Mixed performance for insurance sector

Mixed performance for insurance sector

Post was last updated: May 15, 2020

MANDALA—Covid-19 still a threat

The insurance sector registered a mixed performance in 2019 witnessed by growth in asserts and premiums written while struggling with solvency and liquidity.

This is contained in a Financial Industry Sector annual report for the year published by the Reserve Bank of Malawi (RBM) on Tuesday.

The report further highlights a decline in profit after tax in the life insurance sector.

“The general insurance sector grew in terms of total assets, premium written and profitability. Total assets grew by 12.1 percent to K55.8 billion while premium written grew by 13.4 percent to K54.6 billion. Nonetheless, the sector continued experiencing solvency and liquidity vulnerabilities owing to inadequate capital in a few insurers and high insurance receivables across the sector.

“The life insurance sector assets continued to grow on account of increases in gross premiums and investment income. Gross premium grew by 20.1 percent to K35.8 billion. In addition, the sector registered an after tax profit of MK8.5 billion, albeit lower than MK9.1 billion registered in December 2018. In terms of solvency, all but one life insurer met the minimum requirements at company level while two life insurers failed to meet the solvency requirements at life fund level,” reads the report in part.

In an interview president of the Insurance Institute of Malawi, Donbel Mandala, said there is hope for stability in the general insurance sector.

“The general insurance market grew marginally that is gross written premiums on average around 12 percent in first quarter and expectations were that by close of the year the market would grow by around 15 percent which is slightly above last year’s growth of 13.4 Percent.

“However the Covid-19 effect will have some significant impact on the premium and profitability growth of the industry due to various reasons ranging from the slowdown of the economy, the costs of claims especially motor due to increased costs of imported spare parts, fraud and others,” Mandala said.

He added that the industry is working on various mitigating measures and other costs effective alternative means of serving the customers to ensure efficiency.

He said the market will introduce some digital solutions on motor business and individually the companies are also working on other various digital solutions

Group Managing Director of Nico Holdings Limited, which has general and life insurance companies, Vizenge Kumwenda, said 2020 will be a difficult year as it has presented an unprecedented situation.

“At the begging of the year we were upbeat that we should do better than last year than what we did in 2019, now we are assessing the situation as we are going along, however, we are hopeful that we will sail through but I can only say we will take it one day at a time,” Kumwenda said.

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