29 % Negative growth in Life Reinsurance Business … as Regional giants fail to make a difference

29 % Negative growth in Life Reinsurance Business … as Regional giants fail to make a difference

By Donald Chidoori

The entry of two regional giants, Grand Re and Zep Re, into the life reinsurance business did not have any impact on the total business written by life reinsurers, the latest Ipec Life Report shows.

Instead their entry was met with a dip in premiums written by life reinsurers for the period under review.

In the period ending 30 June 2017, reinsurers wrote business amounting to USD3 million in net premiums compared to USD3.8 million in the same period last year.

“This translated to a negative growth of 21% despite Grand Re and Zep Re coming on board,” Ipec said.

As at 30 June 2016, there were three (3) life reinsurers namely Baobab Re, FBC Re, and FM Re.

The number increased to five (5), with the entry of Grand Re and Zep Re into the fray; as pundits expected growth in business written.

Grand Re and Zep Re managed to write business amounting to $85 thousand and $545 thousand, respectively.

As expected there was a dip in business written by other life reinsurers as Grand Re and Zep Re ate into their pie. FM Re was the most affected with a negative growth of 21%.

The biggest life reinsurer Baobab Re had a negative growth of 30% while FBC had a negative growth of only 3%.

Compliance in Prescribed Assets

Grand Re and Zep Re were not fully compliant with the prescribed assets requirement.

Life Reinsurers are expected to have 7.5% of total assets as prescribed assets; however the two firms, with 0% and 0% respectively, did not have any prescribed assets.

Baobab Re, FBC Re, FM Re, Zep Re and Grand Re complied with prescribed asset ratios of 8.15%, 9.46%, 14.98%, respectively.

“The Commission encourages players to be compliant with the prescribed asset and all regulatory requirements,” Ipec said.

The commission says it will not hesitate to deal with delinquent firms.

The Commission will not hesitate to take regulatory action against noncompliant players,Ipec warned.

Capitalization and Solvency Indicators

As at 30 June 2017, all composite life reinsurers were fully capitalized in terms of statutory instrument 21 of 2013, however these players are working towards compliance with the new statutory instrument 95 of 2017.

SI 95 of 2017 requires life reinsurers to have a minimum capital of  $5 million.

Players reported a current ratio of 154% which is a decrease from 200% the previous year and a capital to liability ratio of 158%, which is an increase from 123%.

Meanwhile  due to a current improvement in performance of the stock and property markets, total assets for the life re-assurers grew by 6% from USD35 million at 30 June 2016 to USD37 million. This is likely to continue for some time as investors seek to hedge against currency risk.

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