Malawi’s insurance industry recorded strong growth in capital, assets and profitability in 2025, but liquidity pressures and risk exposure continue to weigh on the ssector, the Insurance Association of Malawi (IAM) has said.
Commenting on the Reserve Bank of Malawi (RBM) Financial Stability Report for June 2025, IAM president Dorothy Chapeyama described the year as “a mixed bag”, noting that although insurers are well-capitalised, their ability to meet short-term obligations has weakened.
The report shows that sector capital increased by 39.2 percent to K73.9 billion, while the industry-wide solvency ratio stood at 45.4 percent—more than double the 20 percent regulatory minimum. Profit before tax surged to K24.1 billion from K7.2 billion in the previous year, with all insurers except one posting profits.
Asset quality in the general insurance segment was assessed as sound, supporting earnings and long-term resilience. However, liquidity emerged as a key vulnerability, with the sector’s liquidity ratio falling sharply to 63.8 percent in June 2025 from 90.5 percent in December 2024, well below the recommended 100 percent benchmark.
According to the central bank, low liquidity levels among most general insurers could undermine the timely settlement of claims, despite adequate capital buffers.
Chapeyama said revenue growth in the general insurance market—doubling from K33.4 billion to K67 billion within a year—reflects rising insurance uptake, inflation-driven increases in insured asset values and gains from product innovation, digitalisation and service improvements.
She acknowledged, however, that liquidity pressures are being driven by delayed premium remittances, slow reinsurance recoveries, escalating operating costs and elevated claims ratios linked to road accidents, rising spare parts costs and insurance fraud.
Climate-related risks were also flagged as a growing concern, particularly during the rainy season when insurers face increased claims from flooding, property damage and traffic accidents, mainly in motor and property classes.
Chapeyama said insurers are responding by strengthening risk management practices, improving client communication and ensuring adequate reinsurance arrangements under the ongoing Risk-Based Supervision (RBS) framework.
The industry recorded a combined underwriting loss of K2 billion in 2023, compared with K91 million a year earlier, with motor accidents and workplace injury and death claims accounting for 60 percent of incurred losses. The association has since stepped up insurance awareness, tightened underwriting standards, engaged stakeholders to combat fraud and adjusted pricing for weather-related products.
Analysts say the sector remains vital to economic stability, providing a risk-transfer mechanism that supports business continuity, investment and household resilience—provided liquidity and risk governance challenges are effectively addressed.
