Underwriting losses and declining investment yields pose risks to profitability within the insurance industry, a Bank of Ghana report has revealed.
For both life insurance and nonlife insurance companies, the combination of weak underwriting performance and declining investment income has led to a reduction in Return on Equity, the Central Bank’s Financial Stability report indicated.
“Given the general decline in investment income and underwriting losses, there is the need for insurers to strengthen their cost control measures, deal with underpricing issues and adjust business models to address underwriting losses”, it mentioned.
It however expects the introduction of the new minimum capital regime will help improve efficiencies through consolidation.
It said declining investment yields in the presence of weak underwriting performance is gradually reinforcing an investment strategy shift towards investment properties.
The assets of the insurance sector continues to be concentrated in fixed income securities particularly fixed income instruments such as fixed deposits, treasury instruments and Bank of Ghana securities.
Amidst persistent underwriting losses, the report said investment income continues to play a pivotal role in the near to medium term sustainability of the insurance sector.
To optimise returns on investment and maintain profit margins, it advised insurers in response to investment losses to gradually readjust their investment portfolio in favour of investment properties.
A rapid change in the prices of investment properties can also impact the profitability of the insurance sector.
The report stated in addition, to preserving investment income, there is the need for government to enhance policy in order to expand the bond market as an alternative investment option to investors, including insurers.
Latest Stories
-
Gender Advocate Emelia Naa Ayeley Aryee Wins prestigious Merck Foundation Awards
14 mins -
South Africa bursary scandal suspects granted bail
37 mins -
Ecobank successfully repays $500m Eurobond due April 18
40 mins -
Re: Doe Adjaho, Torgbui Samlafo IV, call for Unity among Paramountcies in Anlo
43 mins -
Extortion and kidnap – a deadly journey across Mexico into the US
46 mins -
Rihanna says fashion has helped her personal ‘rediscovery’ after having children
1 hour -
Development Bank Ghana targets GH¢1bn funding for commercial banks in 2024
1 hour -
Shatta Movement apologises to Ghana Society of the Physically Disabled after backlash
2 hours -
Sammy Gyamfi writes: Tema-Mpakadan Railway Project; A railway line to nowhere
2 hours -
Bright Simons: Is the World Bank saving or harming Ghana?
3 hours -
CAF Cup: RS Berkane banned from entering Algeria because of a map of Morocco with its Sahara
3 hours -
The media isn’t doing what is expected of journalism – Sulemana Braimah
3 hours -
Truck driver who caused train accident jailed 6 months
3 hours -
Music review: Okyeame Kwame proves rap dexterity on ‘No Competition’
3 hours -
How a 23-year-old fooled the internet with an AI Kendrick Lamar diss track
4 hours