The Commissioner of Insurance, Mr. Justice Ofori, advises insurance firms in Ghana to take advantage of the risk management opportunities “occasioned by the emergence of the COVID-19 pandemic”.
This would require “the development of new products to meet the demands of the era as this will help them weather the storm against any unforeseen risks that may rear their ugly heads in the future,” the Commissioner of Insurance opined.
Speaking at the Capacity-Building Workshop organized for top-level Managers, mainly Chief Executive Officers (CEOs) and Chief Finance Officers (CFOs) of insurance firms, Mr. Justice Ofori urged all participants to pay specific attention to their financials, because this would enable them to grow their business operations to maintain their profitability levels amidst the crises to remain resilient.
“CEOs and CFOs of insurance companies were educated by seasoned insurance practitioners among others in various subjects during the 5-day workshop on how to handle business operations in the face of the pandemic”.
Addressing the issue of the effect of the coronavirus pandemic on the insurance industry, Mr. Justice Ofori intimated that “insurers should engage their clients in question-and-answer sessions regularly, as this will enable them know the prudence or otherwise of the risks they are accepting”.
“This approach will also engender trust between the insurers and their clients”.
Touching on the subject of the new minimum capital requirement, instituted for the insurance sector last year, the Commissioner of Insurance advised companies, who are unable to meet the capital requirement to “consider mergers as a strategy for struggling companies especially as the deadline to meeting the minimum capital of GH¢50million (i.e. for direct underwriters) fast approaches”.
“The announcement of the new minimum capital requirements (MCR) in June 2019 has provided the opportunity to insurance entities to adequately prepare to recapitalize by the June 30, 2021 deadline”.
“The new MCR is with the view to improving the operational efficiency and financial capacity of regulated entities to improve retention and profitability, which will naturally culminate into prompt claims payment, thus inspiring confidence amongst members of the insuring public. Mergers and acquisitions are possible strategic decisions that insurers may have to take in order to meet the new requirements”.
Based on the findings of a risk assessment conducted on the insurance sector and then disclosed in the Financial Stability Review Report released by the Bank of Ghana in September 2020, it revealed that “underwriting losses and declining investment yields are risks to the profitability within the insurance industry. For both life insurance and non-life insurance companies, the combination of weak underwriting performance and declining investment income has led to a reduction in Return on Equity. Given the general decline in investment income and underwriting losses, there is the need for insurers to strengthen their cost control measures, deal with underpricing issues, and adjust business models to address underwriting losses. It is expected that the introduction of the new minimum capital regime will help improve efficiencies through consolidation”.
