By Favour Nnabugwu
Ghanaian insurance market’s gross premium increased by 19 percent in 2021, according to provisional data released by the National Insurance Commission (NIC).
Premiums grew in 2021 on the back of the digitisation drive by NIC from a total of GHS4.2bn ($401m) in 2020.
Whereas non-life insurers retained 70.0% of premiums, life insurers retained 89.0%, reported Ghanaian Times quoting the NIC. The relatively lower retention ratio for non-life insurers, the NIC pointed out, continues to reflect the nature of risks underwritten and the high gross premiums relative to the capital ratio in the industry.
On the other hand, the high retention ratio among life insurers can be generally attributed to compliance with the NIC’s reinsurance guidelines, and specifically to the demand for savings-linked insurance products and the long-term nature of their actuarial liabilities.
Return on equity improved significantly in the life insurance sector due to investment income that compensated for the poor underwriting results in the sector. In contrast, the non-life sector witnessed a slump despite improved underwriting and investment returns.
The fall in return on equity was partly due to the implementation of new Minimum Capital Requirements, which pumped up the equity base of most non-life insurers.
Insurers are expected to build on the recapitalisation exercise to institute efficient and effective cost measures to improve underwriting results in the near to medium term.
In the medium to long term, it is expected that improved capitalisation will lead to a higher retention ratio in the non-life sector while encouraging the underwriting of pure risk insurance products in the life sector.
The total capital base of the insurance industry grew by 33.0% to GHS3.88bn at the end of 2021, from GHS2.91bn 12 months previously.
This improved the Capital Adequacy Ratio (CAR) in both the life and non-life sectors of the insurance industry. At the end of 2021, the industry average CAR improved to 456.0% and 524.0% in the Non-Life and Life sectors, respectively.
The NIC, as of 31 December 2021, had approved GHS278m of overseas reinsurance premium transfers.