OPPORTUNITIES AND CHALLENGES FOR INSURANCE

COLLABORATION IN THE REGION (EASTERN AND

SOUTHERN AFRICA)

DR. TALENT MAZIWISA

OESAI PRESENTATION

Justification

There is a huge compelling force justifying expediting removal of obstacles for regional insurance collaboration.

With the exception of South Africa and Kenya, financial markets within the region remain under-developed and shallow.

Factors for constrained development

fiscal dominance, lack of effective collateral and information

systems, exposure to significant external shocks, technological constraints,

Base for take-off

The East and Southern Africa region’s size provides obvious advantage of increased market size.

The huge number of insurance companies in our countries.

There are regulatory bodies in our countries that are already talking to each other.

Potential

SADC comprises roughly 289 million people. East Africa has nearly 270 million.

The Gross Domestic Product (GDP) of SADC, is in excess of 767 billion US dollars in 2014.

The International Monetary Fund (IMF) projects that the SADC economy will reach 868 billion US dollars in 2018.

Penetration rate hovers between 0.2 and 4.0 percent in each country. South Africa is at 16%.

Regional structures in place

Financial and Investment Protocol in the Southern African Development Community (SADC) which emphasises formulation and implementation of stability-oriented macro-economic policies and the attainment of macro-economic convergence.

There are SADC regional legal frameworks which provide basis to initiate regional collaborations.

Regional engagement

Regulators in Africa are not FULLY exchanging information relating to various aspects of their markets.

Note should be taken that there are efforts to address this by the regulators.

The East African Community agreed to harmonise their regulations around the 26 insurance principles issued by the International Association of Insurance Supervisors.

Lack of harmonized legislation on Insurance in Africa

There is no common insurance regulatory framework like Solvency II to codify and harmonize insurance regulation.

Legislation relating to compulsory treaty sessions are not so common in most of other African countries.

Lack of harmonized legislation on Insurance in Africa

When the company is negotiating Re-Insurance treaties, they have to take into account various laws relating to compulsory sessions in all the countries they operate.

Legislation relating to Third Party Liability Limits vary with some countries having unlimited third party liabilities on their motor vehicle policies.

Culture of doing business

Different countries in Africa carry out business in different business environments, languages and culture.

There are many different insurance systems operating in the region.

e.g. A policy holder with a full comprehensive motor policy travelling between countries is required to buy additional cover as he drives through three or four countries.

Other challenges

Sanctions and embargos: Countries shun doing business with countries that have sanctions and embargoes imposed on them.

Understanding markets – demographics, etc. This will require strategic partnerships with regional players.

High capital entry requirements, though high is good for me.

Pandemic.

Benefits

Diversification of risk.Insurance collaboration allows diversification of risk. It also

allows offshore investment which further matches and diversifies investments.

Development of markets through sharing innovation, knowledge and skills.

Cross-pollination of ideas contributing to the development of markets.

Investment in emerging markets.Access to other markets allows investment in any emerging

markets that yield high returns.Economic development.Insurance is renowned for its ability to mobilise resources for

economic development.

Leveraging Assets

Why are some regions more successful than others in global competition?

Lacking the ability to plan and act regionally. The challenge of regionalism is to leverage

regional assets to compete effectively in the global economy.

Developments in financial instruments and increased collaboration do enhance insurance firms’ access to deep financial markets and their ability to price financial risks accurately.

Training

We deserve a regional training board.Develop up-to-date training modules. Provide qualifications that are easily

acceptable in all the member countries.

ICT

A research on Information and Communication Technology (ICT) and Insurance Companies Profitability in Nigeria by Olajide Solomon Fadun in 2013 showed that there is a very strong positive relationship between ICT adoption and insurance companies’ profitability in Nigeria.

Legal

Common regional regulatory policies critical. Create a level playing field in prudential

requirements for insurers, an enabling environment.

Fosters a deeper single market in insurance services.

Provides for efficient allocation of capital.

Remodeling

There is need to re-model our insurance packages to ensure we encapsulate wide regional consumer expectations and demand.

Our products must not alienate the markets we intend to serve. The spread and mix of our people cannot be ignored.

Models that speak regionally provide answers to our ever demanding market.

Thank You