Huge claims push Grand Re into underwriting losses

Huge claims push Grand Re into underwriting losses

The Insurance and Pensions Commission’s (Ipec) 2nd Quarter Life Report showed that Grand Reinsurance life business had a large underwriting loss as a result of substantial claims.

Ipec reported that the firm which recently registered as a Life Reinsurer made underwriting losses of $114, 000 in the second quarter ending June 30, 2017.

Grand Reinsurance collected $85, 000, in net premiums, paid out $133, 000 in total net claims and an additional $16, 000 in commissions.

Grand Re was the only life reinsurer which made an underwriting loss. The other life reinsurers made underwriting profits due to a 31% reduction in claims.

Grand Re had an Expense Ratio of 19% and claims ratio of 156%. Its combined ratio (statutory, ratio) was way above the industry average of 98% at 175%.  FBC Re with a combined ratio of 147% was the only other firm with a combined ratio above 100%.

A combined ratio of less than 100 % indicates underwriting profitability, while anything over 100 indicates an underwriting loss.

Grand Re seems to find the going tough in the Life Reinsurance business as the firm and Zep Re were the only two reinsurers 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% and 14.98%, respectively.

Grand Re’s total assets are valued at $71 000.

With Capital to liability ratio of -51%, and a negative Capital of $74, 000, probably due to the high claims ratio, Grand Re seems to be between a rock and a hard place.

So far life in the reinsurance business has not been a walk in the park for Grand Re.

On a positive note overall total costs, including those incurred by Grand Re, for reinsurers reduced by 14.7% from USD3.4 million in June 2016 to the current USD2.9 million.

Ipec also reported that as at 30 June 2017, Grand Re was fully capitalized in terms of statutory instrument 21 of 2013, and was working towards compliance with the new statutory instrument 95 of 2017, which requires life reinsurers to have a minimum capital of $5 million.

As at 30 June 2017, there were five (5) life reinsurers namely Baobab Re, Grand Re, FBC Re, Zep Re and FM Re. These reinsurers are composite reinsurers writing both short and long term business.

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