Insurance firms grow equity, secure strong financial position

Ghana’s insurance industry recorded significant growth in its equity base and solvency position in 2024, underscoring improved financial resilience and stronger shock-absorption capacity.

The 2024 Financial Stability Review revealed that the sector’s equity rose by 31 percent to GHS6.62 billion, up from GHS5.04 billion in 2023.

This expansion, the report noted, has bolstered capital strength and provided a solid buffer against potential market or operational disruptions.

The growth in equity aligns with the industry’s strong solvency profile, with average Capital Adequacy Ratios (CAR) comfortably above the 150 percent regulatory threshold.

Life insurers recorded an average CAR of 325 percent, while non-life insurers reported 390 percent, reflecting robust capital positions across both market segments.

According to the report, the improved equity and solvency performance was underpinned by prudent capital management, better underwriting profitability and enhanced regulatory emphasis on capitalisation in preparation for the implementation of the Risk-Based Capital (RBC) framework in 2026.

Despite these gains, the review cautioned that segment-specific risks remain.

In the life insurance segment, solvency continues to be sensitive to adjustments under the International Financial Reporting Standard (IFRS) 17 and portfolio restructuring following the Domestic Debt Exchange Programme.

These factors, the report warned, expose life insurers to asset quality and discount rate risks. For the non-life segment, the stronger solvency ratios were partly attributed to greater reliance on reinsurance.

While this reduces direct claims exposure, it increases vulnerability to fluctuations in global reinsurance pricing and counterparty risk.

From a financial stability standpoint, the review stressed that these fortified equity and solvency positions provide a critical safeguard for policyholders and reduce the risk of contagion within the wider financial sector.

“As the industry prepares for the rollout of RBC in 2026, supervisory attention will move beyond capital levels to ensuring that capital is appropriately aligned with actual risk exposures. This will help guarantee that strong capital positions translate into genuine resilience and sustainable financial stability,” the report stated.