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Health Check: Insurance Companies

For the year ended December 2021, total assets for the general insurance industry expanded by 4.3 percent to an estimated $1,031 million at year-end. The growth in the asset base is mainly reflected in reinsurance assets and accounts receivable which increased by $25 million and $23 million, respectively. Liabilities incurred by the industry fell by approximately 7 percent, to reach $753 million. This resulted from a $63 million decrease in accounts payable.

Overall, the investment portfolio for the general insurance industry was estimated to be $600 million, a mere 1.6 percent rise over the preceding year. Bond holdings continue to be the largest component with approximately $233 million worth of investments held, followed by the $210 million in cash and other deposits.

The industry’s capital-to-asset ratio was 27 percent at the end of 2021. This ratio reflects an increase of approximately 9 percentage points. This rise is the result of significant increases in returned earnings by two insurers and, as a result, the industry registered an overall of $63 million (28 percent) in retained earnings, relative to the previous year.

Gross premiums written for non-life insurers increased by 3.9 percent when compared to the comparable period. Similar to past trends, this increase was driven by the property line of business which continues to be the largest and the most heavily reinsured line of business. Motor insurance remained the second largest line of business, but reinsurance ceded for that line of business is not as high as property, given that it is supported by a statutory fund.

Net income recorded for the period reached $38 million, with a return on assets of 3.6 percent, 0.5 percentage points below the prior year. This decline in profitability resulted from increased underwriting expenses of approximately 4.8 percent as lines of business such as liability, property and others experienced increases in claims during the period.

Life Insurance Sector

The asset base of the life insurance industry rose by a marginal 0.6 percent during 2021, compared to the 5.7 percent growth achieved in 2020. At year-end, assets within the industry totalled $2,767 million. Similarly, there was no significant change in liabilities from the previous year, as total liabilities were approximated to be $1,424.0 million.

The investment portfolio continues to account for over 85 percent of the assets held by life insurance companies. This portfolio contracted by approximately $100 million (4.2 percent) as the largest investment category-related party investments - declined by $89 million. However, other assets (accounts receivable, pension fund surplus) rose by $144 million.

Gross premiums written for the industry rose by a modest 1.1 percent. The ordinary life class continued to account for more than 50 percent of the premiums written within the industry and was responsible for almost half of the increased premiums for the year.

Profitability within the industry declined for the third year in a row reaching $101 million at the end of 2021, a 15.3 percent decline from 2020. The industry faced an increase in policyholder benefits over the review period driven mainly by an increase in policy surrenders valued of almost $24 million. As a result, the return-on-assets measure dipped to 3.7 percent, reflecting a fall of 0.7 percentage points.

Despite the lower profitability, life insurance companies continued to be highly-capitalised, recording a capital-to-asset ratio of 49 percent, a slight improvement from the 48 percent recorded in 2020. All entities remained solvent over the period and the industry exceeded the solvency margin by more than 90 percent.

Adapted from the 2021 Financial Stability Report.