> companies accounted for 79 percent of premiums in 2001, while the Herfindahl. concentration index stood at 2168. Concentration is even higher with regard to the long term insurance fund. The share of the long term fund held bt the largest 3 companies was

> 83 percent, while the Herfidanhl index was as high as 2872.

Despite the high level of concentration, it is claimed by local experts that competition for new business is very keen. The largest 3 companies specialize in particular segments of the market-that they dominate. SICOM obtains a very large part of its business from the pension funds of statutory bodies, while Anglo-Mauritius has a dominant share of insured company pension schemes. British American specializes in what looks like "industrial life" insurance: low-premium, low-value insurance sold to low-income households. In fact, British American has 60 percent of premiums generated by new business, although it probably experiences much higher lapse and surrender rates than the other large companies. Allowing for these differences, competition for new business in other market segments is much keener than may be implied by the overall concentration indices.

Long-term insurance business operates on the whole with sound financial ratios (Table 6). A small part of premiums is ceded to reinsurers (4 percent), while net claims (payments for all kinds of benefits, including surrenders) amount on average to 52 percent of net premiums. Administration costs absorb about 17 percent of net premiums and net commission paid to agents add another 4 percent, resulting in a total'charge of 21 percent of net premiums. -

|**Table6:FinancialRatios**<br>t|**ofLong**<br>1997|**-Term **<br>18|**Insuran**<br>|**ce,1997**<br>|**-2001**<br>|
|---|---|---|---|---|---|
|(percen)||99|1999|2000|2001|
|CededPremiums/Gross Premiums<br>|5.3<br>|4.1<br>|4.1<br>|4.2<br>|3.8<br>|
|NetClaims/NetPremiums<br>|48.2<br>|54.6<br>|54.2<br>|52.8<br>|52.5<br>|
|NetCommissions/NetPremiums<br>|6.1<br>|5.4<br>|4.6<br>|4.3<br>|4.0<br>|
|AdminCosts/NetPremiums<br>|15.3<br>|16.1<br>|15.9<br>|16.6<br>|16.8<br>|
|Investment Income/Net Premiums<br>|56.9<br>|72.5<br>|63.2<br>|58.4<br>|52.7<br>|
|AnnualSurplus/NetPremiums<br>|90.0<br>|96.4<br>|88.5<br>|84.7<br>|79.4<br>|
|Changein LifeFund/NetPrem<br>|91.4<br>|93.2<br>|86.0<br>|80.8<br>|75.2<br>|
|Profit/NetPreniums<br>|-1.4<br>|3.2<br>|2.5<br>|3.9<br>|4.2<br>|
|Profit/AnnualSurplus<br>|-1.6<br>|3.4<br>|2.8<br>|4.5<br>|5.3<br>|
|ReturnonAverageLifeFund|10.9|13.4|10.9|10.2|_9.5_|

> Source: Estimated on the basis of data collected by the FSC.

> Investment income on the life fund has fluctuated significantly over the years reflecting market returns on the underlying assets. On average it amounted to around 60

> percent of net income, leaving an annual surplus in excess of between 80 and 95 percent of net premiums. Over 95 percent of the annual surplus has been credited to the life fund. The rate of return on the life insurance fund has fluctuated between 9.5 and 13.4 percent between 1997 and 2000. This is at'the same level as that achieved by the National

> 7 In the US, a Herfindahl index of 1800 is used as a threshold value for defining a market as concentrated

> and meriting the attention of competition policy authorities.

7