review of the insurance sector

The review of the insurance sector in 2006, has brought some interesrting development in the insurance sector, bringing new insurance companies to the economy, Boahene Asamoah explains how new players would impact on the insurance sector.


THE Ghanaian industry is expected to get more exciting as new players storm the market taken over existing companies as a result of the oil find.
Some industry experts are already discussing issues rated to the capitalisation of the industry, the prospects of oil find and reshaping the industry especially the life business to attract more policy holders.
These new entrants have huge capital and assets as compared to the local operators
New entrants from especially neighbouring Nigeria have made their entry into the Ghanaian market already taking the initiative from their counterparts in the banking sector.
So far six major insurance companies have regisrtered their presence in the country. They are Capital Express Assurance Ghana Limited, which has bought controlling interest in Benefits Life Assurance Sector, while Regency Alliance Insurance Limited, another Nigerian firm has also bought controlling interest in Benefits Non-Life business.
Industrail and General Insurance (IGI) Ghana Limited, which is a subsidiary of IGI plc of Nigeria has bought controlling interesting in Network Assurance in both the Life and Non-Life businesses.
However, two other firms have set up their own operations in the country. They are the International Energy Insurance Company (IEI) and Equity Assurance Limited.
Others such as Zenith Bank plc, which has an insurance subsidiary are expected to also make inroads into the Ghanaian market.
Following the Insurance Law of 2006, Act 724, the separates the Life and Non-Life business of insurance companies and the raising of the minimum capital to $1 million for each of the buisnesses, the number of players have increased from 24 to 37.
Interestingly, the oil find has brought about new businesses in the country with some experts in the oil insurance underwriting becoming a new hot bed for the indurance industry.
Again, the general business climate in the country which has led to a construction boom presents some tremendous opportunities for insurance companies.
Over the past five years there has been a general increase in premium income. From 2002 to 2007 gross premium income for all businesses increased from GH¢47.2 million in 2002 to GH¢1.64 billion in 2006.
This represents a yearly average growth rate of 36.7 per cent.
Total gross premium for non life business however, increased by 270 per cent from GH¢38. 2 million in 2002 to GH¢141.5 million at the end of 2007.
For the life business gross premium increased from GH¢8.9 million in 2002 to GH¢68.6 million at the end of last year.
Analysts say the continous increased in growth in this sector is an indication of the increase in public awareness and confidence.
Over the past few years, there has been an emergence of new products that are tied to investments such as the funeral insurance, which has received a lot patronage.
However, some industry players still believe that a lot more attention needs to be given to the life business because of its spiral effects.
According to reports the life business of the insurance has the pontential to generate wealth for the industry and encourage investments as a whole in the insurance industry.
Looking at the premium income by class of business for the period between 2002 to 2006,
The Nigerian authorities on the 5th of September, 2005, announced the recapitalisation of Insurance and Reinsurance companies. The new minimum paid-up share capital, as announced, is as follows:
Class of Business, New Capital Base Life Insurance business 2 billion Naira, General Insurance Business 3 billion Naira, Reinsurance companies to 10 billion Naira.( would do the conversion)
It was also identified that the total market capitalization for the insurance industry then which stood about N34 billion spread among 103 direct insurers and 4 reinsurers.
Indeed this is the present situation in Ghana, at least four international banks in the country, with the new capitalisation requirement could take more than half the number of insurance companies in the country.
However some industry experts said it would not be prudent for Ghanaian insurance firms to recapitalise only to take advantage of the oil business, although the experts believe that recapiatlisation was neccessary.
The argument is that the oild business is a one risk business and that should all the insurance underwrite such a business in the likely event of a disaster, claims from such a disaster could wipe off the whole industry.
Experts say Ghanaian insurance firms must be encouraged to take some of the insurance, while spreading the risk with some international firms to safeguard the local industry.
While the economy present some opportunities for the insurance industry, the challenge is how best to educate the Ghanaian public on the need to take insurance policies for future occurences.