Publication: The Insurance Industry in Mauritius

Thumbnail Image
Files in English
English PDF (1.34 MB)
625 downloads

English Text (63.97 KB)
48 downloads
Date
2003-04
ISSN
Published
2003-04
Author(s)
Vittas, Dimitri
Abstract
The insurance industry is relatively well developed. It makes extensive use of reinsurance facilities and is free from the pervasive premium, product, investment, and reinsurance controls that have bedeviled the insurance markets of so many developing countries around the world. Total premiums amounted in 2001 to 4.1 percent of GDP, while insurance company assets were equivalent to 18 percent of GDP. Life insurance, which has been favored by generous tax incentives and has also benefited from the growth of pension business and housing finance, represents 61 percent of total premiums. Nonlife business is also well organized. Large industrial and commercial risks are reinsured with top international companies, while motor insurance, which is the largest class of business with 45 percent of total nonlife premiums, does not suffer from high loss ratios or unduly long delays in settlement. Investment limits are generally sound and, with some small but important exceptions, effectively nonbinding. There is no minimum requirement for investment in government securities. Investment in overseas assets is limited to 25 percent of total assets, except for foreign life companies and general insurance business which are not allowed to invest in overseas assets. The insurance sector is highly concentrated. The three largest groups have 76 percent of total assets. Despite the high level of concentration, the insurance industry appears to be competitive, operating with high efficiency and re Despite the high level of concentration, the insurance industry appears to be competitive, operating with high efficiency and reasonable profitability. Large and medium-size companies have strong reserves, appropriate reinsurance arrangements, and good profitability. However, several of the smaller companies have weak financial ratios and suffer from long delays in settling claims. Insurance regulation and supervision is entrusted to the Financial Services Commission (FSC). The current regulatory framework has many strong elements, including reliance on solvency monitoring, prudent asset diversification, international accounting standards, and actuarial methods. But there are some important gaps in corporate governance, internal controls, and risk management. In addition, solvency ratios are below international standards and do not include modern risk-based capital requirements. These gaps are already being addressed in two new draft insurance bills which contain many highly modern provisions. Implementing regulations on solvency and actuarial standards need to be developed. Insurance supervision has been invigorated since the creation of the FSC, but further strengthening is required. It needs to emphasize risk management and internal controls, to develop an early warning system, and to establish clear procedures for early and effective intervention. The FSC should require actuaries to report on the reinvestment risk faced by insurance companies and their exposure to a large and persistent fall in interest rates.
Link to Data Set
Citation
Vittas, Dimitri. 2003. The Insurance Industry in Mauritius. Policy Research Working Paper;No. 3034. © World Bank, Washington, DC. http://hdl.handle.net/10986/18272 License: CC BY 3.0 IGO.
Report Series
Other publications in this report series
  • Publication
    How to Deal with Exchange Rate Risk in Infrastructure and Other Long-Lived Projects
    (World Bank, Washington, DC, 2023-09-19) de Castro, Luciano ; Frischtak, Claudio ; Rodrigues, Arthur
    Most developing economies rely on foreign capital to finance their infrastructure needs. These projects are usually structured as long-term (25–35 years) franchises that pay in local currency. If investors evaluate their returns in terms of foreign currency, exchange rate volatility introduces risk that may reduce the level of investment below what would be socially optimal. This paper proposes a mechanism with very general features that hedges exchange rate fluctuation by adjusting the concession period. Such mechanism does not imply additional costs to the government and could be offered as a zero-cost option to lenders and investors exposed to currency fluctuations. This general mechanism is illustrated with three alternative specifications and data from a 25-year highway franchise is used to simulate how they would play out in eight different countries that exhibit diverse exchange rate trajectories.
  • Publication
    Rebel with a Cause: Effects of a Gender Norms Intervention for Adolescents in Somalia
    (World Bank, Washington, DC, 2023-09-15) Brar, Rajdev ; Buehren, Niklas ; Papineni, Sreelakshmi ; Sulaiman, Munshi
    Gender inequality and restrictive norms are often reinforced and internalized during adolescence, influencing pivotal life choices. This paper presents results from a randomly-assigned gender norms intervention for young adolescents in Somalia that led to greater support for gender equality in reported attitudes among both girls and boys. In a novel lab-in-the-field experiment designed to observe social group dynamics, treated adolescents were also found to be less likely to succumb to peer pressure to conform when stating their gender attitudes in public. Perceptions of gender norms appears to shift for boys, leading to a greater public expression of gender egalitarian ideals. Furthermore, the findings show improved adolescent mental health, increased caring behavior towards siblings of the opposite sex, and a higher likelihood of involvement in household chores by boys. A complementary gender norms intervention for parents had limited marginal impact on the attitudes and behaviors of adolescents. The results suggest that gender norms interventions can be effective in influencing the attitudes and public discourse around gender equality, even in early adolescence.
  • Publication
    Corruption as a Push and Pull Factor of Migration Flows: Evidence from European Countries
    (World Bank, Washington, DC, 2023-09-14) Bernini, Andrea ; Bossavie, Laurent ; Garrote Sanchez, Daniel ; Makovec, Mattia
    Conclusive evidence on the relationship between corruption and migration has remained scant in the literature to date. Using data from 2008 to 2018 on bilateral migration flows across European Union and European Free Trade Association countries and four measures of corruption, this paper shows that corruption acts as both a push factor and a pull factor for migration patterns. Based on a gravity model, a one-unit increase in the corruption level in the origin country is associated with a 11 percent increase in out-migration. The same one-unit increase in the destination country is associated with a 10 percent decline in in-migration.
  • Publication
    Global Trends in Child Monetary Poverty According to International Poverty Lines
    (World Bank, Washington, DC, 2023-09-19) Salmeron Gomez, Daylan ; Engilbertsdottir, Solrun ; Cuesta Leiva, Jose Antonio ; Newhouse, David ; Stewart, David
    This paper analyzes extreme child poverty ($2.15/day poverty line) trends, as well as child poverty based on the higher international poverty lines of $3.65 and $6.85. The paper provides a trajectory of extreme child poverty (children living in extremely poor households) from 2013 to 2019 (based on the most recent surveys included in the Global Monitoring Database), complemented by nowcasting for 2020 to 2022. Children continue to be disproportionately affected by extreme poverty. Children who are younger than 18 years comprise more than 50 percent of those living in extreme poverty, although their share of the population is 31 percent. The paper estimates that in 2019, 15.8 percent of children in the world (319 million) younger than 18 years lived on less than $2.15 (2017 purchasing power parity) per day, as opposed to 6.6 percent of adults ages 18 and older. More recent “nowcasted” estimates suggest that at least 333 million children were expected to be living in extremely poor households in 2022, implying that 14 million more children were extremely poor in 2022 than in 2019. Following an increase in extreme child poverty at the height of the pandemic in 2020, nowcasted estimates show that the rate of extreme child poverty fell again in 2021 and 2022, but only at the slow rate of progress seen prior to the COVID-19 crisis. If the COVID-19 pandemic had not occurred, an estimated 79.7 million fewer children would have been living in extreme poverty between 2013 and 2022; however, the estimates suggest that the number of children living in extreme poverty decreased by 49.2 million, due to pandemic disruptions.
  • Publication
    Inequality of Opportunity and Investment Choices
    (World Bank, Washington, DC, 2023-09-19) Brock, J. Michelle ; Bussolo, Maurizio
    Inequality of opportunity leads to misallocation of human capital and can affect economies via its impact on individual economic decision making. This paper studies the impact of inequality of opportunity on investment, using a laboratory experiment. The experiment randomized inequality of opportunity, then subjects chose to invest in a risky asset or savings. The results suggest that inequality of opportunity impacts investment choices only for people who are penalized by their circumstances and only once they learn the impact of inequality of opportunity on their relative position in the income distribution. This disadvantaged group invests more often and invests higher shares of their earnings than the control and advantaged groups. The fact that both inequality of opportunity and knowledge of relative position need to be present for the impact on investment to materialize points to the importance of peer effects. More broadly, the paper highlights the relevance of social preferences for understanding the effects of inequality of opportunity on individual decision making.
Journal
Journal Volume
Journal Issue
Associated URLs
Associated content
Citations