Revamping Risk Management: How Malawi’s New Insurance Law Impacts Business Credit and Investment

Key Business Points

• The Insurance Act 2025 introduces a cash-and-carry regime, eliminating the purchase of insurance on credit, and insurers have until April 30, 2026 to comply.
• The new law makes insurance policies valid only upon payment, introducing the principle of “no premium, no cover”, to address systemic weaknesses that exposed insurers to insolvency risk.
• Insurance intermediaries, such as brokers, are now subject to strict rules, including prohibitions on receiving cheques or electronic payments into their own accounts, and must remit cash received within 24 hours without deductions.

The insurance industry in Malawi is undergoing a significant transformation with the introduction of the Insurance Act 2025, which aims to address systemic weaknesses that exposed insurers to insolvency risk and left consumers unprotected. The new law, which came into force on May 1, 2025, fundamentally changes premium payment practices by making insurance policies valid only upon payment. This means that insurers can no longer offer credit periods for premium payments, and customers must pay upfront to receive coverage. As Patrick Mpaka, a legal expert, noted, "Payment of premium is the lifeblood of insurance contracts and insurance companies. Without effective rules on premium collection, insurers are exposed to insolvency risk, consumers are left unprotected, and disputes can multiply."

The old system, which allowed insurers to offer a credit period of up to 30 calendar days for premium payments, created risks of default, disputes, and liquidity gaps. The 2025 Act eliminates this practice entirely, with Section 53 and 54 stipulating that providing insurance cover on credit is now an offence, with insurers caught in the practice liable to administrative penalties. Insurance intermediaries, such as brokers, are also subject to strict rules, including prohibitions on receiving cheques or electronic payments into their own accounts, and must remit any cash received within 24 hours without deductions.

The Insurance Institute of Malawi Annual Lake Conference brought together industry captains, officials from the Reserve Bank of Malawi, and international delegates to discuss the implications of the new law. Ronald Mangani, the Guest of Honor at the conference, called on the insurance industry to innovate and adapt to survive global disruptions. As he noted, "The question is no longer whether the insurance industry must change. The question is, how fast can the industry innovate, how deeply can it adapt, and how effectively can it thrive whilst staying true to the promise of providing protection against adverse eventualities to customers." The conference theme, “Innovate, Adapt, Thrive: Survival of Insurance in the Age of Global Disruptions”, reflects the need for the industry to evolve and respond to changing market conditions.

In Chichewa, this concept is often referred to as "Kugwiritsa ntchito", or innovating and adapting to new circumstances. As the insurance industry in Malawi navigates this new regulatory environment, it is essential for companies to be proactive and "Kukhazikitsa", or to thrive, in the face of global disruptions. By doing so, they can provide better protection to their customers and contribute to the growth of the economy. The Insurance Act 2025 presents both challenges and opportunities for the industry, and it remains to be seen how companies will respond to these changes. However, one thing is certain – the insurance industry in Malawi must innovate and adapt to survive and thrive in the age of global disruptions.

Source Link

What are your thoughts on this business development? Share your insights and remember to follow us on Facebook and Twitter for the latest Malawi business news and opportunities. Visit us daily for comprehensive coverage of Malawi’s business landscape.