Financial Crime World

Insurance Sector Shows Resilience Amidst Pandemic Pressures

The insurance industry in the Solomon Islands has demonstrated remarkable resilience during the COVID-19 pandemic, despite facing significant pressures from domestic inflation and increasing global reinsurance prices.

Improved Profitability

According to the Central Bank of Solomon Islands’ latest financial stability report, the general insurance portfolio’s profit improved by 43% from last year. The profit grew from $1.6 million in the second half of 2022 to $11.4 million in the first half of 2023.

Factors Contributing to Improved Profitability

  • Decline in number of claims recorded over the period, mainly due to the absence of catastrophic losses
  • Low number of claims in dominant classes such as Fire, Contractors All Risks, Workers Compensation, Motor Vehicle and Home Content Insurance

The insurance market in Solomon Islands is highly concentrated, with most insured risks located within Honiara. The low uptake of insurance in provinces such as Western and Malaita was attributed to:

  • Low economic activities
  • Lack of insurer representation
  • High cost of accessing services in Honiara
  • Limited insurance awareness

Investment Portfolio

The industry’s investment portfolio contributed minimally to its overall profitability, due to:

  • Limited investment opportunities
  • Underdeveloped financial infrastructure

However, the sector did receive some income from interest generated on cash deposits with commercial banks.

Sector Performance

  • Total assets grew by 14% in the first half of 2023, driven mainly by the sector’s profitability.
  • Liquid assets comprised 70% of the sector’s total assets, primarily consisting of cash deposits held by commercial banks.

Conclusion

The insurance industry’s resilience during the pandemic is a testament to its ability to adapt and respond to changing market conditions. As the country continues to recover from the economic impacts of COVID-19, the industry is well-positioned to support businesses and individuals in rebuilding their lives and livelihoods.

Key Statistics:

  • General insurance portfolio profit improved by 43% from last year
  • Total assets grew by 14% in the first half of 2023
  • Liquid assets comprised 70% of the sector’s total assets
  • Investment income contributed minimally to overall profitability
  • The industry is highly concentrated, with most insured risks located within Honiara
  • Low uptake of insurance in provinces due to limited economic activities and lack of insurer representation
  • Industry profitability driven by a decline in claims rather than investment income