JUST three out of a total of nine funeral assurance companies are compliant with regulatory minimum capital levels, which puts policyholders funds at risk in the event of an operator collapsing, the insurance industry regulator has said.
Regulatory authority is worried that undercapitalised funeral assurance firms have consistently reported capital levels below the regulatory threshold for over four quarters without taking strides to address the situation.
As at June 30,2018, only Doves ($17 million), First Funeral ($4 million) and Moonlight ($5,95 million) met regulatory minimum capital thresholds for funeral assurers. It also follows that the three control the largest market share for the funeral assurance industry in terms of gross written premium remains, accounting for 90,31 percent. The remaining six players shared the balance.
The list of funeral assurers whose capitalisation falls below regulatory prescription includes Foundation, Orchid, Ruvimbo, Passion, Sunset and Vineyard.
Funeral assurers are required to meet the minimum regulatory capital of $2,5 million after adjusting assets and liabilities prescribed by Statutory Instrument 95 of 2017. As at June 30, 2018, the unadjusted capital positions for funeral assurance players ranged from $0,70 million to $17,7 million.
The Insurance and Pensions Commission (IPEC) said in its second quarter report for the funeral assurance industry that operators who do not meet regulatory prescription should consider downgrading licence to micro-insurance.
“The commission urges undercapitalised players to consider downgrading their licences to micro-insurance as this type of licence requires lower capital. Players who meet the minimum capital requirements of $2,5 million were only three out of nine players in the industry as at June 30, 2018,” IPEC said.
“The Commission will engage these players so that they regularise their capital positions and comply with the provisions of the law for the protection of policyholders interests.”
The industry prescribed asset investments decreased by 7,19 percent from $1,57 million in March 2018 to $1,46 million in June 2018, this translates to a prescribed asset ratio of 2,04 percent, well below the minimum required ratio of 7,5 percent.
“This commission is concerned by the industry’s defiance to abide by the provision of the law with regards to prescribed asset ratio. Corrective measures will be instituted by the commission to enforce compliance,” IPEC said.
The funeral assurance industry’s asset base experienced a negative growth of 3,35 percent from $74,10 million in March 2018 to $71,63 million in June 30, 2018.
The asset base for the assurance industry is mainly concentrated in 3 asset classes. These are properties 49 percent, (with operational property constituting 30 percent and investment property 19 percent), premium receivables of 15 percent and inter-company investments of 10 percent of total assets.
Meanwhile, the funeral assurance industry’s total gross written premium amounted to $20,97 million for the half-year ended June 30, 2018, representing a 6,45 percent growth from $19,41 million reported for the same period in 2017.
For the half-year ended June 30, 2018 the funeral assurance industry reported net profit after tax of $2,86 million; representing 2,47 percent increase from $2,79 million reported for the comparable period the prior year.