90% Of Risks In Ghana Insured Abroad

5 February, 2019

About 90 per cent of insurable risks in the country are insured abroad, largely due to inadequate capital in the local industry to underwrite those risks, the Commissioner of Insurance at the National Insurance Commission (NIC), Mr Justice Yaw Ofori, has revealed. This means that about 90 per cent of revenue arising from the insurance business that could have been retained in the economy is repatriated abroad. Given that the repatriation of insurance business compounds the challenges that the local currency, the cedi, and the economy in general endure under capital flight, Mr Ofori told the GRAPHIC BUSINESS on January 30, that the commission had been concerned about how to reverse the trend and to help 'domesticate' the revenue. The insurance industry currently has 143 companies of which 56 are insurers, three are reinsurers, about 81 are insurance brokers and three are reinsurance brokers. Exporting dollars On how to address the strong growth in capital flight, the commissioner said the NIC found that one solution was to get the various players to build more capital to be able to take on more risks. As a result, he was hopeful that the planned recapitalisation of the industry would help reverse the capital flight menace. ''We need to have stronger companies that retain much of the risks so that we do not always export our premiums. ''What is happening right now is that because we are not very solvent, over 90 per cent of the risks here are being sent outside. This means we are exporting dollars," he said. In the insurance business, a company's ability to underwrite higher risks is dependent, largely, on the. size of its capital. The capital serves as a buffer on which the insurers fall on when claims fall due. Data from the commission showed that in the first half of 2018, the gross premiums of life insurers stood at GH¢951.08 million while that of insurers was GH¢108 billion. This means that the gross premium of the insurance business in the first six months of the year was GH¢2.03 billion. New capital Mr Ofori had earlier told the paper that the NIC, which regulates the insurance business, proposes to jack up the minimum capital of insurers by more than 233 per cent. - from GH¢15 million to GH¢50 million. That of reinsurers is expected to rise from GH¢40 million to GH¢125 million (212 per cent increase) while that of insurance brokers would move to GH¢500,000, a 66.7 per cent increase from the present GH¢300,000. Under the proposal, which currently before the Ministry of Finance, the capital of reinsurers brokers (broker-re) would, however, remain unchanged at GH¢lmillion, the Insurance Commissioner said. Technical CapacityExpatriating further on the need to build the financial clout of the industry, that the inability of local insurers and their reinsurers to underwrite a chuck of risks was in spite of the fact that the personnel and companies have the requisite technical expertise to be able to handle all forms of issues pertaining to insurance. "For the technical know- how, we have it. We have a lot of experts and learned people in our market," he said, explaining that what was still lacking was the capital to be able to underwrite high risks, earn the premium and be able to pay claims when necessary. "The question is; how . come when you want to insure the risks outside, companies are ready to take them? "It means they are good risks. So, why do we not keep them here:' he asked. When combined, the capital of all the companies in the country will not be up to one per cent of the capital of a company in East Africa, the Insurance Commissioner said: "It means that we do not have the capacity. We have a lot of small, small ones that cannot really take much of the pie. We want them to get bigger," he said. By Maxwel1 Akalalare AdombilaSource: Business Graphic

Disclaimer: "The views expressed on this site are those of the contributors or columnists, and do not necessarily reflect insureghana's position. insureghana.com will not be responsible or liable for any inaccurate or incorrect statements in the contributions or columns here."