#2022BFTInsuranceSurvey: the insurers who manage the most risks

• and those who pay the most for doing so

In 2021, the ability of general (non-life) insurance companies to retain the risks they had underwritten on their own books became a crucial issue as the industry regulator instructed them to increase their capital in order to keep more of their premium income in-house. ELLIOT WILLIAMS & TOMA IMIRHE document who earned the most premiums, who kept the most from reinsurers and the effects of this on the quantum of claims they had to pay.

The performance of Ghana’s general (non-life) insurance industry for the 2021 financial year illustrates just how much the industry has changed over the past two decades. At the time the country’s insurance industry began what is remembered as a revolution of sorts during the late 1990s, the conventional wisdom was that no amount of change could topple the then State Insurance Company – which was wholly-owned by government at the time – from its pedestal at the top of the ladder.

But in 2021 it was confirmed that the rise of Enterprise Insurance to the number-one position over the past couple of years was not a fluke. Indeed, last year Enterprise Insurance again proved to be the biggest gross premiums earner – raking-in GH¢335.170million, ahead of the now renamed and stock market-listed SIC Insurance which still came in a close second, generating GH¢276.224million.

Instructively, both companies also ranked second and third respectively by net premiums. Enterprise retained GH¢203.451million of the premiums it received, giving out the rest as reinsurance premiums while SIC Insurance retained GH¢157.419million. Instructively, these top-two premium earners accounted for 25.9% of the entire market, which consists of 26 general insurance companies in all.

But that is where the precise correlation between gross premiums generated and net premiums retained ends. Hollard Insurance Ghana ranks third by gross premiums, having attracted GH¢212.491million; but only ranks 5^th by its net premiums of GH¢112.663million, having given away nearly half of its gross premiums as reinsurance premiums in order to keep its exposure relatively low.

Conversely, Star insurance and Vanguard both show a relatively stronger appetite to keep risks on their own books. Star Assurance is the biggest gross premium earner among the wholly-indigenously owned general insurers, its GH¢192.372million last year giving it 4^th place overall. But it ranks even better, in 3^rd place, with respect to net premiums; retaining GH¢119.869million of those premiums in its own kitty.

Similarly, while Vanguard generated the 6^th-largest gross premiums last year, of GH¢162.610million, it retained the 4^th-biggest net premiums of GH¢113.391million. Between them lies yet another indigenous insurer, Glico General, taking 5^th place with regard to its gross premiums of GH¢172.911million – but a place back at 6^th position with respect to its net premiums of GH¢76.516million. Interestingly, Glico was the only general insurer among the top-six to pass more than half of its gross premiums to reinsurers.

Ghana Union Assurance, one of the traditional big-wigs, ranked 7^th last year by both its gross premiums of GH¢140.910million and its net premiums retained of GH¢56.273million.

But right behind it comes the most conservative general insurer of all in Ghana’s non-life industry for 2021. This is Activa International, which only retained GH¢30.083million as net premiums out of the GH¢116.065million it attracted in gross premiums. This resulted in it ranking 8^th by gross premiums but a distant 17^th by net premiums, having passed on nearly three-quarters of its underwritten risks to reinsurers.

This contrasts with Phoenix Insurance, which retained about two-thirds of the risks it underwrote last year. Consequently, its GH¢86.498million in gross premiums was the 9^th-biggest for the non-life industry last year – but its GH¢55.713million in net premiums earned it 8^th position.

In line with industry-wide practice, the smaller gross revenue earners have generally opted to retain larger proportions of their gross premiums in-house than their bigger counterparts; in part, because they tend to have fewer big-ticket policies on their books.

For instance, while Sunu Assurance ranks 10^th by both gross premiums of GH¢66.620million and retained net premiums of GH¢51.870million, the percentage of retained risk at 77.9% is considerably higher than that of the biggest insurers. For instance, enterprise’s risk retention rate is 60.7% while SIC’s is 58%.

Indeed, this is illustrated, for example by the second-smallest gross premium earner last year, Loyalty Insurance, with GH¢20.457million – ranked two places better at 23^rd position with respect to net premiums of GH¢17.341million, this giving a retention rate of 84.8%.  Similarly, the smallest gross premium earner, Bedrock Insurance – which only generated GH¢3.939million, held on to GH¢3.500million, making for a retention rate of 88.9%.

This trend reaches across the lower-half of the industry as adjudged by gross premiums, albeit with some exceptions.  For instance, Saham Insurance generated GH¢49.184million in gross premiums, the 15^th-largest, but only held on to GH¢17.504million (the 22^nd-largest net premiums) – resulting in a retention rate of just 35.6%.

Indeed, it is primarily the relatively low retention rate across the industry (compared to many of Ghana’s African peers) that has persuaded the industry regulator, the National Insurance Commission, to raise the minimum capital requirement of primary general insurance underwriters by a massive 233% to GH¢50million from the erstwhile GH¢15million: an exercise that was more or less completed earlier this year. The dramatic improvement in minimum capital should enable underwriters to retain more risk in-house than has been the case in the past.

To be sure, the tendency of Ghana’s underwriters to pass-on relatively large proportions of the risks they take on is prudent considering the capital bases they were required to maintain prior to the latest recapitalisation imposed on them by the NIC, since it ensures that they are able to meet genuine claims – an ability that is absolutely crucial for their ability to engender confidence in them by the insuring public.

In 2021 the industry incurred gross claims of GH¢693.328million – amounting to 29.4% of the total gross premiums of GH¢2,361.776million. But taking reinsurance into account, the industry’s total net claims of GH¢457.960million (the industry having passed on GH¢235.368million or 33.9% of its total gross premiums to reinsurers) amounted to 31.9% of its cumulative net premiums of GH¢1,433.718million.

Claims management is therefore the most crucial aspect of insurers’ activities. However, it is also the most misunderstood by an insuring public that wrongly assumes that the higher the claims paid by an insurance company, the better that company is. But while a relatively large proportion of premiums collected being paid out as claims may reflect an insurers’ willingness to pay claims rather than evade payment through technicalities, it also reflects the quality of policy underwriting by that company. Effectively, the higher the quality of underwriting the lower the claims incurred; because the insurer uses the structure, terms and conditions of the policy to minimise the risks being taken on by the policyholder, and thus ultimately the likelihood of an underwritten risk manifesting into a claim.

Nevertheless, gross claims incurred tend to loosely correlate with gross premium income earned for each individual insurer; since the more the risk taken on, the more likelihood of claims being incurred.

Consequently, Enterprise – which generated the biggest gross premiums in 2021 – also incurred the biggest gross claims of GH¢97.994million.  As the biggest net claims earner, it also incurred the biggest net claims (after taking off the proportion of gross claims to be met by reinsurers) of GH¢86.688million.

But SIC, the second-biggest gross – and net – claims earner, shows how complicated insurance underwriting can be. While the company incurred the second-biggest gross claims, of GH¢78.660million, it incurred only the 7^th-largest net claims of GH¢21.929million. This is because it retained less of the risk it underwrote than some of the companies immediately behind it in terms of gross premiums. For instance, while SIC’s premium retention rate was 57%, that of Vanguard’s 6^th (by gross premiums but 4^th by net premiums) was a considerably higher 69.7%. Consequently, even though Vanguard’s gross and net premiums generated were smaller than SIC’s, as were its gross claims incurred of GH¢67.945million, its net claims incurred at GH¢45.834million were more than double those of SIC.

This illustrates the importance of reinsurance, as it is net claims that are the actual cost of claims to the underwriter. However, it is gross claims which show the amount of risk compensation an underwriter willingly pays out and the sheer quality of the policies it underwrites.

With regard to gross claims incurred, Hollard had the 3^rd-highest at GH¢72.850million but incurred the 2^nd-highest net claims of GH¢47.360million; this despite having a relatively low risk retention rate, having given out nearly half of its gross premiums as reinsurance premiums. After 4^th-placed Vanguard with respect to gross claims incurred comes 5^th-placed Star Assurance which incurred GH¢62.194million, but due to its relatively high premium retention rate of 62.7% it ranked 4^th by net claims incurred of GH¢32.446million.

Generally, non-life insurers ranking by gross claims incurred are similar to their rankings by net claims incurred – although their respective premiums retention rates tend to result in variances of up to four places in some instances. For instance, because of Priority Insurance’s industry-high premiums retention rate of 93.9%, the company ranks 24^th by gross claims incurred of GH¢4.908million, but 19^th by net claims incurred of GH¢6.175million.

Bedrock Insurance has both the lowest gross and net claims incurred of GH¢481.333million and GH¢449.800million respectively… the result of its having by far the smallest gross and net premiums.

In general, it is a plus for the industry that although several companies are incurring underwriting losses this is because of their other costs such as management expenses and brokerage commissions among others. At the most fundamental level, Ghana’s general insurers are earning far more as premiums than they are paying out as claims, which puts them and their clients on a sound footing.

However, when their other costs (outside of claims) are added on the situation changes significantly. This is why the investment income they make out of the premium income they retain and their own core capital is so important to their overall solvency and profitability.  Indeed, while premium earning capacities and claims payments are the key financial considerations for clients, the insurance companies themselves have a lot more to juggle with in order to remain in good financial health.

How Non-Life Companies Fared in Gross Premiums – 2021

2021 General Business Financials	Gross Written Premium	Net Premiums  Written	Gross Claims Incurred	Net Claims Incurred	Market  Shares
Activa International Insurance Company Limited	116,064,739	30,083,365	17,275,448	10,433,149	4.9%
Allianz Insurance Company Limited	47,964,511	35,078,619	13,054,462	12,682,640	2.0%
Bedrock Insurance Company Limited	3,938,826	3,500,300	481,333	449,800	0.2%
Best Assurance Company Limited	20,853,031	16,710,040	5,671,866	4,021,559	0.9%
Coronation Insurance Ghana Limited	24,596,769	18,983,621	12,676,225	7,019,735	1.0%
Donewell Insurance Company Limited	52,908,853	43,583,501	26,564,482	16,299,355	2.2%
Enterprise Insurance Company Limited	335,170,338	203,451,460	97,993,841	86,687,566	14.2%
Ghana Union Assurance Company Limited	140,909,608	56,273,451	25,847,791	25,847,791	6.0%
Glico General Insurance Company Limited	172,910,883	76,515,953	33,231,242	22,557,577	7.3%
Hollard Insurance Ghana Limited	212,491,724	112,662,689	72,850,273	47,357,949	9.0%
Imperial General Assurance Co. Ltd.	25,079,329	19,368,754	5,854,559	3,366,745	1.1%
Loyalty Insurance Company Limited	20,456,531	17,340,969	4,712,012	4,307,477	0.9%
Millennium Insurance Company Limited	41,779,214	34,550,279	14,024,269	7,740,290	1.8%
NSIA Ghana Insurance Company Limited	23,333,147	17,833,910	10,858,996	6,254,728	1.0%
Phoenix Insurance Company Limited	86,497,562	55,713,325	22,476,419	16,695,304	3.7%
Prime Insurance Company Limited	65,023,004	55,285,326	20,763,776	19,149,541	2.8%
Priority Insurance Company	40,906,415	38,399,490	4,907,833	6,175,420	1.7%
Provident Insurance Company Limited	53,110,119	42,374,410	18,275,779	12,906,247	2.2%
Quality Insurance Company Limited	63,259,193	46,122,790	27,957,340	16,317,042	2.7%
Saham Insurance Ghana Limited	49,184,064	17,503,888	7,921,441	5,015,987	2.1%
Serene Insurance Company Limited	43,364,450	29,039,653	7,675,000	5,903,816	1.8%
SIC Insurance Company Limited	276,223,658	157,418,513	78,659,844	21,929,284	11.7%
Star Assurance Company Limited	192,371,605	119,868,987	62,194,232	32,446,035	8.1%
Sunu Assurance Company Limited	66,620,052	51,870,079	27,087,753	15,450,064	2.8%
Unique Insurance Company Limited	24,148,432	20,793,710	6,366,876	5,110,789	1.0%
Vanguard Assurance Company Limited	162,609,621	113,391,084	67,945,379	45,833,708	6.9%
TOTALS	2,361,775,678	1,433,718,167	693,328,471	457,959,597