The Insurance and Pension Commission (IPEC) says it is banking on underwriting business in foreign currency to boost confidence in the sector and drive its anticipated 5,4 percent growth in 2022.
Overall, the economy is now projected to grow by 4,6 percent from the 5,5 percent initially projected on reduced output from the 2021/22 agricultural season.
However, there are still downside risks to that growth emanating from the prolonged dry spell affecting the agricultural season, as well as the geopolitical tensions in Eastern Europe that have resulted in global commodity crises, causing severe economic damage.
This also comes as inflationary pressures have been a major concern with the country battling foreign currency volatility resulting in the local currency depreciating against the US dollar and rampant price increases eroding real incomes and consumer spending.
The waning confidence in the local currency has seen some businesses across sectors switch to USD pricing or implement dual pricing.
For the insurance, sector, underwriting in US dollar is expected to drive its growth and restore confidence.
“The financial and insurance activities are projected to register a growth of 5,4 percent in 2022, on account of improved confidence due to underwriting business in foreign currency and improved soundness in the sector.
“The Board is optimistic of a good year, with strong growth and resilience built by the industry to absorb exogenous shocks,” said IPEC chairman Albert Nduna in the regulator’s annual 2021 report.
According to the pensions report for the quarter to March 31, 2022, total foreign currency-denominated income received by the pensions industry was US$11,96 million with total expenditure amounting to US$0,77 million. Dividends from forex investments and contributions were the major drivers of income on foreign currency business constituting 53,22 percent and 43,05 percent respectively.
The pensions industry had a total USD-denominated asset base of US$114,23 million as at the reporting date, which was largely concentrated in quoted equities, prescribed assets and money market.
The total asset base in forex grew by 19,5 percent from the previous quarter.
Meanwhile, total income for the industry as at March 31, 2022 was $135,93 billion compared to $34,20 billion reported in the same period in 2021.
Total income was mainly driven by fair value gains and interest from investments, which constituted 44,36 percent and 38,86 percent of total income, respectively. Total industry expenditures for the period under review amounted to $7,70 billion, of which $5,56 billion or 72,17 percent went towards benefit payments.