The Ghana Insurance Association has called on the government to exempt them from the proposed domestic debt exchange programme.
The exemption would ensure that the insurance packages of the insurees are protected and the survival of insurance companies during the ongoing financial crisis.
The President of the GIA, Mr Seth Aklasi made the call at a press conference in Accra yesterday.
According to him anything short of an exemption will discourage the citizenry from taking up life and annuity policies, adding that the role the insurance industry play in protecting assets and liabilities will be shorthanded.
He said a total asset of 40 percent worth of GH¢4,613,604,088 which account for shareholders’ and policyholders’ fund were held in trust by Government of Ghana securities.
“Considering the market capitalisation of insurance companies, majority of the investment are from policyholders’ funds which are used to pay claims when risk mature,” he explained.
He noted that the GIA had incurred an outstanding debt of about GH¢356, 1 16,525 in the third quarter of 2022 and any further loss would cause all insurees to lose their investment.
He revealed that the Insurance sector was in crisis as some companieshad lost their investments during governments banking sector cleanup hence the need for government to release the locked-up funds to the insurance companies concerned to improve their liquidity status.
He appealed to government to formulate sustainable solutions that would repose confidence of Ghanaians in insurance as “Insurance had been identified as one of the important tools for increasing financial inclusion from the current 58 per cent to 75 per cent by the year 2023.”
He added that the failure of Insurance companies to pay the claims promised to their customers because government failed to release the company’s investment income from the government of Ghana securities made insurance unattractive to Ghanaians.
He underscored the need to rope in the informal sector since it constitutes more than 80 per cent of the Ghanaian workforce.
He cautioned that the debt exchange would further compound the investment base with an additional 10 percent exposure that would further worsen their situation adding that “any reduction in the investment will wipe away insurance companies’ ability to pay claims.”
On the effect of the cedi depreciation on payment of replacement parts of insured vehicles, he said claims in January 2022 stood at $100,000 the cedi equivalent of GH¢600,000 when the exchange was about GH¢6 to $1 but currently the exchange rate of GH¢13 to 1$ raises the cost to GH¢130,000.
This he said has caused Non-Life Insurance Companies to incur extra cost of GH¢70,000.
He added that insurance companies experience high rates of surrenders when there are economic challenges.
“Currently, Life Insurance Companies are experiencing over 50 per cent increase in surrender of policies because the insurance companies have invested the premiums in government-related securities but may not have earned the expected returns hence early surrenders lead to asset-liability mismatch,” he explained.
He hinted that the GIA was open to further engagements with government on the domestic debt exchange programme since one approach could not be used for all institutions.
BY JESSEL LARTEY THERSON-COFIE & ELIZABETH OFFEI
