DDEP: Insurance firms cut investments in GoG, BoG bonds

Insurance firms in Ghana have trimmed their investments in Government of Ghana (GOG) and Bank of Ghana (BoG) bonds, reflecting the income pressure from the recent Domestic Debt Exchange Programme (DDEP), according to the Financial Stability Review.

The non-life insurance sub-sector reported a 13% reduction in GOG and BoG securities, which now account for 27% of its total investment portfolio, down from 38% in 2022.

The sub-sector’s portfolio shows a shift toward fixed deposits at 23%, with listed securities and investment properties at 27% and 19%, respectively.

The life insurance sector also reduced its holdings in GOG and BoG securities, with a 9% decline bringing its allocation down to 40% from 49% the previous year.

This adjustment suggests a cautious pivot by insurers, responding to the DDEP's financial impact.

Life insurance firms have slightly increased investments in real estate, now at 23%, and fixed deposits, which rose by 8 percentage points to 21% in 2023.

The report underscores that these reallocations reveal a shift in insurers' investment strategies, emphasising the importance of diversification in the face of changing economic conditions.

"Achieving optimal returns while managing operational costs is essential for maintaining profitability. The industry’s adaptability to economic shifts highlights the importance of strategic investment decision-making for sustained growth and resilience," the report noted.

The National Insurance Commission (NIC) remains optimistic about the sector’s future, attributing this confidence to the industry's demonstrated resilience and forward-looking strategies.

While the adoption of IFRS 17 accounting standards could challenge the industry's Capital

Adequacy Ratio (CAR), the NIC has implemented strategies to address potential impacts.

The NIC emphasised that its commitment to strategic planning, regular reviews, and regulatory compliance will safeguard the sector's financial health and stability.