The insurance industry in Ghana has made some modest games last year despite the impact of COVID-19 on the world and domestic economies. According to a new report from the Bank of Ghana, gross premiums within the insurance industry grew by 20.6 per cent in the review year.

Gross premium at End-December 2020 stood at GH¢4.20 billion as compared to GH¢3.49 billion at end-December 2019. The steady growth in gross premiums was attributable to the rollout of various alternative distribution channels on digital platforms and the introduction of a digital platform (Motor Insurance Database – MID) by the NIC in January, 2020.

“The MID, introduced in the review year, ensured that sales of insurance policies were not compromised during the pandemic and that premiums generated from motor insurance, were commensurate with the risks associated with the asset insured”.
BOG Report

Meanwhile, Nonlife insurers’ return on equity climbed dramatically, while life insurers’ return on equity stayed steady.

“Return on equity increased significantly for nonlife insurers and remained stable for life insurers. In the life sub-sector, poor underwriting results and declining investment income led to a reduction in return on equity. In contrast, return on equity in the non-life sub-sector increased on the back of investment income, which more than compensated for poor underwriting results within the non-life subsector. Underwriting losses and declining investment yields remain significant risks to profitability within the insurance industry.”
BOG report

The report suggested that, to manage underwriting losses, insurers must change their business models to avoid risk underpricing while also increasing their cost-cutting strategies. The extensive usage of the MID, as well as the ongoing recapitalization exercise with cost management measures, are likely to boost underwriting outcomes in the near-to-medium term.

Growth of Total Assets of the Insurance Sector

In both the non-life and life sub-sectors, total investment assets were concentrated in fixed income securities, with a progressive transfer of investments to the real estate sector, which moderated in 2020. Investments in GoG and BoG securities (42.0 percent), investment properties (24.7 percent), and fixed deposits (42.0 percent) dominated the life subsector (19.5 percent).

Likewise, fixed deposits (28.5 percent), Government of Ghana and BoG securities (24.7 percent), and investment properties accounted for the majority of nonlife investments (24.7 percent). Investment income will continue to play a critical part in the Insurance industry’s near-to-medium-term viability notwithstanding underwriting losses.

Measures to Mitigate Emerging Risks

The National Institute of Standards and Technology is working on a framework to manage cyber-risk. The use of digital platforms in the insurance business has grown significantly, posing dangers such as data integrity breaches, data theft, and service disruption.

The report also declared The NIC has begun efforts to build a comprehensive industry Cybersecurity policy and framework in order to avoid and minimize the effects of these risks. This will help to significantly reduce the threat of cyber-attacks such as Denial of Service (DoS) attacks, computer virus deployment, malicious attacks, and data breaches.

The NIC has enhanced the minimum paid-up capital for the insurance business to address solvency risk. Insolvent insurance businesses may expose policyholders to a variety of risks. The NIC is enforcing a new minimum capital regime from January 1, 2022, to limit solvency risks and promote confidence in the insurance market. The NIC is now engaging with industry participants to ensure that companies are prepared to fulfill the new directive.