PRESENTATION TO THE STANDING COMMITTEE ON
ECONOMIC AFFAIRS
RESERVE BANK OF FIJI INSURANCE ANNUAL REPORT 2018
1. Introduction

Thank you Honourable Chair and Honourable Members for the invitation
the Reserve Bank of Fiji's
to present Insurance Annual Report for 2018 to
the Standing Committee on Economic Affairs. The Reserve Bank always
welcomes such opportunities to explain to the Honourable Members of
Parliament what, why and how we do the work that we do.

As you may be aware, the RBF is mandated under section 165 of the
Insurance Act 1998 ('the Act') to submit the Insurance Annual Report to
the Minister for Economy by 30 June of the following year. The Bank
continues to effectively meet this requirement. Needless to say, the RBF
continues to receive positive feedback on this publication as an excellent
source of information and statistics on an important sector of the economy.

Please allow me to therefore provide an overview of the 2018 Insurance
Annual Report, before I take your questions.
2. The Fijian Insurance Industry in 2018

2018 marked both the end of a full year of recovery for Fiji since the
devastation of Tropical Cyclone Winston and a return to normalcy for the
Fijian insurance industry, as it was spared from further losses of a
catastrophic event and most insurance entities posted positive results.

The total assets of the Fijian insurance industry grew by 9.2 percent, or
$95.5 million, to $1.8 billion in 2018, underpinned by the life insurance
sector. The industry made up around 8 percent of the total assets of the
financial system.

While the number of life policies enforced increased by 2,977 in 2018, there
was a significant 62.5 percent decline in general (non-life) insurance
policies compared to 2017 i.e. a reduction of 124,465 policies arising from
the transfer of the Compulsory Third Party (CTP) class to the Accident
Compensation Commission Fiji (ACCF). However, the general insurance
industry benefitted from an increase in group covers by 1,069 policies in
2018.
 industry's combined gross premiums
The insurance grew by 7.5 percent to
$347.9 million in 2018, supported by growth in both the life and general
insurance sectors. A marginal pick-up in the contribution of the industry to
GDP was noted, with gross premiums as a percentage of GDP registering
at 3.4 percent in 2018, compared to 3.0 percent in 2017.

The gross premiums of the general insurance sector grew by 8.4 percent to
$205.7 million, despite the transfer of the CTP insurance class to the ACCF,
underpinned by renewals and new policies issued for the motor vehicle
class, and the continued uptake of the micro insurance bundled product.

The life insurance sector recorded a turnaround with a 6.2 percent increase
in gross premiums to $142.2 million from a decline in 2017 and is attributed
to the continued uptake of investment-linked endowment products.

Honourable Chair, the risk transfer role that the insurance industry provides
is vital to the sustainability of our economy. Insurance provides the
necessary safeguard for the financial health of individuals, families,
communities, businesses, financial institutions and the economy as a whole.

A key safeguard therefore is in the form of claim payments, and total net
claims and policy payments increased by 6.0 percent to $223.3 million in
The general insurance sector's net claims paid increased by 7.8
2018.
percent to $104.5 million, due to the settlement of major fire claims.
Similarly, the life insurance sector recorded an increase of 4.5 percent to
$118.8 million in 2018, as matured policies accounted for majority of the
payout to policyholders.
 Honourable Members, insurance companies can only honour their claim
obligations if they are adequately capitalised through a buffered level of
solvency capital, and I am pleased to report that the insurance industry was
assessed as sound over 2018 with both the life and general insurance sectors
reporting strong solvency positions. These sound solvency positions were
supported by the positive profitability position of both sectors, though
profitability reduced from the level reported in 2017 by 30.1 percent to
$23.7 million, as a result of the higher loss ratios for the fire and motor CTP
classes.

The sustained safety and soundness of each individual insurance company
is also supported by effective reinsurance arrangements. Reinsurance
premiums paid by general insurers in 2018 totalled $56.6 million with total
reinsurance recoveries reported at $23.8 million.

The insurance industry also plays a significant role by supporting economic
growth as it recycles premiums back into the economy as investment
In 2018, the life insurance sector's investment
capital. portfolio grew by
$121 million to $1.2 billion, investing mostly in government securities
($719.3m), listed and unlisted equities ($295.6m), and properties
($103.9m). The insurance industry as a whole held deposits in the banking
system totalling $224.4 million as at 31 December 2018, supporting the
banks' ability to provide loans for consumption and investment purposes.

Honourable Members, in addition to our core financial stability work, the
development mandate of the Bank calls for extended efforts on inclusive
insurance initiatives. We wish to briefly provide an update on the work
undertaken by the Bank in this space, in 2018:

Bundled Insurance Product: Following the successful launch of the Fiji
Care micro insurance bundled product in 2017 to 11,606 cane farmers, the
cover was extended in early 2018 to dairy farmers (258), copra farmers (89)
and rice farmers (63) with premiums as low as $52 per annum or $1 a week.
The product was further extended to civil servants (37,000) and social
welfare recipients (71655) which brings the total number of bundled
insurance holders to 120,671. At the end of 2019, the number further
increased to just over 135,000. During the year, a total of 837 insurance
claims valued at $1.4 million was paid out. This increased significantly in
2019 with approximately 3,800 claims paid out totalling $6.5 million.

The bundled product has significantly increased the take-up of insurance in
Fiji specifically from those who have never owned insurance, and has also
assisted in the creation of awareness on the benefits of having insurance
with our grassroots people. The Reserve Bank has a vested interest in such
a trend for another reason, as the increased uptake allows Fiji to remain on
track to achieve its National
"percentage of adults with insurance product"
Financial Inclusion core indicator target of 25 percent, by 2020.

The RBF sought to assist in the reactivation of the
Agriculture Insurance:
Agriculture Insurance National Working Committee, to engage with
relevant stakeholders on exploring opportunities to introduce agriculture
insurance in Fiji and better adapt to climate change and disaster risks. We
understand that the Ministry of Agriculture continues to lead the dialogue
on this issue, and we stand ready to assist if required.

With regard to consumer protection, the Reserve
Consumer Protection:
Bank received 48 insurance related complaints in 2018 comprising 0.8
percent of the outstanding claims reported for the year. Most of the
complaints were in the area of customer services, and 39 of these
complaints were settled during the year with one withdrawn. I can also
report that the eight (8) pending complaints reported in 2018 have now all
been settled.
We continue to work together with the industry to ensure that an efficient
redress process is undertaken. Awareness on consumer rights and
responsibilities are created in the complaints management process with
consumers encouraged to seek independent advice and ask questions on
aspects of their policy that they do not understand.
3. 2019 Key Highlights

Honourable Members, we usually conclude our review with the outlook for
the next 12 months, but given the timing of this presentation, we can also
report on the year that has just ended, though our 2019 Report will be
released in June 2020.
 2019 was also a quiet year for the insurance industry in terms of the absence
of major catastrophes, but there have been some major losses in the fire
class, exposing some insurance entities to significant claims. The transfer
of the workers compensation class to the ACCF has not impacted the
profitability of general insurance companies in 2019.
 performance
Although the industry's was expected to reflect the economic
slowdown generally experienced through most of 2019, statistics for the
first three (3) quarters of 2019 have shown otherwise. On a consolidated
basis, the insurance industry continued to register improved profitability
results, and stronger solvency positions.

However, we expect that some major claims are yet to be reported when the
annual 2019 statistics are confirmed, giving rise to claim payments by the
general insurance industry in 2019.
4. Conclusion and Outlook for 2020

Honourable Chair and Members of the Standing Committee, with respect
to our priorities in the next 12 months, the Reserve Bank will continue to
work on strengthening its supervision role including the review of existing
supervision policies and the development of new guidelines in line with
international supervisory developments and sound practices.

A key policy development initiative that we worked on in 2019 and will
continue to undertake in 2020 is the confirmation of the conduct regulator
role of the Reserve Bank, in addition to its prudential regulator role.
Acknowledging the extreme importance of appropriate market conduct and
culture, as we have witnessed in the recently completed Royal Commission
in Australia, the Reserve Bank has therefore initiated a review of the culture
and conduct risk management frameworks of all our supervised institutions
including the insurance companies and brokers, and will finalise a
supervisory guidance on this in 2020. Furthermore, we continued to test
the revised Solvency Guidelines in 2018 and 2019 while awaiting the
finalisation of the review of the Insurance Act.

With the partnership of licensed entities, we continue to be challenged to
'think outside the box' and be part of the national solution to ensuring Fiji's
resilience against the risk and effects of climate change, given the rapidly
evolving developments in disaster risk management. We will continue to
discuss with the industry on the design of insurance products and insurance
arrangements that will specifically meet the growing needs of our people.

The Insurance Act 1998, now more than 20 years old, is undergoing a
review with the technical assistance of the IMF, with the aim of
modernising the legislation to incorporate recent industry developments
and supervisory practices. These developments include exploring the
fronting arrangements, the possibility of allowing captive insurance
frameworks, and further clarity around the legal provisions for inclusive
insurance.

Honourable Members, we continue to see the effect of natural disasters
locally and globally, evidenced by the vivid images of devastation caused
by the current Australian bushfires, the recent earthquake in Puerto Rico
that is claimed to have changed the landscape of the country, and for us, the
expectation that Fiji may be in the path of a number of tropical cyclones in
the remainder of the current cyclone season. The magnitude of economic
and social losses caused by these natural disasters reiterates the importance
of not only having adequate insurance coverage in place but also enhancing
insurance affordability.
 There is indeed an ongoing need for the industry to not only promote
insurance awareness to the general public, but to also develop and offer
innovative insurance solutions that meet the needs and affordability of all
Fijians. The Reserve Bank is committed to continue work on the necessary
initiatives to achieve such outcomes.
Honourable Chair and Members, thank you again for this opportunity to discuss the
2018 report with you, and we welcome any questions that you may have.
Reserve Bank of Fiji
16 January 2020