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Genac reinsurance obligations dampen profits

General Accident Insurance Company is smarting from the effects of premiums handed over to reinsurers, evidenced by a decline in profit over nine months, its latest earnings report shows.

Managing Director Sharon Donaldson said the company had to “cede” more to reinsurers because of a change in the mix of insurance business it wrote; with property insurance policies causing the company to hand over more.

“We write two major classes of business, one of which is property, and the premiums there are shared between our company and the reinsurers 10/90, meaning the reinsurers get 90 per cent of the premiums,” Donaldson said.

“If I write more property and less motor, then it will look like I’m ceding more premiums which ultimately affects the bottom line,” she told the Financial Gleaner.

Insurance companies routinely pass on the risks that they take on when the write insurance policies for their clients. Reinsurers such as Lloyds and Swiss Re or Hamburg Re are essentially fund managers with access to a larger pool of funds that they use to cover local insurance companies in the event of a catastrophe.

The local insurance company therefore pays over or cedes a portion of the premiums that they take from clients to cover the risk.

For the nine-month period ended September, General Accident Group ceded more than $10.38 billion to reinsurers. This was $1.38 billion or 15.36 per cent more that the similar period in 2021. With yet another quarter to go, the general insurer’s payments were about the same as the $10.48 billion it paid to reinsurers for all of 2021.

Amid those costs, and other impacts, profit declined by 21 per cent from $351 million or 39 cents per share to $277 million or 25 cents per share.

It comes amid expansion by General Accident which has been growing its footprint beyond Jamaica into Barbados and Trinidad & Tobago.

“They are growing at a faster rate so it would mean that I have more premiums coming in from the two subsidiaries. I would therefore be ceding more in reinsurance premiums up to the end of the third quarter compared to 2021,” Donaldson said of the regional subsidiaries.

Both the Trinidad and Barbados subsidiaries are effectively in their second year as part of the General Accident Group. The company acquired 55 per cent of the assets of Motor One Trinidad in late 2019 before going to full acquisition in 2020. In the meantime, it started General Accident Barbados in 2020.

“Now, these two entities have gained acceptance and are part of the conversation in both jurisdictions. They will therefore be growing in gross premiums,” Donaldson said.

For the nine-month period, the group wrote $13.1 billion of premiums, up from $11.5 billion. In the current nine-month period, the Jamaica operation wrote premiums of $12.1 billion; Trinidad wrote $653.9 million; and Barbados wrote $291.1 million.

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