Short-term insurers yet to meet new capital levels

Walter Muchinguri Assistant Business Editor
At least half of the 20 registered short–term insurers operating in the country had not yet raised their minimum capital levels to $2,5 million by the December 31, 2016 deadline that was set by Finance and Economic Development Minister Patrick Chinamasa in last year’s budget.

According to the latest short-term insurance report for the quarter ended December 31, 2016 that was issued by the Insurance and Pension Commission, only 11 of the 20 registered insurers were compliant with the proposed $2,5 million capital level. IPEC, however, said all but one insurer were compliant with the previous minimum capital requirement of $1,5 million.

“All the registered non-life insurance companies, except Credit Insurance Company, reported capital positions which were compliant with the minimum capital requirement of $1,5 million, as at 31 December 2016. The reported capital positions do not, however, account for non-admissible assets. The Commission is in the process of promulgating a Statutory Instrument that will see an upward review of minimum capital requirements for non-life insurers to $2,5 million as well as accounting for admissible assets for the capital computations,” IPEC said.

Minister Chinamasa last year proposed to increase minimum capital requirements for short-term insurers and funeral assurers from $1,5 million to 2,5 million and Life Assurers from $2 million to $5 million.

The upward review of the minimum capital requirements was expected to improve underwriting capacity and contain insurance business within the country. At least four companies New Reinsurance, Global insurance, KMFS and Navistar were deregistered last year for failing to meet minimum capital requirements and failing to pay claims.

IPEC’s former commissioner Mrs Marnet Mpofu last year indicated that not all companies will be able to meet the new minimum capital requirements by the end of the year deadline and IPEC was engaging the Finance Ministry to be patient with the industry.

“We know that not all companies will meet this requirement by year-end so we are going to be lenient to those companies that would have not met the requirements but whose minimum capital is close to the new thresholds because we do not want to stifle them,” she said at the time.

Meanwhile the shift from hard copy insurance cover notes to electronic ones is now bearing fruit with motor insurance premium driving growth in gross premium written for the short term insurance industry for the period under review.

Total gross premium generated from motor insurance increased by $7,41 million from $85,74 million for the year ended December 31, 2015 to $93,14 million during the year under review while total gross premium written (GPW) for the short term insurance industry amounted to $215,97 million for the year-ended December 31, 2016 compared to the audited GPW of $213,44 million reported during the previous year.

“The increase could be explained by the introduction of electric cover notes which meant that most motor vehicles previously insured using fake cover notes are now insured with genuine electronic cover notes and a natural growth in vehicle population,” IPEC said.

The contribution of the short-term industry to the country’s GDP as measured by the insurance penetration ratio remained constant at 1,52 percent while the average per capita spending on non-life insurance as measured by the non-life insurance density decreased marginally from $15,.31 for the year ended December 31, 2015 to $15,17 for the year under review.

Total assets for non-life insurance companies increased by 5,01 percent to $197,43 million during the period under review from $188,01 million as at 30 September 2016. The increase in total assets was mainly driven by an increase in total premium debtors from $30,09 million as at September 30, 2016 to $36,81 million during the period under review.

“The observed increase in total assets during the quarter under review is in line with the trend observed since 2012, which is attributable to tobacco insurance, where premiums are only collected in arrears at the end of the tobacco farming season,” IPEC said.

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