Ghanaians spending more on insurance as coverage remains low
By Praisebell Rosemond Larbi
Insurance penetration in Ghana remained subdued in 2024, holding steady at 1.0 percent of Gross Domestic Product (GDP) based on gross premiums, according to the 2024 Financial Stability Review.
This figure mirrors the penetration level recorded in 2023, highlighting persistent structural and market challenges in expanding insurance coverage nationwide.
However, when assessed under the new International Financial Reporting Standard (IFRS 17) for Insurance Contracts, which adopts the Insurance Service Revenue approach, insurance penetration for 2024 stood at a lower 0.63 percent.
The change in methodology reflects a more precise representation of the insurance industry’s actual service delivery but also underscores the modest contribution of insurance to Ghana’s economy.
The report anticipates that, in the years ahead, penetration levels could improve, driven by digitalisation, product innovation, expansion of inclusive insurance offerings and sustained public education initiatives aimed at increasing awareness and uptake.
“Although insurance penetration remained low, insurance density showed an improvement compared to the previous year,” the report noted.
Insurance Density Shows Improvement
Insurance density, which measures the average annual amount spent on insurance per person, increased to GHS202.40 in 2024, up from GHS195.00 in 2023.
This growth suggests either a rise in the average size of policies taken or improved disposable incomes among consumers, potentially reflecting an easing of economic pressures on households and businesses.
The National Insurance Commission (NIC) sees the increase in density as an encouraging sign that, despite the relatively low overall penetration, there is scope for deepening insurance adoption through tailored products and improved market accessibility.
Premium Retention Remains Strong in Life Segment
The review also examined the retention of premiums by insurers, a key indicator of sector resilience and reliance on local market capacity.
The life insurance segment maintained a high premium retention rate of 96.36 percent in 2024, reinforcing the sector’s strong reserving practices, prudent asset-liability management and careful investment strategies.
High retention rates are crucial in protecting policyholder funds and ensuring that insurers remain solvent in the face of market shocks.
In the non-life segment, premium retention ratios remained broadly stable. The sector retained 73 percent of premiums in 2024 compared to 69 percent in 2023. The report described this as evidence of the non-life market’s growing ability to absorb risks domestically, reducing dependence on external reinsurance markets.
The NIC noted that limiting reliance on offshore reinsurance not only reduces exposure to global reinsurance price cycles and counterparty risks but also curtails foreign exchange outflows, a critical factor given Ghana’s current macroeconomic constraints.
Overseas Reinsurance Premium Transfers Rise
Despite improvements in local retention, the report highlighted a notable rise in overseas reinsurance premium transfers. In 2024, the NIC approved GHS814 million in offshore reinsurance transfers, up from GHS656 million in 2023.
The increase reflects ongoing limitations in local underwriting capacity, particularly for large or complex risks, and a growing reliance on foreign reinsurers.
A significant portion of these remittances was denominated in foreign currencies, further linking the sector’s stability to exchange rate movements.
While offshore reinsurance arrangements help diversify risk and provide access to global expertise, the report cautioned that they also expose the domestic insurance market to foreign exchange volatility and capital outflows. In the event of severe currency depreciation, these obligations could heighten systemic liquidity pressures within the financial sector.
Outlook
The 2024 Financial Stability Review concludes that boosting insurance penetration will require sustained efforts to bridge the awareness gap, expand microinsurance and inclusive products, and leverage technology to lower distribution costs.
It also urges closer collaboration between regulators, insurers and industry associations to expand local capacity, improve retention rates and reduce vulnerability to external shocks.
