Broker’s premium income in massive growth
HARARE, Premium income for the quarter ended September 30, 2020 for the insurance brokers increased by 785% in nominal terms to $2,4 billion from $268.68 million recorded during the comparative period driven by gradual premium increases in line with inflationary trends.
Net brokerage commission for the third quarter amounted to $341.99 million. The average commission rate for the sector decreased by three percentage points from 17% recorded during the third quarter of 2019 to 15% recorded during the comparative period in 2020.
According to Ipec Q3 report, the top ten brokers accounted for 77% of the total premium income written during the nine months ending 30 September 2020.
The market leader in terms of premium written was Minerva Risk Services with a premium income of ZWL525.06 million accounting for 22% of the business written.
Of the 32 direct brokers only five filed their foreign currency denominated business returns. The total premium received in United States dollars amounted to $6.78 million and total Commission was recorded as $1.07 million.
Motor and Fire business lines respectively constituted 37% and 30% of total premium. The chart below shows the distribution of premium written by line of business.
As at 30 September 2020, five insurance brokers reported capital positions below minimum capital requirement of ZWL1.5 million.
The reported capital positions for insurance brokers ranged from $19, 286 to $50.38 million. Non-compliant brokers are once again urged to implement / review their compliance roadmaps to ensure compliance with the minimum capital requirements in line with Statutory Instrument 59 of 2020.
“In addition to maintaining minimum capital requirements, all insurance brokers are expected to ensure that they have in place, at all times, proper and valid professional indemnity in line with the provisions of Statutory Instrument 59 of 2020,” Ipec said.
Total assets for the insurance brokers moved from $114.1 million as at 30 September 2019 to ZWL957.23 million as at 30 September 2020.
The significant increase in assets was on account of asset revaluations and growth in response to inflationary trends. The asset base for insurance brokers is skewed towards cash and cash equivalents, premium receivables and land and buildings accounting for 35%, 36% and 15% of the total assets respectively. The distribution of assets across different asset classes
For the third quarter ended 30 September 2020, Minerva Risk Solutions dominated the market in terms of both business written and brokerage income. Figure 19 below shows the market share for the top ten insurance brokers in terms of net brokerage commission (NBC) and gross premium written.
“The Commission is concerned by the continued increase in premium debtors at the expense of profitable deployment of the resources. Brokers are, therefore, urged to employ effective underwriting modalities to avoid tying significant resources in premium debtors, ensure the settlement of claims as they fall due and minimise the repudiation of claims as we rebuild confidence in the sector. Insurance brokers are encouraged to preserve value of their assets as they determine the financial strength of their balance sheets.”
Insurance brokers` after tax profit amounted to ZWL146.13 million, reflecting 809% increase from ZWL16.08 million reported for the comparative period in 2019.
The significant drivers of the increase were currency reforms which culminated in inflationary pressures thereby driving premium increases for short-term insurers.
The industry average return on equity (ROE) and return on assets (ROA) for the reporting period were 35% and 15% respectively. Six brokers reported negative after tax profits during the period under review while four recorded.