in the comparative period in 2017.

The growth was largely driven by funeral assurance and fund business because confidence in other type of life assurance remained low.

It is also understood that the growth in the in the funeral assurance business was a result of a “desire by individuals to have decent burial for their loved ones and themselves” given the prevailing economic challenges.

IPEC said it has also noted the emergence of the United States denominated policies, on which life assurers may not have yet accumulated adequate critical mass to enable diversification of underwriting risks. Out of the 11 life assurers registered, eight reported capital positions compliant with the minimum capital requirement of $5 million during the reviewed period.