Life insurers vulnerable

THE Bank of Namibia (BoN) has warned that the general outlook for the long-term insurance industry has deteriorated over the last six months, saying the sector remains “vulnerable”.

In its latest Financial Stability Report released yesterday, the central bank said the challenges facing the long-term insurance industry call for close monitoring of the sector. “Performance in the long-term insurance sector, though facing challenges and warranting close monitoring, remained sustainable,” it said.There are 16 registered long-term insurance operators in the N$21,3 billion industry, with three companies controlling 88 per cent of the market.”The surplus assets and the Capital Adequacy Requirement of the industry have declined over in the first quarter of this year compared to the corresponding period last year.”From the first quarter of 2007 to the first quarter of 2008, excess assets and Capital Adequacy Requirement declined by 20 and 40 per cent respectively,” the report said.The slump in surplus assets and Capital Adequacy Requirement, BoN said, has a “negative impact on industry solvency”.While total assets of life insurers grew by eight per cent from N$19,8 billion in the last quarter of 2007 to N$21,3 billion in the first quarter of this year, the total investments of the industry declined by nearly one per cent in the same period.The decline in total assets, BoN said, was because of falls in investment in listed and unlisted companies.The reduction in investment in unlisted companies was 73 per cent and 21 per cent in listed companies.”The fall in investment was attributed to unfavourable local and global financial market conditions.”Investment and other income of the industry also showed a significant drop.Income from investment alone decreased by 74 per cent while other revenue saw a 113 per cent slump during the first quarter this year compared to the same period last year.The central bank further said that the turmoil in international financial markets have led to both investments and investment income falling.Death claims as a result of HIV-AIDS also remain high.BoN also expressed concern over the mounting pressure on household and corporate finances, which have resulted in a “marked increase in non-performing loans (NPL).It is, therefore, important to continue keeping a close watch on developments in NPLs”.”Performance in the long-term insurance sector, though facing challenges and warranting close monitoring, remained sustainable,” it said.There are 16 registered long-term insurance operators in the N$21,3 billion industry, with three companies controlling 88 per cent of the market.”The surplus assets and the Capital Adequacy Requirement of the industry have declined over in the first quarter of this year compared to the corresponding period last year.”From the first quarter of 2007 to the first quarter of 2008, excess assets and Capital Adequacy Requirement declined by 20 and 40 per cent respectively,” the report said.The slump in surplus assets and Capital Adequacy Requirement, BoN said, has a “negative impact on industry solvency”.While total assets of life insurers grew by eight per cent from N$19,8 billion in the last quarter of 2007 to N$21,3 billion in the first quarter of this year, the total investments of the industry declined by nearly one per cent in the same period.The decline in total assets, BoN said, was because of falls in investment in listed and unlisted companies.The reduction in investment in unlisted companies was 73 per cent and 21 per cent in listed companies. “The fall in investment was attributed to unfavourable local and global financial market conditions.”Investment and other income of the industry also showed a significant drop.Income from investment alone decreased by 74 per cent while other revenue saw a 113 per cent slump during the first quarter this year compared to the same period last year.The central bank further said that the turmoil in international financial markets have led to both investments and investment income falling.Death claims as a result of HIV-AIDS also remain high.BoN also expressed concern over the mounting pressure on household and corporate finances, which have resulted in a “marked increase in non-performing loans (NPL).It is, therefore, important to continue keeping a close watch on developments in NPLs”.