General insurance profits soar to K1.5 billion

General insurance industry profits rose to K1.5 billion in 2012 from a loss of K18 million in 2011, the Reserve Bank of Malawi (RBM) Pensions and Insurance Annual Report shows.

The report released last week indicates that the industry returned to profitability in 2012 after a poor performance in 2011 with the significant improvement being boosted by a strong performance in investing activities.

The industry which includes insurance in motor, fire and personnel accident experienced a rise in total investment income by 230.6 per cent to K2.1 billion from K638.2 million in 2011 regardless of policy changes including the devaluation and floatation of the kwacha and consequent general economic problems.

However, the registrar of financial institutions who is also RBM governor, Charles Chuka, in the report notes that following the implementation of the Premium Payment Directive, general insurers are now able to collect and invest their premiums.

“The sector nevertheless still faced challenges in meeting the minimum solvency requirements as a result of which a number of insurance companies were placed under the registrar’s enforcement action. Towards the end of the year, most of the ailing insurance companies managed to recapitalise to meet minimum requirements. Thus, there is need to improve the solvency regime for general insurance to enable the insurers retain more risk and underwrite larger risks to boost their underwriting results,” said Chuka.

The RBM report, however, notes that the solvency ratio of the general insurance industry stood at 24.3 per cent as at December 31 2012 against the regulatory minimum requirement of 20 percent, improving by 15.3 percent recorded in 2011.

But in September, Nico General Insurance Company—with largest market share at 38.4 percent, according to the report—chief executive officer Eric Chapola, speaking during a presentation of the company’s performance, alleged fraud in the sector arguing the malpractice has driven up operating costs which is likely to lead into a rise in their premiums by over 30 percent in 2014.

Chapola explained that some lawyers claim for injuries that are not there or claim for injuries more that have been suffered.

In terms of gross premiums, the report adds that the written amounts went up by 33 per cent to K12.9 billion in 2012 compared to K9.7 billion in 2011 10.9 percent growth rate recorded in 2011.