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Life Goes on

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You are here: Home > Insurance sector faces fresh threats
Insurance sector faces fresh threats
October 1, 2011 in Business
The sector has also been a victim of subdued premium growth.
Thirty licensed short-term insurance companies in the sector are chasing a paltry US$150 million in annual premiums.
This represents an average gross income of US$5 million for each player.
After reinsurance costs, this hardly leaves enough income for administration, claims dividends and receiving costs.
Zimbabwe’s insurance industry currently comprises 76 players — 30 short-term insurers, five life assurers, eight short-term reinsurers, six funeral assurers, two life reinsurers and 25 insurance brokers.
Only one out of 27 short-term insurers is publicly quoted and only five are credit-rated.
Competition has increased among players, with most opting for sub-economic premiums to attract business, leading to poor underwriting, a development market experts say could see more insurance companies folding or merging with bigger companies who can underwrite meaningful business.
Baobab Reinsurance manager Tarupiwa Tarupiwa said if no immediate measures were taken to bring order and sanity into the sector, once considered one of the largest on the continent, it would collapse again.
“An accumulation of cases of the same means you will not have an idea of a sufficient pool from which to pay claims.
“The concept of an insurance pool where the sum of premiums of many is used to pay claims for the few will be breached as funds will be inadequate to fund claims and potential liabilities,” he said.
Tarupiwa said insurers had to be prepared to walk away from markets and certain products when prices fall below a prudent, risk-based premium.
“Uneconomic rates threaten the viability of both insurance and reinsurance companies and can lead to insurance and market failure.”
“Insurance

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