High premium debts might further strain the general insurance sector’s weak liquidity position and compromise its ability to settle insurance claims on time, a financial stability report by the Reserve Bank of Malawi (RBM) has shown.
According to the report, liquidity for the sector generally worsened over the period between March and September 2016 as indicated by a rise in the liquidity ratio.
Liquidity ratio as measured by insurance liabilities to liquid assets rose to 167.6 percent in September 2016 from 149.3 percent in September 2015. This was largely attributed to high levels of insurance receivables in the sector.
Reads the report in part: “If not addressed, insurance debts may adversely affect the sector’s capital adequacy and profitability through premium write offs.”
In an earlier interview, Insurance Association of Malawi (IAM) president Grant Mwenechanya said rising premium debts are affecting the sector, adding that clients are facing challenges to pay the premiums owing to adverse economic conditions, including high inflation rate.
However, RBM said the sector’s solvency margin remains above the regulatory minimum of 20 percent. n