The Reserve Bank of Malawi (RBM) has expressed concern with the rise in externalisation of insurance business and premiums.
RBM Director of Pension and Insurance Supervision, Chimwemwe Kachingwe, made the observation in Blantyre this week during the rebranding of Malawi Reinsurance Company to Emeritus Reinsurance Company.
Kachingwe said that the regulator wants all insurance risks arising from Malawi to be underwritten in the country.
Figures she provided showed that total premiums of over K26 billion have been externalised between 2014 and 2017.
“This is a lot of money and it means loss of foreign exchange. If this money had remained in Malawi, it would have made a difference in the insurance sector because the premiums make the insurance companies to grow,” she said.
In the process of unscrupulous externalisation, companies also shun paying dividend and corporate taxes to the government.
Kachingwe then said creating a strong local insurance support could help the country curb the challenges.
She said RBM has since issued a directive, which will require companies to get approval from the central bank for the process.
“Before you externalise that insurance business, you have to make sure that the local insurance industry has processed the issue up to their maximum capacity. The excess is what can be externalised outside Malawi,” Kachingwe said.
Emeritus Reinsurance Managing Director, Christopher Mukwindiza, said the rebranding will help the company reposition and further transform it into a strong and adequately capitalised firm that will add value to the local insurance sector.