Reserve Bank of Malawi (RBM) has expressed concern with the rising numbers of requests to externalise insurance companies business.
RBM director of pensions and insurance supervision Chimwemwe Kachingwe said on Thursday in Blantyre that the regulator wants insurance risks arising from Malawi be underwritten in the country.
She said: “Each and every day, we are dealing with requests to externalise business from insurance companies and brokers outside Malawi and we look at this as a worrisome problem because we want insurance risks arising from Malawi to be underwritten in Malawi.
“We intend to have strong and resilient companies in Malawi with capacity to underwrite bigger risks arising from the country. It is in the heart of the registrar to increase local capacity and reduce externalisation of business.”
Kachingwe said the regulator expects the general insurance industry to grow this year although growth does not appear to translate into profitability.
Kachingwe said this on Friday in Blantyre during the Nico General Insurance Company Limited brokers’ dinner and dance.
Figures she provided show that as at September 30 2017, the insurance industry’s gross premium was recorded at K33 billion from K28 billion during the same period last year.
Combined pre-tax profit as at September 30 2017 was recorded at K2.7 billion compared to K2.8 billion during the corresponding period last year and K3.4 billion reported for the whole of last year.
In his remarks, Nico General Insurance chief executive officer Donbell Mandala said despite facing new challenges, the company is poised to register growth in profit this year.
“Our market is facing new challenges that were not there before. We have been pricing our products as if they will expire one day. We need to learn that insurance is a service and not a product, and once we learn that, we are going to achieve what we want to achieve and survive in this market.
“The second element is fraud, something we are not immune to happening in big numbers across all networks and stakeholders. Liability claims that come through the courts are also affecting us,” he said.
Mandala said 20 years ago, if a child was hit by a car, it was an automatic K200 000 settlement, but right now, the settlement is starting from K15 million,” he said.
Nico General Insurance Company Limited gets 73 percent of its business from brokers and 27 percent from direct clients, according to Mandala.
RBM says their analysis shows that the insurance industry has been adversely affected by high management expenses evidenced by management ratio of 39.8 percent as at September 30 2017 which calls for insurance companies to manage their expenses to provide meaningful profits and return to the shareholders.