Maihapa Ndjavera
The domestic short-term insurance (STI) industry’s profit before tax for the third quarter of 2021 declined by a whopping 65.9%, quarter-on-quarter and by 20.2% to N$63.8 million. Short-term insurance, generally speaking, covers possessions, referring to car insurance, home insurance, cellphone insurance, travel insurance, etc. Short-term insurance covers, as well as monthly premiums, are influenced by circumstances such as age and gender.
This is according to the third quarter bulletin released by Namibia Financial Institutions Supervisory Authority (Namfisa) last week. Short-term insurance provides coverage for specific assets for a limited duration.
“The increase in management expenses and significant decline in investment income of the industry mainly contributed to the decline in profit before tax during the review period,” said Namfisa.
The industry’s investment income declined by 41.8% quarter-on-quarter and by 26.1% year-on-year to N$38.3 million during the period under review during the third quarter of 2021.
The quarterly and yearly decrease in investment income resulted from low interest rate earnings in the money market instruments equally corresponding to low local and foreign interest rates when compared to prior periods.
“Additionally, significant investment withdrawals made by entities in the previous period in order to service claims reduced the value of invested assets, therefore, leading into declining investment income during the period under review,” the Namfisa report stipulated.
Furthermore, the value of the STI total assets increased by 1.5% quarter-on-quarter and by 19.9% year-on-year to N$7.6 billion at the end of the third quarter of 2021.
Sound growth in the value of investments and cash and cash equivalents mainly contributed to the increase of the total assets on both a quarterly and yearly basis.
Namfisa stated the increase in cash and cash equivalents resulted from insurers holding more cash at the end of the third quarter while appreciation in the value of the industry’s assets mainly resulted in gains observed in the South African and local equity and bond markets.
On liabilities, the industry’s total for the quarter increased slightly by 0.2% and by 27.6% year-on-year to N$5.2 billion as of 30 September 2021.
“The quarterly increase in total liabilities emanated from an increase in the gross claims incurred but not reported and the yearly increase mainly resulted from growth in the gross outstanding claims at the end of the third quarter of 2021,” reads the bulletin.