Insurance sector adjusts investment strategies amid DDEP impact

Insurance companies in Ghana have reduced their investments in Government of Ghana (GoG) and Bank of Ghana (BoG) securities, responding to income challenges from the Domestic Debt Exchange Programme (DDEP).

According to the 2023 Financial Stability Review, the non-life insurance sector lowered its holdings in GoG and BoG securities by 13%, dropping from 38% in 2022 to 27% in 2023.

Within this portfolio, fixed deposits now make up 23%, while listed securities and investment properties represent 27% and 19%, respectively.

Similarly, the life insurance segment decreased its investments in GoG and BoG securities by 9%, reducing its holdings from 49% to 40% in 2023.

This shift reflects an industry-wide move to mitigate risk and optimize returns amid the financial impacts of the DDEP.

Life insurers also increased their investment in property to 23%, a 1% uptick, and fixed deposits rose by 8 percentage points to comprise 21% of their portfolio.

These changes highlight a strategic pivot toward diversification, as insurers aim to balance risk and enhance returns in a challenging economic climate.

NIC Maintains Optimism on Industry Stability

Despite these adjustments, the National Insurance Commission (NIC) maintains a positive outlook on the sector’s resilience.

Recognizing the upcoming impact of IFRS 17 on capital adequacy requirements (CAR), the NIC is actively supporting insurers in compliance efforts to uphold financial stability.

Through proactive regulatory oversight, the NIC is confident that the industry will continue to navigate shifting market dynamics while maintaining financial health.