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Life companies wrote $86 million in net written premiums in the first quarter to March 31, 2016 reflecting an 18 percent growth from $73 million recorded in the same period last year, the Insurance and Pension Commission has said. In the Commission’s first quarter report for life assurance companies, 81 percent ($70 million) of net premium written was attributable to the top three companies Old Mutual, Nyaradzo and First Mutual thereby showing that the life market remains highly concentrated.Life companies realised $88 million in gross premiums for the period compared to $74million in March 2015. $69million was made up of recurring business while the balance of $19 million was new business showing that the players’ efforts in securing new business streams are growing.

Employee benefits for the period contributed 65 percent of the business and the balance was individual lines.

IPEC reported that life companies realised $88 million in gross premiums for the period compared to $74million.

Gross written premium was mainly drawn from fund business ($42million), group life assurance policies ($9million) and funeral cover ($27million). These product lines contributed 90 percent of gross written business.

“The pre-dominance of corporate business continues a signal of constrained disposable incomes which curtailed demand for other insurance products. We continue to encourage the industry to compete on product innovation heavily geared towards micro-insurance,” said IPEC.

The industry reported that total policies that were not-taken up amounted to $110 000. Lapse ratios were as high as 51 percent and mainly related to individual lines business.

High lapse ratios are a sign of mis-selling practices which is punishable at law. The Commission is coming up with practice notes for players to address such anomalies.

For the period under review, life companies paid $46 million in net claims compared to$33 million in March 2015 while total claims expenditure grew 41 percent against the net premium growth rate of 18 percent reflecting an unfavourable imbalance given the challenging investment environment.

The major claim types were surrenders, maturity and death. Outstanding claims were $3 million with 50 percent of the claims aged more than 31days.

“Prompt payment of claims is not only a competitive tool but also a requirement in terms of the law, failure of which IPEC may apply penalties in terms of the law,” said IPEC.

The life players reported a debtor’s book worth $5 million out of gross premium written of $88 million, implying that the premium collection rate was 94 percent which is deemed reasonable in view of the challenging liquidity environment prevailing currently.

Except for two players, the life insurers were adequately capitalised as prescribed by Statutory Instrument 21 of 2013. Care and maintenance measures continue to be applied especially to Altfin Life to protect policyholder values and interest.

The industry reported combined capital to liability and liquidity ratios of 22 percent and 33 percent respectively.

On reinsurance, IPEC said the Commission continues to encourage players to reinsure risk business which is in excess of their capacity or scope of cover.

“Reinsurance must be recognised as a prudent risk sharing mechanism by the industry rather than an optional risk management measure especially given our current challenging operational as well as investment environment,” said IPEC.

Reinsurers wrote $1,4million in Net Written Premiums during the period under review compared to $1,86million of the same period last year.

This translated into a negative 22 percent growth from the comparative quarter last year despite FBC Re coming on board by opening a life reinsurance division. This could be attributable to limited local growth opportunities and increased capacity to retain risks on their balance sheets.

Total costs for reinsurers grew four percent on prior year to $1,65 million from $1,59 million while net premium written declined 22 percent. Consequently, reinsurers made an underwriting loss of $213 000 and a combined ratio of 114 percent.

For the period under review, FML Life and Health was undercapitalised but they have since merged with First Mutual Property and Casualty to form First Mutual Reinsurance Company Limited.

Reinsurance players reported a current ratio of 200 percent and a capital to liability ratio of 123 percent reflecting excess capacity to meet current obligations on demand.

On the market share, Baobab Life wrote 51 percent of net written business while the balance was shared between FM Re Life and Health (46 percent) and FBC Re (three percent).

IPEC encouraged reinsurers to champion the introduction of new innovative products such as micro-insurance products using their international expertise and experiences.

The industry was fully compliant with prescribed asset requirement following industry wide engagements and imposition of fines.

“Players are encouraged to maintain and improve their compliancy levels in order to avert the risk of flouting Statutory Instrument 2 of 2016 as the prescribed paper matures,” said the Commission.