Members of the Association of Insurance Companies of Cameroon (ASAC) are of the view that an increase in capital without taking into account the profitability of insurance companies could hinder the development of the insurance sector.
This is particularly so because the insurance coverage rate is below 50% in Cameroon, according to a commentary in Financial Afrik.
The Inter-African Conference of the Insurance Markets (CIMA) decided in 2016 to prescribe that insurance companies in 14 countries in West and Central Africa increase their share capital from FCFA1bn ($1.7m) to FCFA5bn. The first phase of the capital increase exercise sets the minimum capital at FCFA3bn for insurance companies by 31 May 2019. The exercise also requires additional shareholders' equity to be at least 80% of the share capital. Insurance mutuals are to have increased their capital from FCFA800m to FCFA3bn in total, with FCFA2bn to have been reached at the end of last May.
Insurance companies in Cameroon do not believe that regulators have taken into account the profitability of insurers to effect the capital increase. The low profitability has deterred foreign investors from investing in the sector.
The ASAC argues that the profitability of insurance companies requires "a rigorous selection of risks; fair pricing of these with realistic loadings; increased retention of risks and development of new products”.
In addition, insurance companies favour a “more equitable distribution” of business with reinsurers, because they believe this would help them improve profitability.
At the same time, the insurers pledged to support various moves of the government such as introducing compulsory insurance and promoting insurance.