Ghana’s insurance industry has been transformed in recent years by regulatory reforms, led by the National Insurance Commission (NIC). The commission has prioritised modernising the sector, as well as enhancing its accessibility and reach. Supported by these efforts, the sector has expanded rapidly, with total gross written premium growing by 232% between 2018 and 2022. Along with the increase in premium, the number of insurance providers has expanded to keep up with demand. This has allowed the country to bring previously uninsured individuals into the fold. Even as the sector has seen progress, it was deeply affected by the country’s wider financial crisis and currency devaluation. While there were initial concerns about the sector following the Domestic Debt Exchange Programme (DDEP), the industry has proven to be resilient.
Structure & Oversight
The NIC oversees Ghana’s insurance sector, working to ensure the effective administration, supervision and regulation of most insurance businesses. The commission also approves insurance premium rates and arbitrates disputes about claims. Also involved in the sector is the National Health Insurance Authority and the National Pensions Regulatory Authority (NPRA), which are responsible for the provision and regulation of health insurance and pensions, respectively.
The sector comprised 49 insurance providers – 28 in the non-life and 21 in the life segment – as of September 2023. In addition to insurance providers, the sector featured four reinsurers, five reinsurance brokers, 116 brokerages and around 12,500 agents with licences to operate in the country.
The life insurance segment is concentrated, with the top-three companies by assets accounting for 60.9% of the market as of the second quarter of 2023. These companies were StarLife Assurance, accounting for 25.7% of total assets, followed by Enterprise Life Assurance (19.4%) and SIC Life Insurance (15.9%). The non-life segment was less concentrated, with the top-three companies making up a combined 38.1% of assets. The top-three companies in the non-life segment were Star Assurance (16.6% of assets), SIC Insurance (11.7%) and Enterprise Insurance (9.8%).
Insurance Act
The NIC was created under the Insurance Act of 1989, but today operates under the provisions of the Insurance Act of 2021. The Insurance Act of 2021 aims to modernise the sector and increase penetration through the introduction of a special licence for companies with new or innovative products or services, among other measures. Among its most important measures is the addition of three compulsory lines of coverage: public liability, professional indemnity and marine cargo insurance. Prior to the law, only auto and fire insurance coverage was required.
The new framework aims to raise awareness among Ghanaians about the importance of having insurance, long a challenge for the industry (see analysis). “Ghana needs a new approach to boosting insurance awareness to ensure consumers see the value and significance of insurance and increase overall penetration,” Yasmin Essilfie-Mensah, managing director of Edward Mensah, Wood & Associates told OBG. “This could be done through universal financial education of the public and teaching the concept in basic academic curricula.”
The legislation also created the Insurance Education Fund to provide support for training the industry’s workforce, as well as the Agriculture Insurance Fund to develop that segment. The creation of the two dedicated funds highlights the government’s commitment to ensuring that the sector thrives, both in terms of its workforce and in efforts to expand coverage to some of the country’s most economically important sectors. Agriculture insurance is a particular priority as a large portion of the population –around 40% as of 2021 – is employed in the sector, making it a significant contributor to GDP.
Size & Performance
Insurance penetration, or gross premium as a share of GDP, held steady at around 1% between 2016 and 2021, ticking upwards slightly to 1.6% in 2022, according to the Bank of Ghana (BoG), the country’s central bank. While the figure shows improvement, the country remains behind some of its continental peers.
To put insurance penetration into a regional context, in 2021 South Africa had the continent’s highest penetration rate, at 17%, followed by Namibia at 6.3%. However, countries such as Tanzania (0.6%) and Uganda (0.8%) reported lower insurance penetration rates. Ghana’s relatively low premium has been identified as one of the contributors to the continent’s muted penetration rate.
However, by some measures the country is faring better: insurance coverage, or the percentage of the population that has insurance services, reached 44.6% in 2022. Life insurance penetration, meanwhile, witnessed an uptick from 29% in 2015 to 31% in 2022; when measured as a proportion of the country’s working population, this figure was up to 45%.
At constant 2013 prices, the contribution of financial and insurance activities to GDP was GHS7.9bn ($717.3m) in 2022, up 5.7% from 2021 and 8.2% from 2020, according to the BoG. In nominal terms, the contribution of financial and insurance activities to GDP was GHS17.3bn ($1.6bn) in 2022, up 9.6% from 2021 and 20.4% from 2020. The difference between the two figures reflects the devaluation of the cedi, which lost 55% of its value between January and October 2022. Overall, financial and insurance activities accounted for 3% of Ghana’s GDP in 2022.
NIC data shows that total life insurance assets grew by 13.9% in nominal terms, from GHS6.4bn ($581.1m) to GHS7.3bn ($653.8m) between the second quarter of 2022 and the second quarter of 2023, the most recent quarter for which data is available. Non-life insurance assets, meanwhile, expanded by 35.1% over the same period from GHS4.7bn ($426.8m) to GHS6.3bn ($572m). Meanwhile, profit after tax across the sector increased by 20.3% from GHS240m ($21.8m) to GHS289m ($26.2m).
Premium
Gross premium increased from GHS3.1bn ($281.5m) in the second quarter of 2022 to GHS4.1bn ($372.3m) in the second quarter of 2023, an increase of 35%. Non-life non-life accounted for GHS2.3bn ($208.8m) and life GHS1.8bn ($163.4m) of second quarter 2023 figures. For life insurers, the business lines that contributed the most to premium were universal life and investment products at GHS826.9m ($75.1m). Other products included whole life and endowment (GHS543.6m, $49.4m), group life (GHS175.3m, $15.9m), term (GHS141.2m, $12.8m), other approved products (GHS73.3m, $6.7m) and credit life (GHS53.3m, $4.8m).
For non-life insurers, nearly half of premium came from motor at GHS1bn ($90.8m). Other lines included fire, theft and property (GHS675.3m, $61.3m); engineering (GHS141.4m, $12.8m); liability (GHS140m, $12.7m); marine and aviation (GHS126.2m, $11.5m); personal accident, health and medical (GHS97.1m, $8.8m); and bonds and financial guarantees (GHS81.5m, $7.4m).
Distribution Channels
According to the most recent figures from the NIC from 2021, 40.4% of life insurance premium was attributed to distribution by individual or tied agents, 31.4% to direct business, 12.9% to bancassurance, 7.9% to brokers, 4.3% to telecoms companies and 3.5% from other corporate agents. On the non-life side, 42.7% came from brokers, 30.5% came from individual or tied agents, 22.1% from direct business, 2.3% from bancassurance, 1.8% from other corporate agents, 0.6% from telecoms companies. The distribution may be set to change, however, as more financial technology and telecoms companies embrace mobile insurance and other emerging segments. With new players in the space, the market could see more activity stemming from non-traditional players targeting un- and under-insured individuals.
International Standards
In January 2023 the International Financial Reporting Standards (IFRS) 17 took effect, replacing IFRS 4 as the international standard for insurance contracts. IFRS aims to standardise insurance accounting around the world to improve comparability and increase transparency by implementing a uniform approach. While the NIC had established a framework for the standards, the month the standards were set to become effective, the commission announced it would postpone implementation to mitigate the impact of the DDEP on the sector. Other measures to support the sector included revisions to claim payments timelines; a 40% reduction in product approval fees; and the creation of a regulatory asset that companies could utilise to fill gaps in their balance sheet, with up to 15 years to write down.
Also included in the package was a moratorium on the enforcement of minimum capital requirements and capital adequacy ratio, at 14.2%, for the 2023-24 period. In 2019 minimum capital requirements for insurance firms were raised from GHS15m, or around $2.6m at the time, to GHS50m ($8.5m at the time), while reinsurers would need GHS125m ($21.4m at the time), up from GHS40m ($6.8m at the time), and brokers GHS500,000 ($85,500 at the time), up from GHS300,000 ($51,300 at the time).
Pensions
Public and private pension schemes are integrated in Ghana and are managed separately from most other activities in the insurance sector. They function according to a three-tiered system, overseen and managed by the NPRA, and the Social Security and National Insurance Trust, both of which were established in 2008 by the National Pensions Act. The first tier is publicly administered and is contributed to by all workers in the formal sector through compulsory payments, operating on a pay-as-you-go basis. The second tier receives contributions from both workers and employers, with payments made either incrementally each month or in lump sums. The third tier involves voluntary, tax-deductible individual payments. The administration of tiers two and three is handled by private enterprises. The NPRA is responsible for ensuring compliance with pensions-related legislation, and conducts periodic visits to private establishments to ensure that both formal and informal employers paid their mandatory monthly pension contributions.
The pension system has historically been limited to the small portion of Ghanaians who work in the formal sector, leaving the informal 80% of the workforce vulnerable to financial shocks. The government has worked to enhance awareness about the importance of pensions, especially among those in the informal sector. As part of these efforts, in April 2023 the NPRA held a workshop for artisans to educate workers about the pension programme.
Reinsurance
There are four reinsurance companies operating in the domestic market: Ghana Reinsurance, GN Reinsurance, Mainstream Reinsurance and WAICA Reinsurance. A substantial portion of the implicit risk assumed by Ghanaian insurers has traditionally been transferred to foreign reinsurers, resulting in foreign exchange outflows. The transfer of risk to foreign reinsurers also exposes the domestic sector to exchange rate volatility. To address this imbalance, the NIC mandates that insurers exhaust local reinsurance capacity before looking abroad. The proportion of the local reinsurance market’s risk retention on assets grew from 2% in 2018 to 7% in 2021, as domestic underwriting capacity expanded.
Outlook
Fuelled by modernising regulations and increasing revenue, the upwards trajectory of the insurance sector has been tempered by the wider economic downturn. With 40% of the industry’s assets in local government bonds, rebuilding its capital buffers will be critical to offsetting the capital erosion under the DDEP, and promoting financial stability and development. In the long run, the DDEP is likely to benefit the larger economy by reducing the country’s debt burden. Though it may cause challenges in the short term, the restructuring will likely benefit insurers who seek to diversify their portfolio to enhance investment returns, improving resilience. Moreover, as more Ghanaians move into the formal economy, demand for coverage will grow, creating more long-term opportunities for insurers.
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