https://www.myjoyonline.com/without-good-insurance-economy-will-be-unattractive-to-investors-ex-activa-boss/-------https://www.myjoyonline.com/without-good-insurance-economy-will-be-unattractive-to-investors-ex-activa-boss/

Government has been urged to provide stimulus packages for insurance companies affected by the novel Coronavirus pandemic, as doing so will help to ensure a strong insurance industry and boost investor confidence in the economy’s recovery.

According to Solomon Lartey, a former Chief Executive Officer of Activa International Insurance Ghana, the country may not be able to attract certain kinds of foreign direct investments (FDIs) if steps are not taken to reduce the impact of COVID-19 on the insurance industry, which is already suffering loss of premiums.

To him, each insurance company in Ghana comes to the table with its own unique strengths and capabilities, carving niches and offering specialised services for specific sectors of the economy; and he believes that this must be preserved amid the devastating effects of Covid-19. To do this, however, means government must set an amount of money to aid insurance companies that might face challenges because of Covid-19.

The proposed support will help retain the sector’s role of providing peace of mind for businesses through risk transfer; contribute to Gross Domestic Product (GDP); and provide employment for thousands of Ghanaians as well as other auxiliary benefits – like provision of capital for medium- to long-term investments including road projects, real estate among others.

Already, the NIC has pointed to a slowdown in the life insurance business sub-sector, and according to him this may affect some companies’ ability to afford salaries and other fixed and variable costs if the situation continues – a reason for which he strongly believes government must come out with a stimulus package for insurers.

Doing so will therefore ensure business sustainability and continuity, saving jobs and above all ensuring continuous provision of support for the economy, he opined.

On performance of the wider economy in the face of the pandemic and how that could affect the insurance insurers, he said: “I understand Ghana experienced a negative growth rate in March 2020, probably because of the lockdown; but with the increase in reported cases on a daily basis, the possibility for further future lockdowns is not far-fetched. This means that the effects could even be worse than projected”.

Others include the decline in tourism and international travel and resulting job losses; unanticipated increase in health expenditure and resulting upsurge in public debt burden; and tighter global financing conditions despite interventions through monetary policy to cut interest rates.

All these are expected to have adverse effects on international investments and their accompanying big-ticket insurance policies, like engineering, liability and financial lines businesses.

Travel insurance also suffers a similar fate to the hospitality and airline industry globally. “The above list of effects from Covid-19 has both direct and indirect consequences on the Ghanaian economy, and for that matter on insurance,” he explained.

Even though it is too early to determine the exact impacts of Covid-19 on the Ghanaian insurance industry, Mr. Lartey expects that investments, generally, may either be delayed or called off. He also said, due to uncertainty, investors may disinvest – and there could be capital flight, as investors tend to repatriate their earnings or disinvested monies back to their home countries.

Mr. Lartey’s view is further supported by Delloitte, which is predicting a contraction of foreign direct investment flows into the country due to uncertainties, as well as the general decline in trading volumes and values due to disruption of supply chains globally.

“All these will lead to loss of new insurance business opportunities, non-renewal of policies – and even reduction in insured values/assets. The reduced activity in the economy means that motor policies may not be renewed, travel policies may not be sold; and other policies may be ignored in favour of other basic necessities like food and shelter.

“In spite of the loss of premiums, insurance companies are still bearing fixed and variable costs which could badly affect cash flow and operating income as well as profitability,” he said.

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DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.