MOST players in the life assurance sector are failing to comply with prescribed assets regulatory requirements, with only two out of 11 life insurers having complied in Q3 2022 despite the directive by the regulator for all entities to conform.
Prescribed assets are bonds or securities issued by the government, local government, quasi-government organisations or any other bond that may be accorded the prescribed asset status.
In its Q3 2022 life report, Insurance and Pensions Commissions (Ipec) said it was expecting life assurance entities to invest in prescribed asset-accorded value-preserving projects as a way of ensuring both compliance and policyholder value preservation.
“Two out of the 11 life assurers were compliant with the minimum prescribed asset ratio of 15% of adjusted assets. Nhaka and Fidelity Life Assurance companies reported prescribed asset ratios of 82,4% and 19,3% respectively. The commission directs all entities under the life assurance sector to comply with all regulatory requirements, statutes, directives, guidelines, and circulars on an ongoing basis. The sector is also encouraged to be highly-innovative in terms of both product development as well as re-alignment of their business models to adapt to the unfolding realities in the market environment,” Ipec said
The regulator also underscored the need for the life assurance sector players to continuously strengthen their balance sheets in order to withstand exogenous shocks that could have a devastating impact on their financial stability.
During the period under review, total investments in prescribed assets by the life assurance sector amounted to $17,6 billion translating to a sector compliance level of 8,24%.
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With the introduction of gold coins, which have been accorded prescribed asset status, Ipec said it expected compliance ratios to gradually improve.
“Those entities who have invested in gold coins are advised to notify the commission through their quarterly returns. Prescribed assets investments are an important resource mobilisation tool for funding projects of national importance for socio-economic development,” Ipec noted.
Two out of the four life reassurers were compliant with the minimum prescribed asset threshold of 15% of total adjusted assets.
Total investments in prescribed assets by the life reassurance sector amounted to $571,12 million, translating to an average compliance level of 50% of the sector.
“The introduction of gold coins, which have been accorded prescribed asset status will likely improve compliance for the remaining two players,” Ipec said.
“The commission requires the two non-compliant life reassurers to follow their compliance plans to achieve compliance.”
During the period, the life assurance sector reported a gross premium written (GPW) of 37,5 billion, representing a nominal increase of 220% from $11,7 billion reported in the comparative period in 2021.
The sector experienced inflation- adjusted negative growth in GPW of 16% attributable to premium adjustment in line with rising inflation.
“The two classes which contributed to the significant increase are funeral assurance and group life assurance business. GPW for life reassurers grew by 196% in nominal terms, from $396,1 million reported for the 3 quarters that ended on 30 September 2021 to $1,173 billion for the three quarters that ended on September 30 2022,” Ipec revealed.