funds not invest more than 5% of AUM in a collective investment scheme (CIS).<sup>109</sup> In addition, Section 4.2 of the guidelines states that the fund managers can only invest in CIS that are authorized by the SEC according to Securities Industry Law, 1993, under Part IV. This section of the law authorizes unit trusts and mutual funds but does not authorize private equity or venture capital funds. Further, 5.1.2 states that the fund must be governed by the laws of Ghana, which does not allow for pension funds to invest in PE/VC funds registered abroad.<sup>110</sup> In fact, pension funds wishing to invest abroad have to get presidential approval through the NPRA and the Minister of Finance and Economic Planning for these investments.<sup>111</sup> The investment guidelines therefore are clearly biased towards investments in Ghana, and specifically in government securities. Despite these restrictions, currently SSNIT is invested in both PE/VC funds locally (Fidelity) as well as abroad (e.g. ECP). It is unclear if this is because these investments were made prior to 2008, and these guidelines do not apply to prior investments. NPRA’s position is that they are cautious about the PE/VC asset class and want to ensure the regulatory regime is robust (since the SEC does not currently regulate PE/VC) before allowing pension funds to invest in the asset class.

# **Insurance companies**

Currently, the insurance industry is governed by the Insurance Act, 2006 (Act 724), and a new solvency regime which was introduced effective January 2015.<sup>112</sup> The National Insurance Commission, which regulates the insurance industry, was established in 1990 by the Insurance Law, 1989. As at June 2015, the insurance industry has 25 Non-Life companies,<sup>113</sup> 21 Life companies<sup>114</sup> and 3 Reinsurance companies.<sup>115</sup> As of December 2013, total premium was Ghana cedi 1.03bn or US$425 million (life and non-life), comprising 42% life and 58% non-life premiums. The total assets of the industry – life and non-life – amounted to Ghana cedi 1.7bn or US$725 million (of which 58% million was non-life and the remainder was life). The industry has been growing at a 30 – 35 percent per annum in premiums for the past 5 years.

The risk-based regime imposes a 30 percent discount on PE/VC securities, which may deter investment. The new solvency regime complies with international standards and practices and impacts a number of areas such as capital requirements, valuation and solvency levels. The regulator determines solvency level by applying different discount rates for different types of assets. While government securities have a 0 percent haircut; and money market securities have 5 percent haircut; any security not listed on a stock exchange has a 30 percent haircut. This naturally deters investments in private equity.<sup>116</sup> Ghanaian insurance companies usually invest in T-bills and fixed deposits.<sup>117</sup> Historically, among the insurance companies, Ghana Union Assurance has invested US$1 million in Ebanekese (a VCTF Fund) and Bedrock’s initial investor included SIC Insurance Company. Insurance companies do not usually invest abroad, although they may hold cash balances abroad. All life insurance funds have to invest in Ghanaian

> 109 In general, pension funds cannot invest more than 75% in government securities; not more than 30% in corporate bonds/ debt; not more than 35% in money market instruments; not more than 10% in listed securities on an approved stock exchange; not more than 30% in Money Market instruments; and not more than 5% in CIS regulated by the SEC.

> 110 In fact, the general investment guidelines state that no more than 5% of AUM can be invested outside Ghana.

> 111 AXCO 2015 “Insurance Market Information: Life & Benefits”. These investments are also subject to the foreign exchange rules from Bank of Ghana.

> 112 AXCO 2015 “Insurance Market Information: Life & Benefits”. A new insurance act, which includes the new solvency model, is expected to be passed later in 2015.

> 113 SIC non-life is listed and the government owns 60%; public owns 40%.

> 114 SIC is the only state-owned company.

> 115 There are also 69 Broking companies, 1 Loss Adjuster, 1 Reinsurance Broker, 1 Oil and Gas company, 2 Contact Offices and  6,000 insurance agents (non-captive agents assigned to companies).

> 116 T bills – 0 % discount rate (basically, face value); PPE 50% discount   (for life and non-life); Land and building held for investments (20% life; 30% non-life); Government securities: 0%; Cash and term deposits: 5%; Securities listed on GSE: 15%; Equity backed Mutual Funds: 10%; Money market Funds : 5%; Any security not listed on stock exchange: 30%.

> 117 AXCO 2015 “Insurance Market Information: Life & Benefits”.

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