Namfisa defends insurance sector

THE Namibia Financial Institutions Supervisory Authority (Namfisa) has hit back at the Bank of Namibia (BoN) for calling for the close monitoring of the long-term insurance industry.

In a statement issued on behalf of the Namibia life-insurance industry yesterday, Namfisa said the sector is “sound and intact”. The Namibian carried a report yesterday in which BoN warned that the general outlook for the long-term insurance industry over the last six months had “deteriorated”.The Namibian’s report was based on BoN’s September 2008 Financial Stability Report released on Tuesday.In the report the central bank highlighted some of challenges facing the life-insurance sector, saying the situation warranted “close monitoring”, which in some financial sectors was seen as an indictment on Namfisa.Namfisa is the statutory supervisory authority for non-bank financial institutions.In its statement yesterday, Namfisa said the life-insurance industry was “financially sound and solvency requirements are met”.”In fact, as at 30 June 2008 the life assurance industry had excess assets of N$2 billion in comparison to N$1,8 billion during the same period last year,” Namfisa said in its statement.But the N$2 billion excess assets as at June 30 this year is still lower than the N$2,2 billion the sector had in its coffers at the end of the fourth quarter of 2005.”The industry Capital Adequacy Requirement (CAR) – or excess of assets over liabilities – however, fell from N$2,2 billion at the end of the fourth quarter of 2005 to N$1,8 billion by the end of December 2006,” BoN said in its Financial Stability Report for September 2007.Namfisa assured policyholders that the excess assets the industry holds are sufficient to act as a “buffer” against any adverse market movements.The authority admitted that the current global financial crisis had “inadvertently” affected the Namibian consumer, saying “more pronounced is the pain being felt by investors that have seen the value of their investments decline significantly in recent weeks”.Despite the industry having experienced growth in premium incomes between the first quarter of 2007 and the first quarter of this year, the number of policy lapses rose over the same period.Income from investments and other revenue lines also slumped significantly during this period.According to BoN the industry is prone to the uncertainty surrounding international financial markets, “causing both investment and investment income to fall”.But Namfisa said it is “closely monitoring the effects of the global market crisis on the non-bank sector and although there will be spillover, it will be less acute and not to the extent that is being experienced in the UK, American and European markets”.The life-insurance industry has experienced “steady growth” albeit at a slower rate “as consumers suffer from high interest rates that has put enormous pressure on disposable income and the substantial increases in the overall cost of living”, Namfisa said.In addition to the turbulent international financial markets, the local industry also has to deal with policy lapses because of shrinking disposable income and decreasing life expectancies that could impact negatively on future profits.Another challenge weighing on the industry is how it deals with the impact of HIV-AIDS.In its March 2008 Financial Stability Report, BoN warned that economic slowdown could result in a decline in the demand for life insurance products.Despite these concerns, particularly the declining surplus assets impacting on solvency levels, the central bank said the “overall operations of the sector were deemed to be sustainable, though warranting close monitoring”.The Namibian carried a report yesterday in which BoN warned that the general outlook for the long-term insurance industry over the last six months had “deteriorated”.The Namibian’s report was based on BoN’s September 2008 Financial Stability Report released on Tuesday.In the report the central bank highlighted some of challenges facing the life-insurance sector, saying the situation warranted “close monitoring”, which in some financial sectors was seen as an indictment on Namfisa.Namfisa is the statutory supervisory authority for non-bank financial institutions.In its statement yesterday, Namfisa said the life-insurance industry was “financially sound and solvency requirements are met”.”In fact, as at 30 June 2008 the life assurance industry had excess assets of N$2 billion in comparison to N$1,8 billion during the same period last year,” Namfisa said in its statement.But the N$2 billion excess assets as at June 30 this year is still lower than the N$2,2 billion the sector had in its coffers at the end of the fourth quarter of 2005.”The industry Capital Adequacy Requirement (CAR) – or excess of assets over liabilities – however, fell from N$2,2 billion at the end of the fourth quarter of 2005 to N$1,8 billion by the end of December 2006,” BoN said in its Financial Stability Report for September 2007.Namfisa assured policyholders that the excess assets the industry holds are sufficient to act as a “buffer” against any adverse market movements.The authority admitted that the current global financial crisis had “inadvertently” affected the Namibian consumer, saying “more pronounced is the pain being felt by investors that have seen the value of their investments decline significantly in recent weeks”.Despite the industry having experienced growth in premium incomes between the first quarter of 2007 and the first quarter of this year, the number of policy lapses rose over the same period.Income from investments and other revenue lines also slumped significantly during this period.According to BoN the industry is prone to the uncertainty surrounding international financial markets, “causing both investment and investment income to fall”. But Namfisa said it is “closely monitoring the effects of the global market crisis on the non-bank sector and although there will be spillover, it will be less acute and not to the extent that is being experienced in the UK, American and European markets”.The life-insurance industry has experienced “steady growth” albeit at a slower rate “as consumers suffer from high interest rates that has put enormous pressure on disposable income and the substantial increases in the overall cost of living”, Namfisa said.In addition to the turbulent international financial markets, the local industry also has to deal with policy lapses because of shrinking disposable income and decreasing life expectancies that could impact negatively on future profits.Another challenge weighing on the industry is how it deals with the impact of HIV-AIDS.In its March 2008 Financial Stability Report, BoN warned that economic slowdown could result in a decline in the demand for life insurance products.Despite these concerns, particularly the declining surplus assets impacting on solvency levels, the central bank said the “overall operations of the sector were deemed to be sustainable, though warranting close monitoring”.