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Business Reporter

The Insurance and Pensions Commission (Ipec) wants funeral assurers to adopt prudent investment practices to make sure they continuously hold assets that match their liability profiles.

According to Ipec, the insurance sector continues to hold investments in equities, cash and money market instruments in very small proportions relative to the overall asset portfolio.

In its 2022 fourth-quarter funeral assurance sector report, Ipec said insurers and pension funds should respect the choice of the policyholder at the claim stage, on whether to be paid cash or to be provided with services.

“Furthermore, funeral assurance players are required to always adhere to the requirement of Section 29 of the Insurance Act by making sure that policyholders’ and shareholders’ assets are kept separately,” Ipec said.

For the quarter under review, total assets for the funeral assurance sector increased by 5,31 percent from $5,80 billion as at 30 September 2022 to $6,10 billion. According to the industry report, the asset base of the sector remains highly concentrated in operational property which constituted 67,55 percent of the total assets.

“This concentration in operational property mainly arises from the need by the sector to invest in assets that are used for funeral service provision,” Ipec said.

As of December 31, 2022, seven out of the eight funeral assurers were compliant with the regulatory minimum capital requirement (MCR) of $62,50 million as required and regulatory action is being taken on the non-compliant entity.

“There has been an increase in the average minimum capital compliance level from 75,00 percent as at December 31, 2021 to 87,50 percent as at December 31, 2022.

“The increase was attributed to inflation-driven revaluation gains on the sector’s assets, at the back of fixed capital requirements,” it said.

Ipec said all players were required to be fully capitalised at all times while industry operators were also required to adequately prepare for the implementation of the new risk-based capital regime.

“To ensure the resilience of the industry, the Commission awaits the gazetting of United States Dollar indexed minimum capital regulations. The proposed USD indexed minimum capital requirement for funeral assurers is US$750, 000,” Ipec said.

For the year to December 2022, the funeral assurance sector recorded a nominal gross premium of $5,44 billion, an increase of 307,35 percent from $1,33 billion reported for the year ended December 2021. After adjusting for inflation, the sector’s gross premium written increased by 18,50 percent from $1,33 billion to $1,58 billion during the period under review.

In terms of foreign currency business, the sector wrote gross premiums worth US$494 929,23 and South African rand (ZAR) 285,873.69 for the year ended December 31, 2022.

US dollar GPW increased by 518,09 percent from US$80,074.58 recorded in 2021 while rand GPW increased by 375,77 percent from ZAR60,086.37 recorded in 2021.

For the year under review, new business contributed 2,66 percent of GPW and the remaining 97,34 percent was from recurring business.