RBF Insurance Industry recorded $311.9m total gross premium last year
The combined gross premium income of the Fijian insurance industry stood at $311. 9 million last year. Reserve Bank of Fiji Governor Ariff Ali said it was a reflective of a growing industry even in a year of a severe catastrophe referring to cyclone Winston.
While presenting the RBF Insurance annual report to the Parliamentary Standing Committee on Economic Affairs yesterday, Mr Ali said it was the first time that the annual premium has gone past the $300m mark.
The net policy payments for the life insurance sector and net claims paid for the general insurance sectors was $185.9 million. “The industry continued to be assessed as solvent and its earnings performance assessed as satisfactory,” he said.
The Reserve Bank has the powers to enforce requirements to ensure that individual companies remain safe and the insurance industry as a whole continues to be stable, Mr Ali says.
“The risk transfer role that the insurance industry plays in key to the growth of our economy,” he says.
“It provides the necessary safeguard for the financial health of individuals, families, communities, businesses, financial institutions and the economy as a whole.”
Recent Developments by RBF
Mr Ali highlighted some recent developments by the RBF, insurance industry and development partners to increase the Fijian insurance industry’s capacity to offer new and innovative products.
Inclusive Insurance Bundled Product (micro insurance)
RBF in partnership with the United Nations Pacific Financial Inclusion Programme embarked on a project to facilitate the expansion of inclusive insurance in Fiji.
This refers to the provision of insurance products to the low income and vulnerable sectors of the population.
This year in July, FijiCare Insurance Limited offered the first bundled micro insurance product to 11,606 registered cane farmers. They now have access to some form of insurance.
FijiCare has paid 18 claims amounting to $64,000.
Crop Insurance
The insurance scheme aims to reduce the rehabilitation costs by farmers and the Government after a natural disaster. Goverment support will be needed in the form of premiums or tax incentives. Discussions are ongoing with relevant stakeholders agencies on the finalisation of a product proposal.
Household Insurance for Fijians
The insurance covers household sector for the low income and uninsured population.
Household are classified into different standards.
Gold standard – those who can afford insurance and are currently paying. There are 15,000 households.
Silver standard – the middle income that can afford but do not have insurance due to high cost of the insurance requirements. There are 36,000 households.
Bronze standard – this is the targeted group by the bank for the low income that can afford some form of insurance but are not offered the relevant products to meet their capacity to pay. There are 121,000 households.
Mr Ali said they had put together a proposal for a sum insured of $7000 to be offered as insurance for majority of households with a low level of compliance, and a premium of about $200.
The final product proposal will be presented to the Government by the World Bank with the aim of to assist in reinsuring the portfolio, Mr Ali says.
Microinsurance – considered uninsurable and will need support as they cannot afford to pay for insurance, there are 68,000 households.
Below are some of the questions posed by the standing committee and the response by the Reserve Bank of Fiji governor, Ariff Ali.
Under the snapshot local insurances (in the annual report) the pie chart shows 58.5 per cent claims have been settled while 41.5 per cent remain outstanding. Can you give us some reason why the claims are still outstanding or is it related to any particular issue that needs addressing?
Response: the claims which remain outstanding are mainly due to assessments which are still ongoing depending on the various elements and the aspects involved in the insurance scope/ coverage. These assessments are carries out by the loss assessors of the respective insurance companies. The pending claims, Mr Ali said was mainly related to the Material Damage and Business Interruption Class.
As at 31 August this year, general insurers reported 1,504 claims worth $113.4 million relating to cyclone Winston of which $73 million (1,426 claims) have been settled. This means that $95 per cent of the claims have been settled in terms of numbers while 64.6 per cent have been settled in terms of values.
Mr Ali added that there are number of businesses that place insurance offshore because the local general insurance companies do not have the capacity, sophistication or because its much cheaper.
In this regard, total offshore claims following TC Winston stood at $154.4 million, of which $113.6 million have been settled.
In total, $186.6 million or 70 per cent have been settled out of the $267.8 million in claims.
As at 30 August 2017, 64.6 per cent of total claims have been settled by our local general insurers, while 35.4 per cent remain outstanding.
On other loans and assets $97,875.40 is shown as outstanding loans, what type of regulations RBF uses to determine that these loans do not affect the policies of the insured?
Response: The loan is secured against the sum insured of the policy. The loan amount given to the policyholder is limited by the surrender value of the policy. It is the policyholder’s decision to take such a loan and the RBF does not have any regulations around this product.
In your opinion, what are the likely effects of transferring Compulsory Third Party (CTP) to LTA with respect to insurance companies?
Response: Currently, five out of seven general insurance companies provide CTP products. Last year, 132,261 policies were issued with total gross premium of $9.4 million received by these insurers.
This will be the major loss for the insurance companies and ultimately affects their profit forecasts.
Mr Ali concluded, the Reserve Bank looks forward to further enhance collaboration with all relevant stakeholders in supporting initiatives for the continued development of Fiji’s insurance industry.