Insurance companies are weighing their options including a legal action against government if the directive to Ministries, Departments and Agencies (MDAs) to do business with only wholly- or partially-owned state insurance companies is not reversed, B&FT has been told.

Insurance companies are awaiting a response from government after expressing their dismay at a decision geared toward boosting the business fortunes of institutions partially- or wholly-owned by the state.

Government’s silence on the matter is causing uneasiness among insurers.

The president of the Ghana Insurers Association (GIA), Kwame-Gazo Agbenyadzie, has told the B&FT in an interview in Accra that the Board of the GIA -- the trade association of insurance and reinsurance companies -- will meet next week Tuesday to among other things consider what actions to take toward reversing the directive.

He said the Association will go to court as a last resort to seek interpretation on the legality of the directive following passage of the Insurance Act 2006, which repealed PNDC law 227 and its provisions that required all government agencies, statutory bodies or corporations where the government owned more than 50 percent interest to be insured with SIC.

Currently, there are 43 companies in both the life and non-life insurance sectors which are all competing in a market where insurance penetration is less than two percent.

Mr. Agbenyadzie explained that the directive will adversely affect the financial performances of most private insurers that have huge business portfolio with some MDAs.

He said attempts to create a monopolistic situation for a particular company should be resisted and condemned.

According to the GIA the directive is anti-competitive as much as it is illegal, which sends a wrong signal to both local and foreign insurance markets -- while in some African markets they have started retaliatory actions against the government’s directive by reconsidering their business dealings and treaties with any Ghana government-established insurance/reinsurance firm.

Already, private insurance companies in Cameroon have expressed their misgivings about the directive and resolved to avoid doing business with Ghana Re -- a state-owned reinsurer which has set up an office in that country.

“There are retaliatory actions underway which are affecting other state companies in the insurance business, especially in the Cameroon market, and it is not going to stop there,” Mr. Agbenyadzie said.

In December last year, the government in a letter signed by the Executive Secretary to the President, Dr. Raymond Atuguba, directed all MDAs to with immediate effect purchase or renew any insurance cover required in the course of government business solely from insurance companies wholly- or partially-owned by the state.

The directive required any MDA that had cause to do business with a private insurance company to seek permission from the government.

It is understood that the directive is intended to especially boost the business fortunes of SIC Insurance and SIC Life.