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Business Reporter
The Insurance and Pension Commission has threatened to take legal action against non-life insurance firms that have not complied with the mandatory minimum prescribed assets ratio of 5 percent after it emerged that only one out of the 25 operating insurers had complied.
According to the short term (non-life) insurance report for the quarter ended March 31, 2014 all the short term underwriters except FBC Reinsurance Company were not compliant with the prescribed assets ratio.

IPEC added that only six non-life insurers out of 25 had investments in prescribed assets while the industry average prescribed asset ratio remained largely unchanged at 0,50 percent.

“All insurers are encouraged to make efforts to comply with the prescribed assets ratio, failure of which the Commission will take necessary regulatory action,” IPEC said.

Meanwhile, the industry average ratio of premium debtors to total assets deteriorated marginally from 23,83 percent as at December 31, 2013 to 25,58 percent during the period under review. The commission said Allied Insurance Company, Heritage Insurance Company and Tristar Insurance Company reported the highest premium debtors to asset ratios.

High premium debtors to total asset ratios compromise asset quality of an insurer, as well as its liquidity and solvency.

The non-life insurers, however, reported an improvement in premium collection rate as evidenced by the decrease in premium debtors to gross premium from 69,57 percent for the quarter ended March 31, 2013 to 65,21 percent during the quarter under review.

“However, some insurers were yet to receive premium for business written during the year ended 31 December 2013 as shown by the ratios which were above 100 percent.

“KMFS Insurance Company, Allied Insurance Company and Altfin Insurance Company reported the poorest collection rate compared to their peers,” IPEC said.

IPEC said there were no significant changes in the risk appetite for short term underwriters as evidenced by negligible changes in industry average retention ratios with direct underwriters reporting an average retention ratio of 50,30 percent during the quarter under review.

The development comes amid revelations that only 12 out of 25 operating insurance companies have complied with the minimum capital requirement of $1,5 million by the end of last month.

According to IPEC the 13 non-compliant insurers reported capital levels ranging from $520 000 to $1,49 million.

“The average capital maintenance ratio for the 13 insurers was 73,76 percent as at March 31, 2014. This implies that, on average, the capital position of the 13 insurers fell short of the minimum capital requirement by $390 000,” the commission said.