Audit firm, Deloitte, has asked insurers to consider taking alternative investment options in order to be secured against impairment losses that may arise from the effects of the domestic debt exchange programme.

The firm in its 2023 Africa Insurance Outlook Update said insurers must take advantage of regulatory interventions in order to prevent these losses.

According to them, it is quite clear that there would be long-term losses to insurance companies.

“While the programme is expected to alleviate the country’s debt burden, it is also likely to impair the return on investment for insurance companies. Insurers are encouraged to take advantage of the regulatory interventions and explore alternative investment choices to boost returns,” the report said.

Deloitte said insurance companies faced liquidity risks. For this reason, new bonds under the debt exchange programme that have longer maturities may have to be extended further.

“Again, the tradability of the old bonds is expected to be limited, thereby reducing liquidity and potentially affecting the ability to pay claims,” it added.

SSD/NOQ

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