Insurance policies safe, industry says

THE current international financial turmoil will not adversely affect any life-insurance company’s ability to pay out insurance claims, the Life Assurer’s Association of Namibia (LAAN) said in a statement yesterday.

This latest release follows a statement issued by the Namibia Financial Supervisory Authority (Namfisa) on Wednesday to restore confidence in the life-insurance industry after a call by the Bank of Namibia (BoN) that the sector be monitored more closely. In September 2008 Financial Statement Report released on Tuesday, BoN was worried about the declining surplus assets of insurance companies.Yesterday, Raimund Snyders, the chairman of LAAN, assured policyholders that they need not be worried about their investments.Namfisa, the regulator of the industry, Snyders said, requires that the “value of capital assets under management” of insurance companies “must be more than the value of possible claims to be paid at any given time”.Therefore, he said, no insurance company will be unable to pay claims on life-insurance policies.BoN had expressed concern over the absence of an “explicit method” to determine the level of reserves and capital, apart from the requirement that assets should exceed liabilities.”By this measure, the long-term insurance sector appears to be adequately capitalised”, BoN wrote in its March 2008 Financial Stability Report.Snyders advised investors not to divest their savings because of a decrease in their investment returns as a result of a fall in the stock market.”Policyholders saving on a monthly basis will now be investing at cheaper prices and will therefore be buying more assets for the same monthly contribution,” Snyders said.According to him markets are cyclical by nature “because values rise and fall and rise again because of a variety of factors”.Calling on investors to ride out the wave, Snyders advised that selling out of the markets now because of the uncertainty would be “disastrous”.”Selling out of the markets now will mean that the depreciation in the value of investments will be locked in, and when the markets recover in future, the investor will not be in the market to benefit from this recovery,” Snyders said.Although the Bank of Namibia is not the regulatory authority for long-term insurance companies, the central bank dedicates a special section in its Financial Stability Reports to the long-term insurance industry.”The insurance sector is important to the rest of the financial system because of the links between the payment system and the insurance sector.”In September 2008 Financial Statement Report released on Tuesday, BoN was worried about the declining surplus assets of insurance companies.Yesterday, Raimund Snyders, the chairman of LAAN, assured policyholders that they need not be worried about their investments.Namfisa, the regulator of the industry, Snyders said, requires that the “value of capital assets under management” of insurance companies “must be more than the value of possible claims to be paid at any given time”.Therefore, he said, no insurance company will be unable to pay claims on life-insurance policies.BoN had expressed concern over the absence of an “explicit method” to determine the level of reserves and capital, apart from the requirement that assets should exceed liabilities.”By this measure, the long-term insurance sector appears to be adequately capitalised”, BoN wrote in its March 2008 Financial Stability Report.Snyders advised investors not to divest their savings because of a decrease in their investment returns as a result of a fall in the stock market.”Policyholders saving on a monthly basis will now be investing at cheaper prices and will therefore be buying more assets for the same monthly contribution,” Snyders said.According to him markets are cyclical by nature “because values rise and fall and rise again because of a variety of factors”.Calling on investors to ride out the wave, Snyders advised that selling out of the markets now because of the uncertainty would be “disastrous”.”Selling out of the markets now will mean that the depreciation in the value of investments will be locked in, and when the markets recover in future, the investor will not be in the market to benefit from this recovery,” Snyders said.Although the Bank of Namibia is not the regulatory authority for long-term insurance companies, the central bank dedicates a special section in its Financial Stability Reports to the long-term insurance industry.”The insurance sector is important to the rest of the financial system because of the links between the payment system and the insurance sector.”