Posted: Friday 7th March 2014 at 10:00 am

Govt Suspends Directive To MDAs To Purchase Premiums From State-Owned Companies

The government directive to ministries, departments and agencies (MDAs) to purchase and renew their insurance cover with only state-owned insurance companies has been suspended with immediate effect.

A letter from the Office of the President signed by the Chief of Staff, Mr Prosper D. K. Bani, to all ministers stated that the directive to suspend the previous directive was issued by President John Dramani Mahama.

It explained that the decision was taken after meeting stakeholders in the insurance sector.

According to the government, the suspension was to enable it to consider a petition from the private insurance industry to President Mahama.

“In the interim, MDAs can buy or renew insurance cover in the course of government business from state or private-owned insurance companies as long as they can demonstrate value for money,” the letter, which was copied to the Vice-President and the Executive Secretary to the President, said.

The Directive

A directive dated December 9, 2013 and signed by Mr Raymond Atugubah, the Executive Secretary to the President, had indicated that President Mahama had instructed all MDAs to renew or purchase their insurance cover required for official purposes from insurance companies owned partially or wholly by the state.

Some players in the insurance industry said the directive was an apparent introduction of monopoly into the industry which was likely to affect the operations of private companies who were playing a key role in the economic development of the country.

The Ghana Insurers Association (GIA) and the Ghana Insurance Brokers Association said the directive was at variance with the government’s positive effort at promoting the private sector as the engine of growth and, therefore, wrote to the President to reconsider its directive.

Rejoinder

However, the SIC Group and the Ghana Reinsurance Company Limited (Ghana Re), in a rejoinder, stated that the petition by the GIA, which was supposed to be the mouthpiece of the industry, meant it was treating some of its members as though they were alien to the association.

“Evidently, there is a deliberate bias by the GIA against some of its own members,” the SIC and Ghana Re said, adding that the Insurance Act 2006 did not restrict the insured in their choice of insurers for any reason.

“It is illegal, therefore, for the GIA to try to bully the government in the name of private sector growth,” they said.

Issues Raised

Private insurance company operators who spoke to the Daily Graphic explained that Ghana Re, the wholly state owned and largest reinsurer in Ghana, might become the immediate target of a retaliatory action by the private insurance companies in Ghana.

However, since 2009, the monopoly enjoyed by Ghana Re in the reinsurance market had been removed.

According to the private operators, that was made possible by the repeal of the Ghana Reinsurance Organisation Law, 1984 (PNDCL 79) and the Ghana Reinsurance Organisation (Amendment) Law 1987 (PNDC Law 169).

They said the repeal was after the passage of the Insurance Act, 2006, Act 724 which resulted in the removal of the 20 per cent compulsory legal concession to Ghana Re.

Business Starving

To the private insurance companies, the directive would result in especially the top private insurance companies starving Ghana Re of reinsurance business.

Consequently, they said the directive would end up encouraging premium flight to foreign reinsurers.

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