Despite increases in premium income, the insurance penetration remains low and unchanged in Ghana, according to the latest Bank of Ghana’s Financial Stability Review 2019.

From December 2014 to December 2019, the report said insurance penetration, which is defined as premium income to Gross Domestic Product (GDP) has remained relatively stable at about 1%.

The low level of insurance penetration suggests that the insurance industry has significant room to grow.

The insurance sector however grew significantly in 2019 on account of policy reforms and an improved operational environment.

Growth in premium income increased from 18% in December 2018 to 22% in December 2019.

Total assets of the insurance industry also grew at an annual rate of 19 percent to GH$6.54 billion at end-December 2019.

Reinsurance premium

Also, overseas reinsurance premium transfers generally increased in 2019.

The National Insurance Commission during the period under review, granted approval for the transfer of reinsurance premiums amounting to approximately GHS222.5 million.

This is an increase from the GH₵79.74 million recorded in 2018.

The report said the government’s objective of driving private sector growth and industrialisation is expected to increase overseas reinsurance premium transfers in the short-term.

In the medium term, however, the recapitalisation effort of insurers and reinsurers is likely to significantly drive the overseas reinsurance premium transfers downward.

Retention ratio continues to remain high in the industry

On average, about 79 percent of the premium received by insurers was retained in 2019.

A more granular analysis indicates that non-life insurers retained 68% of their premium while life insurers retained 98 percent.

The low retention ratio of premium by non-life insurers is partly due to the nature of risks underwritten and high gross premium to capital ratio.

On the other hand, the high retention ratio among life insurers is mainly due to the increased purchasing of savings-linked insurance products and the long-term nature of their actuarial liabilities.

The report emphasized that the implementation of the recapitalisation exercise by the NIC is expected to drive risk retention in the non-life insurance segments and also drive the underwritting of pure risks insurance products for Life insurers.