The warning came from the country's top life insurer, Botswana Life Insurance Limited (BLIL), which said the shallow capital market threatened the industry.In its 2012 annual report, BLIL says insurance industry players could soon be forced to stop underwriting life annuity business due to a dire shortage of Pula matching longer dated investment instruments on the capital market. BLIL is a subsidiary of listed BIHL and the country's largest life insurance company with an estimated 80 percent market share. As at the end of 2012, BIHL was holding about P13 billion in policyholder funds from both insurance and investment contracts.
The funds are collected from life insurance premiums as well as pensioners funds that are paid out monthly payments through annuity products. "Botswana Life - and its competitors - is facing a serious challenge, one that could undermine the entire life assurance industry in Botswana. There is an acute shortage of long term matching assets for the annuity liabilities. This is not a new issue for the industry, but it is becoming increasingly acute. There is a real danger that we get to the point where we are unable to underwrite annuities because we do not have sufficient matching assets," reads the report. According to the insurance giant, what is needed are long-dated government bonds in which the companies can invest the policyholder funds and be able to pay out.
