Insurance companies defend decision not to underwrite risks in agric

Accra, April 30, GNA - Dependence on rainfall and lack of infrastructure in the agricultural sector to allow for all year cultivation are key reasons why insurance companies shy away from underwriting risks in the sector, Mr George Otoo, Managing Director of Enterprise Insurance Company (EIC), said on Wednesday.

Answering questions at the facts behind the figures programme on the Ghana Stock Exchange, Mr. Otoo said absence of irrigation systems and the unpredictable nature of the weather made agriculture a risky area for insurance companies.

Besides the infrastructure, there was also need to transform agriculture from small holder production to large commercial business as a first step to attract insurance companies into the sector, he said. Mr. Otoo said with the increasing growth in commercial agriculture the Ghana Insurance Association would work with government, the private sector and other agencies to see how best to come out with products to underwrite risks in the sector.

On preparations the company was making towards the production of oil in the country, Mr Otoo said everything was being done to get EIC to position itself to benefit from the oil boom.

He said because of the capital intensive nature of the oil business underwriting such risk would require collaboration and pooling of resources by the insurance companies to be able to benefit from the boom. EIC's underwriting profit grew by 70.3 per cent in 2007 as a result of improved underwriting, interest, net premium, controlled expenses and efficient claims management. The profit jumped from 2.7 million GH cedis in 2006 to 4.6 million GH cedis in 2007.

Shareholders' Funds also went up from 10.1 million GH Cedis to 13.3 Million GH cedis, a rise of 31.6 per cent while total assets also increased by 40 per cent.

The growth was on account of good performance in the Life sector, which contributed 38 per cent to the group gross premium. Group Life premium income grew by 64 per cent last year from 0.24 million GH cedis to 0.40 million GH cedis.

New business acquisition accounted for 26 per cent of Gross Premium.

Mr Otoo said the company would continue to focus on the areas that would yield the maximum return for its shareholders. In this direction, a group structure was being considered to enable the different operational areas to focus more on their areas of comparative advantage to deliver profit.

EIC will also consider the development of its real estate potentials. Currently, Genesis Real Estate Consultancy of which EIC is a shareholder is putting proposals for the redevelopment of landed properties.

"There is additional value in our real estate assets that is not fully reflected in the balance sheet values until new professional valuations are obtained," Mr Otoo said.

To better the position of the company, Mr Otoo said EIC was subjected to independent and international financial rating in 2006 by Global Credit Rating Company. EIC was rated AA- on a scale ranging from AAA (highest) to D (lowest).