Insurance industry loss hits K2 billion

The insurance industry posted a K2 billion combined underwriting loss in 2023, with 60 percent of the incurred losses coming from motor accidents, workplace injury and death claims.

Insurance Association of Malawi outgoing president Abdul Magid Dyton said in an interview yesterday that the loss, which is a rise from the previous year’s K91 million, has been aggravated by economic pressures and fraud.

He said: “The factors that contributed to the losses include national economic pressures coming from currency devaluations in 2022 and 2023, high inflation environment which led to an increase in claims costs, court awards and operating expenses.”

Dyton, who is also Libertas General Insurance Company Limited chief executive officer, said despite the loss, the industry remains strong and stable as the underwriting losses were offset by investment income buoyed by the high interest rates prevalent in the investment market.

For a turnaround, he said the industry has intensified insurance awareness, limiting the provision of workers’ compensation insurance, engaging stakeholders on taming insurance fraud, bringing innovations in the market and negotiating with stakeholders on weather-related insurance product pricing to reach out to more beneficiaries.

The 2023 subdued performance comes on the back of Reserve Bank of Malawi (RBM) data showing that in 2022, gross premium written, the sum of both direct written and assumed written before deducting ceded reinsurance, grew by 8.4 percent, year-on-year, to K71 billion.

Motor insurance remains the biggest class of insurance business contributing 52.4 percent of the gross written premiums compared to 53 percent in 2021.

In its December 2023 Financial Stability Report, RBM indicated that as at the end of last year, two out of eight general insurers failed the solvency test due to under-capitalisation and weak assets, which the central bank said could affect their ability to pay claims or lead to complete failure.

In the life insurance sector, the central bank noted that contagion and market risk remained high, observing that life insurance is crucial for mobilising resources and providing long-term finance for the capital and banking sectors.

On June 24, RBM launched the Risk-Based Supervision (RBS) Framework for local insurance companies, a move expected to enhance resilience and stability within the insurance industry.

RBM Governor Wilson Banda said during the launch in Blantyre that with only 15 insurance underwriters against a finite human resource capacity, the task of ensuring compliance with all rules and regulations has been daunting and often did not achieve the level of standard and conduct required of insurance underwriters.

The insurance sector is crucial to the economy, serving as a vital channel for households and businesses to transfer risks to entities better equipped to manage them, according to experts.