PROFITABILITY for the country’s short-term insurers slid 5,12% for the period ending September 30 last year despite growth in business written, a latest sector report has shown.
Report by Bernard Mpofu Chief Business Reporter
According to the Insurance and Pension Commission (IPEC) third quarter report for non-life insurance players, total gross premium written (GPW) during the period under review trended upwards driven by motor and fire insurance which contributed 39,94% and 19,82% respectively.
After tax profit, however, declined to $3,544 million from $3,735 million.
GPW is the amount of premiums customers are required to pay for insurance policies written during the year. This contrasts with premium earned which is the amount of premiums that a company has earned by providing insurance against various risks during the year.
“Total gross premium written by insurers and reinsurers for the nine months ended September 30 2012 amounted to $141,12 million and $69,51 million, up from $116,05 million and $50,48 million respectively reported in the comparative period in 2011,” reads the report in part.
“Out of the total gross premium written during the period under review, $77,04 million was underwritten through insurance brokers. Motor and fire insurance remained the dominant classes of business for the short-term insurance industry.
“Although the sector reported improvements in business volumes, profitability for both the direct short-term insurers and reinsurers deteriorated owing to increase in loss ratios.
- Chamisa under fire over US$120K donation
- Mavhunga puts DeMbare into Chibuku quarterfinals
- Pension funds bet on Cabora Bassa oilfields
- Councils defy govt fire tender directive
Keep Reading
“Total profit after tax for short-term insurers decreased marginally from $3,74 million reported for the year to September 30 2011 to $3,54 million for the period under review, while that of reinsurers decreased from $2,54 million to $0,02 million for the period under review.”
However, total profit after tax for insurance brokers improved from $0,29 million reported for the nine months ended September 30 2011 to $2,06 million for the nine months ended September 30 2012.
According to the report during the period under review, all operational short-term direct insurers and reinsurers, except SFG Insurance Company, complied with minimum regulatory capital requirements. In terms of the solvency ratio, SFG Insurance Company and Tristar Insurance Company, according to the report, did not comply with the regulatory minimum of 25%.
The direct short-term insurers, reinsurers and the insurance brokers, according the report, recorded a combined total asset base of $271,84 million during the period under review. The combined total asset base, the insurance regulator observed, remained skewed towards current assets, which is in line with the short-term nature of non-life insurance business.
“Short-term insurers reported average premium retention ratio of 51,39% during the year to September 30 2012, compared to 50,15% reported in the corresponding period in 2011. Short-term reinsurers, on the other hand, reported an average premium retention ratio of 75,29% for the year to 30 September 2012, up from 66,24% reported for the year to September 30 2011,” the report reads.
Experts say the slow rate of economic growth has resulted in people and business underinsuring.
