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The Insurance and Pensions Commission (IPEC) is working on enforcing insurance companies’ compliance on the submission of US dollar returns for their foreign currency denominated business.

This comes as only three short term insurers submitted foreign currency denominated returns for the nine months to September 30, 2020.

The insurance sector received nod to accept premiums in US dollars. But according to the regulator’s Short Term (Non Life) Insurance Report for the nine months to September 30, 2020, the rest of the insurers did not comply with the requirement to submit their foreign currency denominated returns.

According to the report, the three companies which complied wrote gross premiums amounting to US$13,32 million.

“The rest of the industry players did not respond to the Commission’s repeated calls for the filling of returns relating to foreign currency denominated business in terms of Circular 15 of 2020.

“The Commission will, accordingly, institute appropriate regulatory sanctions to enforce compliance,” said IPEC.

The report also shows that fire and motor insurance business classes contributed 65,64 percent of the total gross premium written in foreign currency by the insurance players during the period under review.

For short term reinsurance companies, only five out of the eight short term re-insurers submitted their foreign currency denominated quarterly returns in line with the requirements of circular 15 of 2020.

These wrote US$33,8 million during the period under review. Overall, total gross premium written by short-term insurers for the nine months under review went up 634 percent to $4,63 billion, compared to $629,97 million reported for the comparative period in 2019.

IPEC attributed the significant nominal growth in gross premium written mainly to insurance premiums tracking inflation following currency reforms.

Motor, fire and engineering insurance business classes were the major sources of the sector’s gross premium written accounting for 78,95 percent of the overall business written during the period under review.

In terms of capitalisation, all the 18 short-term insurers are compliant with the minimum capital requirement of $37,5 million.

At $6,76 billion, total assets for short-term insurers increased by 21 percent from $5,56 billion reported as at June 30, 2020 on the back of property re-evaluations, cash, cash equivalents and premium debtors which collectively accounted for 61 percent of the assets.

According to the report, premium debtors slightly decreased by 1,82 percent to $1,52 billion from $1,54 billion as at June 30, 2020.

The slight decrease is reflective of the price and exchange rate stability witnessed during the last three months following the introduction of the Dutch auction foreign exchange system.

“The commission is, however, concerned by the high level of the premium debtors as this negatively impact on insurers’ capacity to meet policyholders’ claims as they fall due.

In this regard, insurers are urged to strengthen their underwriting to reduce credit risk,” said IPEC.

The report also shows that total business written by re-insurers rose 599 percent to $2 billion from $294,32 million reported during nine months in the prior year.

The increase in the volume of business by re-insurers is in line with the 634 percent nominal growth in the business written by direct short term insurers during the two comparative periods.