Lo­cal in­surance in­dus­try fore­cast to ex­pe­ri­ence sub­dued per­for­mance

GEN­ERAL IN­SUR­ERS’ LOSS RA­TIOS EX­PECTED TO IN­CREASE, PAR­TIC­U­LARLY FOR THE FIRE AND MO­TOR VE­HI­CLE CLASSES

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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.

Fo­cus now

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.

Growth recorded

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.

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