We invested GH¢1.5 billion in GoG securities; exempt us from debt exchange – Insurance companies

The Ghana Insurers Association is demanding that insurance companies be exempted from the domestic debt exchange programme since 40 percent of their total assets for the third quarter of 2022 was invested in Government of Ghana Securities.

The group’s president, Seth Kobla Akwasi, told journalists at a press conference on Friday, 9 December 2022: “According to data from NIC, insurance companies invested over GH¢1.5 billion in deposits with licensed banks and money market mutual funds.”

“Considering the fact that these banks and fund management companies have also invested in government of Ghana securities, the debt exchange will further compound the investment base of the insurance industry, since 40% of our investments are directly exposed to government of Ghana securities an additional 10% exposure from the licensed banks and fund managers will further worsen our situation”, he said.

He added: “In uncertain times like this, entities must protect their assets through insurance, which is a key risk management tool. Anything short of an exemption will have far-reaching consequences for the insurance industry and the important role they play in protecting assets and liabilities of this country. This will also discourage the citizenry from taking up life and annuity policies”.

“In the absence of the foregoing, the insurance and reinsurance companies will be happy to cede all our claims to the financial stabilisation fund.”

GIA is the latest in a long streak of unions and groups to kick against the government’s debt exchange programme.

The Ghana Securities Industry Association (GSIA) recently said it cannot accept the programme announced by Finance Minister Ken Ofori-Atta in the 2023 budget.

In a statement issued on Wednesday, 7 December 2022, GSIA said: “We, at the GSIA understand the difficult crossroads at which our nation currently finds itself and the difficult choices that need to be made to set us on the path to debt sustainability. However, we are unable to accept the bond exchange program announced by the Minister of Finance in its present form”.

“It is our intention to engage the MoF on our concerns and reservations. We, therefore, urge the investing public to continue to have confidence in us as we pursue this process. In this vein, we entreat clients of our member firms to allow us to engage and then communicate the outcomes to enable them take the best decision on their investments.”

GSIA was established to be the voice of the securities industry and to work in partnership with the regulator to ensure the protection of investors.

It is made up of firms regulated under the Securities Industry Act 2016 (Act 929) as amended (Investment Dealers, Investment Advisors, Fund Managers, Registrars and Custodians) with associate membership provision for other financial institutions and the Ghana Stock Exchange.

The association was incorporated as a company limited by guarantee on 11 December 2003.

It is a non-profit membership organisation with self-regulatory functions, to maintain prudent business practices among members and to ensure investor protection.

It was founded by 10 firms: Boulders Advisors Limited, Capital Alliance Limited, CDH Securities Limited, Databank Brokerage Limited, Databank Asset Management Services Limited, Gold Coast Securities Limited, HFC Investment Services Limited, NTHC Limited, SEM Capital Management Limited and Strategic African Securities Limited.

Recently, Mr Ofori-Atta said Treasury Bills have been exempted from the government’s debt restructuring programme.

Also, individual bondholders will not experience a haircut.

The government is currently negotiating a programme with the International Monetary Fund for a $3-billion credit facility programme, thus, necessitating the debt restructuring exercise.

“Under the programme, domestic bondholders will be asked to exchange their instruments for new ones”, Mr Ofori-Atta announced Sunday evening (4 December 2022), adding: “Existing domestic bonds as of 1st December 2022 will be exchanged for a set of four new bonds maturing in 2027, 2029, 2032 and 2037”.

Also, “the annual coupon on all of these new bonds will be set at 0% in 2023, 5% in 2024 and 10% from 2025 until maturity. Coupon payments will be semi-annual”.