Local insurance industry forecast to experience subdued performance
GENERAL INSURERS’ LOSS RATIOS EXPECTED TO INCREASE, PARTICULARLY FOR THE FIRE AND MOTOR VEHICLE CLASSES
After recording a 2.1 per cent increase in post-tax profit in 2015, our insurance industry is forecast to experience subdued performance this year. This has been highlighted by the Reserve Bank of Fiji in the 2015 Insurance Annual Report. The 2015 Insurance Annual Report was tabled in Parliament by Minister for Economy, Aiyaz Sayed Khaiyum, this week. This forecast has been made in line with the downward revision to the forecasted economic growth in the aftermath of Tropical Cyclone (TC) Winston.
Life insurers are expected to continue with their growth momentum with stable returns on investments, however at a slower pace, considering the anticipated downturn in economic activity. The combined net profits after tax (NPAT) of the Fijian insurance industry grew to $72.4 million in 2015, as the life insurers’ earnings increased by 15.6 per cent to $42.0 million, driven by a reduction in taxation expense.
The general insurers, however, experienced a decline in earnings by 12.2 per cent to $30.4 million, in line with the increases in claim payments, non-underwriting expenses and taxation expenses.
General insurers’ loss ratios are expected to increase in 2016, particularly for the fire and motor vehicle classes, as a result of the losses arising from TC Winston.
However, RBF forecasts reinsurance recoveries will, to some extent, cushion the impact of the catastrophic event on the solvency position of the industry.
“As such, insurers will need to develop sound capital management plans and ensure that they remain well capitalised,” it said.
Additionally, the domestic market is likely to experience hardening conditions as premium prices increase, reflecting the adjustments for anticipated increase in reinsurance costs and TC Winston claim payments.
Thus, insurers will need to continue to place importance on quality underwriting and sound risk management practices to maintain favourable earnings and solvency positions in 2016.
RBF Governor, Barry Whiteside, is hoping for an increased focus on raising awareness about risk mitigation through insurance, with the concerted effort of all key industry stakeholders.
With recent calls to review the Fijian insurance industry, enhanced collaboration between the insurance industry and RBF to address issues of expanded coverage and inclusive insurance will be undertaken. The review of the Insurance Act will also continue in 2016. Mr Whiteside has emphasised the need for local insurers to remain vigilant, given the rise in climate change influences becoming more apparent in Fiji and the Pacific.
He challenged the industry to continue to explore the development of innovative products to meet the insurance needs of the Fijian people.
Mr Whiteside pointed out that the 2015 results confirmed the continued growth in the number of insurance policies acquired. He noted an 8.2 per cent increase in the number of general insurance policies and a 5.8 per cent increase in the take-up of life insurance.