Se cu r it y Gr ow t h

a n d Pr ofit a b ilit y

REINSURANCE INDUSTRY CHALLENGES IN AFRICA BY MR. ALBERT JOEL NDUNA, GROUP CHIEF EXECUTIVE OFFICER OF ZIMRE HOLDINGS LIMITED 40TH AIO CONFERENCE AND GENERAL ASSEMBLY CAIRO, EGYPT 26TH TO 29TH MAY 2013 24 May 2013

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PRESENTATION OUTLINE • Global Economic Challenges and Their Impact on African Economies. • Challenges facing the African Continent. • Financing Africa’s Economic Resurgence. • State of the African Reinsurance Market. • Confronting New Market Realities. • Major Challenges Faced By African Reinsurers. • Conclusion/ Closing Remarks 24 May 2013

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GLOBAL ECONOMIC CHALLENGES AND IMPACT ON AFRICAN ECONOMIES. • Growth remains largely weak and fragile and uneven with emerging economies outperforming the advanced economies in terms of output. • Advanced economies struggling to shrug off the anaemic growth rates following the global financial crisis. • Global economy expected to grow by 3,6% in 2013 (IMF), a slight improvement on 2012. • The African Continent is increasingly becoming one of the fasted expanding economic regions in the world. • Experts say that for the period 2011 to 2015, out of the 10 fastest growing economies (over 10% growth), 7 will be in Africa. • Africa’s GDP is currently estimated at US$1,6 trillion and is expected to grow to US$2,6 trillion by 2020. 24 May 2013

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GLOBAL ECONOMIC CHALLENGES AND IMPACT ON AFRICAN ECONOMIES. • Sub- Saharan Africa’s growth rate at more than 5%, is expected to outpace the global average in the next 3 years driven by rising commodity prices, increasing investment and a rebound in the world economy. • Strong economic growth on the Continent is expected to reduce significantly the levels of poverty where the majority of the people live on less than $1,25 per day. • The proportion of people living on less than $1,25 per day declined from 58% in 1996 to 48,5% in 2010. • The African Continent has by and large weathered the effects of the global financial crisis. • Only those countries that had strong trade ties with Europe and linkages with International Financial Markets (like South Africa) that were noticeably affected by the negative effects of the crisis. 24 May 2013

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GLOBAL ECONOMIC CHALLENGES AND IMPACT ON AFRICAN ECONOMIES. • Crisis to some extent being transmitted to some African Countries through declining exports, falling commodity prices, reverse migration and reduced remittances from citizens working overseas. Budgetary support from the rich countries is also declining. • Official development assistance to African nations such as Malawi and other programmes aimed at alleviating poverty, are declining. • The Continent is still however home to many of the world’s biggest opportunities. • As the economies grow, opportunities are opening up in sectors such as telecommunications, banking, retailing, resource related businesses, the agricultural value chain, and infrastructure related industries. • Africa offers higher returns on investment than any other emerging markets mainly due to the low intensity of competition, and strong 24 Maygrowing 2013 6 and consumer demand.

GLOBAL ECONOMIC CHALLENGES AND IMPACT ON AFRICAN ECONOMIES. • In 2008, experts say that Africans spent US$860 billion on goods and services compared to US$635 billion spent by India in the same period. • There is great potential for the development of the African insurance market as the growth of the industry is inextricably linked to economic expansion. • The African economy that was languishing in past decades is finally stirring up. • Africa which was at the same level of development as Asia in the 1950’s and 1960’s was overtaken by Asia in the 1970’s but is now recovering, stirred by the adoption of right policies, and through home grown economic initiatives such as NEPAD ( New Partnership for African Development) and Indigenization of the economies. 24 May 2013

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CHALLENGES FACING THE AFRICAN CONTINENT • Politics and Governance • The concepts of democracy, respect for human rights and good governance still to be fully embraced. • Institutions like the judiciary, legislature, the media and civil society organizations need to be knowledgeable, strengthened and supported in order to bring the necessary checks and balances in the fledgling democracies. • Most countries in Africa attained independence more than 50 years but still politically unstable and are still facing challenges such as coup de tats. • Peace and stability are necessary ingredients required for economic growth and Governments and Civil Societies have a responsibility to provide that conducive and enabling environment. • The Continent and through the African Union, is slowly developing the capacity to manage conflicts. • Corruption and poverty are very often the roots of conflicts and if these are properly addressed the Continent will continue to enjoy improving levels of peace and stability. 24 May 2013 8

CHALLENGES FACING THE AFRICAN CONTINENT • Human Development • The existence of a skilled and healthy workforce is a key ingredient for high productivity and general economic development. • Talent is still scarce in Africa and diseases afflict many nations. • The majority of the citizens are still crippled by poverty, inequality and unemployment. • Despite the rising national income levels, inequalities in income are on the rise. • By 2020 more than half of Africa’s projected population of nearly 950 million people will be less than 20 years old thereby creating a large labour force which needs to be looked after in terms of food, health, education, and employment, otherwise discontent will turn to insurrection and other social problems. • The numbers form the market for our commodities and services. 24 May 2013

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CHALLENGES FACING THE AFRICAN CONTINENT • •

Economic Policies and Resource Management Most African Governments are trying to do the right thing by implementing policies that promote accelerated economic growth. • Budget deficits are being managed effectively. • Foreign debt is being trimmed and inflation is being managed in most cases at single digit levels. • Some Governments have embraced and adopted market friendly policies in order to promote investment. • State owned enterprises are being forced to be productive and some are being privatized. • Trade barriers are being removed. Corporate taxes are being reduced and legal systems strengthened.

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Continent will continue to benefit from rising global demand for oil, natural gas, minerals, food and the abundant natural resources. Africa has between 80% and 90% of the world’s deposits of chromium and platinum group metals. Africa must however add value to their primary products before exporting them in order to improve the levels of income. Africa is forging new types of relationships with countries such as China and India who are investing in infrastructure, but there is still need to share technologies and skills. 24 May 2013

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CHALLENGES FACING THE AFRICAN CONTINENT • Economic Policies and Resource Management • Africa currently produces and exports unprocessed minerals and other products and the manufacturing sector is not competitive nationally and on the Continent and on international markets due to quality and pricing shortcomings. • The World is buying primary goods and selling manufactured goods to Africa despite the fact that the raw materials originate in Africa. • Cheaper foreign manufactured goods are undercutting African products and are contributing to the de-industrialization of Africa. • Unfortunately, the current growth in African economies is being driven by resource exploitation and is not sustainable. • Optimal exploitation of resources will depend on the existence of adequate infrastructure; continued foreign direct investment into mining; stable commodity prices and demand on the international markets. • Demand for commodities will someday slump and Africa must be ready for this eventuality. • African economies need to be restructured as a matter of urgency, be less resource reliant and shift to be more consumer and services driven as more and more of its citizens move into middle class status. 24 May 2013

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FINANCING AFRICA’S ECONOMIC RESURGENCE • Despite the huge natural resources, Africa is short of savings and capital. • The capital markets are still relatively underdeveloped, narrow and illiquid. • There is lack of innovative financial instruments on the markets and the majority of the Africans lack access to financial services • Africa is attractive to investors from advanced and emerging economies seeking better returns. • Africa needs to leverage on its vast resources to establish sovereign wealth funds. • Africa must review laws governing the exploitation of natural resources such as oil, natural gas and minerals. • Current laws do not ascribe intrinsic value to unexploited minerals/resources. • Mineral claims are still being given to foreign investors for nominal fees. • Investors list these assets on foreign stock markets and borrow billions of Dollars against these claims. • Multilateral financial institutions such as the African Development Bank (AfBD) need to assist the Continent with the creation of economic funding models. 24 May 2013

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STATE OF REINSURANCE INDUSTRY IN AFRICA • The African reinsurance market is still greatly influenced by the state of the international reinsurance market where the industry gets its retrocession. • The inconceivable disasters that have occurred in recent years (e.g. attack on twin towers -World Trade Centre in the USA in September 2001, the Indian Ocean Tsunami in December 2004, Hurricane Katrina in USA, the earthquake followed by a tsunami that damaged the Fukushima nuclear plant in Japan), have had a tremendous impact on the reinsurance and retrocession markets. • Unfortunately such natural disasters and losses are likely to continue increasing due to global warming. • Also there is rising demand for insurance from emerging economies notably those of India and China which have been expanding at accelerated growth rates, putting strain on the retrocession capacity. • The insurance industry in Africa is still relatively small and there are currently just over 650 insurance companies and about 46 African reinsurance companies operating on the Continent of which about 38% are in South Africa. 24 May 2013 13 • The companies wrote premiums estimated at US$51,5 billion which was

STATE OF REINSURANCE INDUSTRY IN AFRICA • The reinsurance sector generated premium of about US$6,25 billion 2009. • Average insurance density was about US$54 compared to the global US$596. • The Continent’s insurance penetration was 3,5% compared to other regions like Asia where the rate was about 6,1%. • South Africa has the highest penetration rate of 13,2% on the Continent. • Zimbabwe penetration ratio estimated at 3.4%. • Most African countries have low penetration rates of below 1%. • The life assurance/reassurance sector on Africa (apart from SA) is still largely untapped. • South Africa wrote about US$28,76 billion in 2009 in life business whilst the rest of the Continent generated only about US$2 billion. • There is a growth potential for the life assurance business on the Continent. • The impending and gradual creation of a sizeable middle class on the Continent i should see an increase in the demand for life assurance products. • There is need for African assurers and reassurers to invest in product research and development and innovation and increase awareness on the importance 24 May 2013 14 of life products.

STATE OF REINSURANCE INDUSTRY IN AFRICA •

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The development of the insurance industry in Africa has been gathering momentum in the last 60 years or so as the governments realized the importance of insurance in risk transfer, the mobilization of earnings to aid national development and the general preservation of resources. Reinsurance and insurance companies were and are increasingly being expected to play a developmental role by addressing issues of poverty alleviation, the needs of the rural sector and the formal and informal sectors of the economy. In the early stages, African governments played a direct role in the Insurance Sector by setting up reinsurance and insurance companies to mobilize investible funds and stem the outflow of foreign currency from African countries and earn it. Foreign companies were viewed as only interested in reaping profits without due regard to the development and upliftment of Africa and its people. The governments of newly independent countries through the UNDP, intervened and introduced state owned reinsurance companies because individuals had no resources to set up companies. These companies had compulsory cessions to protect the newly established reinsurance companies from external competition and to facilitate their smooth take off. The UNCTAD formally acknowledged the importance of the insurance industry in developing countries and assisted with the drafting of legislation to facilitate the development of the industry. 24 May 2013

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STATE OF REINSURANCE INDUSTRY IN AFRICA Performance of State Owned Reinsurance Enterprises Performance benchmarks set for the state owned insurance companies created included profitability, growth and contribution to general social development. The reinsurance companies were tasked to provide reinsurance capacity to the newly established insurance companies, and the establishment of vertical integration structures in the insurance businesses. They were also expected to play a pivotal role in property development, and actively participate on the local money and capital markets. In general these companies contributed immensely to the development and growth of the insurance industry. This success was achieved against the backdrop of limited managerial experience, limited capital and some political interference in some cases. 24 May 2013

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STATE OF REINSURANCE INDUSTRY IN AFRICA • Economic Reform Programmes (ESAP) • African countries embraced World Bank inspired ESAPs in the late 1980’s and early 1990’s with poverty reduction as the focal point. • Some of the aims of the programmes were: • • • • •

Eliminate price distortions Adopt market determined exchange rates Accelerate the growth of the private sector Attract foreign direct investment Achieve sustained economic growth.

• The deregulation of external trade, more reliance on market forces as major determinant of economic activity and privatization of state owned enterprises were implemented. • The implementation of the programmes resulted in significant reduction in the involvement of governments in the insurance industry. • New entrants were attracted to the market. • The reforms addressed some of the issues relating to the underperformance of some state owned enterprises and they 24 May 2013 17 became more efficient and turned around in terms of profitability.

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STATE OF REINSURANCE INDUSTRY IN AFRICA Economic Reform Programmes (ESAP) The reforms created a competitive environment for African reinsurance companies. But the reforms also undermined the performance of some reinsurance companies. The critical mass of business from legal cessions was removed and local risks started to find their way to the international insurance markets directly. Some Governments did not implement the adjustment programmes wholeheartedly mainly due to ideological differences with the initiators of the programmes and due to the fact that solutions were not homegrown. The expected results were not achieved fully mainly because of tight time frames for implementation. The main impact of the programmes was to hit the poorest defeating the original objective of poverty reduction. 24 May 2013

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CONFRONTING NEW MARKET REALITIES • The playing field for the reinsurance sector in Africa has changed drastically in the last few years and is facing new market realities. • In the aftermath of the global financial crisis, there is reduced demand for reinsurance services in Europe and the US. • Reduced business activity in commerce and industry has meant that losses are down and profits are up for reinsurance companies. • The global risk landscape is becoming complex and uncertain. • The challenge for international reinsurers is to achieve profitable growth in a new and different global marketplace. • In terms of demand for insurance, the rapidly expanding markets of South America, Asia and Africa offer the greatest potential for expansions and growth. 24 May 2013 19

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CONFRONTING NEW MARKET REALITIES Globalization has ushered in the intensification of political, economic, social and cultural relations across geographical boundaries. There has been an increase in cooperation between nations through trade and diffusion of technology. Economic interdependence of nations and the mobility of capital across borders, are some of the manifestations of globalization. There is growing convergence between insurance players in the developed markets and those on the African Continent. African reinsurance companies require critical mass and higher ratings in order to be effective in the new world economic order. Competition for business from international reinsurers is likely to increase as the number of players seeking business in Africa increases. 24 May 2013

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Anti – Selection • Reinsurers operating in Africa suffer the problem of discrimination in their dealing with companies in the advanced economies. •

Companies in Africa face problems in sourcing capacity especially for large and complex risks, which cover is often obtained at exorbitant rates and stiff terms due to poor security ratings.

• Very few African reinsurers are rated favourably by International Rating Agencies due to high country risk profiles. • In addition, African based Rating Agencies are not fully accepted. • The international reinsurers select good insurance companies to deal with and write only good risks and well rated, usually in foreign currency. • The African reinsurance companies are denied the opportunity to participate on these risks. 24 May 2013

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Limited Underwriting Capacity • The Reinsurance Industry in Africa faces the perennial problem of limited underwriting capacity. • Companies have small capital bases which at times are constantly being eroded in hard currency terms due to currency devaluation. • The largest African Reinsurer has a capital base of about US$600 million. • Low and negative economic growth in some cases, impacts negatively on investment returns, profitability and capital growth, and in turn underwriting capacity. • Because of low capitalization levels, African reinsurance companies are forced to write lowly valued risks and taking small lines. • Sometimes business volumes transacted are very low to attract international investors but as African economies grow, the insurance and reinsurance business will increase too. • Because of the low capacity to underwrite huge risks on the Continent, many insurance companies continue to reinsure their business with reinsurance companies outside Africa. • In 2009, about 21% of the insurance industry income was ceded to the international reinsurance market. 24 May 2013

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • The time is ripe to interest international investors including Development Financial Institutions (DFIs) such as World Bank, IFC, AfDB, PTA Bank, DEG etc. to invest in African reinsurance companies. • The focus of Global investment is shifting to the emerging and developing markets. • As some international investors are still skeptical about investing in Africa, it is up to the African reinsurance companies to convince the international investors and guarantee performance. • The direct insurance companies must also be adequately capitalized so as to eliminate undue demand on the reinsurers. • When shareholder capacity has been exhausted there should be syndicated capitalization and pools at national level to meet the needs of the economy. • Increasing capacity at all levels enhances retention of premiums at company level and ultimately profitability and company growth. • A strong domestic reinsurance and insurance market can even attract foreign capital into the country and the insurance sector in particular. 24 May 2013

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • The management of African reinsurance companies must be agile enough to be able to address the capitalization and capacity issues. • The capitalization of reinsurance companies by shareholders should not be limited to statutory minimum levels only, which are just basic prescribed entry levels. • There are opportunities to create huge insurance companies with strong balance sheets through mergers and acquisitions, if shareholders of individual companies cannot provide the required capital. • Underwriting capacity will be boosted and such companies will be able to compete effectively on the regional and international markets. • Regional and local stock exchanges can also be instrumental in building capacity by raising capital for 24 May 2013 24 insurance companies too.

MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • The idea of creating joint reinsurance companies like Africa Re must be expanded so as to build capacity on the Continent. • These companies must cooperate and exploit the synergies that exist (An African Lloyds of London with syndicates to manage African risks). • Team work between reinsurance companies is essential. • If cooperation between African countries intensifies, this will bring in more investment opportunities to local insurance industries. • Sharing know-how and skills as well as sharing best practices and leveraging on core competencies of different reinsurers are essential for the growth of African reinsurers. • Companies operating in more developed African economies must invest in other African markets starting with neighbouring countries with similar risk profiles. • The spreading of shareholding across geographical regions should not be seen as a new form of colonization but a necessary initiative for regional development. • Nationalistic sentiments can be accommodated by including local investors in the equity structures of foreign investments in reinsurance operations. • There is need to break barriers to facilitate the entry of regional investors. 24 May 2013

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS

• Heightened Competition • African reinsurers are competing among themselves and with international reinsurers . • Some foreign reinsurers have been operating in the African market for decades and others are new players. • Some African Reinsurance companies are competing outside their geographical spheres of influence and are posting good financial results. • The sustained profitability of the African Insurance market will make it attractive to both local and foreign reinsurers. • Foreign Currency Constraints • Reinsurance business requires foreign currency to pay retrocession premiums and to settle claims across geographical boundaries. • This had been a perennial problem but the situation has greatly improved, except in few cases. • African reinsurers need to ensure that business partners are educated and assured that African companies offer suitable security and should not be prejudiced from accessing good terms and business. 24 May 2013

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Leadership and Skills • One of the major challenges facing Africa is leadership and the shortage of a skilled workforce. • Problem has been compounded by the brain drain drawn to the advanced economies, and these are few institutions on the Continent that offer specialized training in reinsurance. • Skills are needed to manage and understand more complex and unfamiliar risks. • Gaps in strategy execution are often a problem. Agile and efficient strategies are often needed to capitalize on the unfolding opportunities. • An adequate skills base is essential because complex structures and systems must be created in the insurance companies in order to enable them to compete effectively with those in the advanced economies. • Staff requires core leadership and managerial skills, including actuarial skills, loss adjusting, risk management and advanced specialized 27 24 May 2013 underwriting skills.

MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Leadership and Skills • Actuarial skills are increasingly becoming important even in the short term insurance sector. • Technical and managerial skills can be improved through participating in cooperation and technical assistance programmes. • Intra-regional staff exchange programmes can also be used as a means to enhance managerial skills, and close the skills gap. • Countries with surplus skills must export them to those without and those without must be open to solicit assistance from neighbours. 24 May 2013

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Leadership and Skills • Organization of workshops and seminars on insurance matters can assist skills development. • Business exchange programmes and other forms of cooperation must be intensified at regional level leading to the establishment of strong networks. • African reinsurers need to invest in human capital development. • Reinsurance companies and other insurance industry players need to develop relationships with universities and other tertiary institutions in order to enhance the skills levels. • There is need for continuous in house training and to attract those insurance practitioners in the diaspora who are willing to come back. • The benefits of having optimal skills levels include improved performance and business growth, offering a quality service, and innovativeness. 24 May 2013

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Research and Development Capacity • Research and development capacity is pivotal to the success of the industry. • It is important that African insurers have actuaries and other professionals with skills in research and development. • The African insurance industry has traditionally relied on expertise from advanced economies in the areas of insurance products. • Some of the products obtained from abroad are not relevant because they are not designed to meet the specific requirement of the African situations. • Products such as ART and securitization have not yet been developed in most countries save for South Africa because of lack of research capacity. • Insurance modeling and actuarial work are weak with a lot of the methods employed to price risks being thumb suck. • Insurance companies in Africa need to invest in and develop the capacity to conduct ongoing research and come up with relevant products that satisfy the unique needs of this growing market. 24 May 2013

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Information and Communication Technology (ICT) • There is now heightened awareness in Africa to the fact that ICT is a major driver of economic growth and development. • Africa is making great progress in making investments in ICT and the training of its people to match the challenges of technological advancement. • Insurance companies should be encouraged to make more investments in ICT and pool certain ICT resources and create data bases which would be useful in the interchange of insurance and reinsurance business. • ICT platforms need to be updated and upgraded continually in line with emerging cutting – edge technologies. • ICT systems if implemented correctly have the potential to enhance response times and reduce the cost of doing business. 24 May 2013

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Information and Communication Technology (ICT) • African reinsurers need to harness the latest developments in ICT in order to fine tune their underwriting systems and procedures, reduce losses and enhance returns. • This includes the use of mobile phone technology, the internet, real time monitoring and adopting new pricing and modeling platforms. • This is expected to improve efficiencies in underwriting and policy administration. • Africa must not just wait for technology transfer either from the West or East but must invest in technical and vocational education, technology development, and knowledge creation underpinned by innovation and entrepreneurship.

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Insurance Supervision • The objective of insurance regulation is: • • • •

To protect consumers Control the conduct of players Ensure that companies are financial sound and to establish a strong economic and financial system.

• Many African Countries are working hard to improve the weak post independence insurance regulatory frameworks. • This is being done through increasing minimum capital requirements, putting in place effective risk management structures and opening up the market to foreign competition. • Insurance Regulators are also insisting on the implementation of business safety nets including: • Adoption of approved shareholding structures for Insurance Companies, • Controlling the ratio of local versus foreign shareholding •24 May Investment in prescribed assets 2013 • and controlling portfolio and other investments outside the countries.

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Insurance Supervision • Some countries however have weak regulatory authorities that often bend to political pressure and therefore become ineffective. • In most countries, supervisory examinations are focused on compliance with rules and regulations only. • There is therefore need to institute effective regulatory frameworks which also learn from international standards. • A well regulated domestic market acts as a catalyst for attracting inflows of capital. • The intensity of industry regulation often has a direct relationship with the perceived risk of insolvency of insurance companies in a particular market. • Governments must ensure that the insurance industry is well regulated, concentrating on supervision, monitoring and handling issues such as licensing, capital adequacy and human resources 24 May 2013 34 development.

MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • • • • • •

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Corporate Governance Some insurance companies operate in countries with poor governance. Good corporate governance is often not embraced leading to lack of confidence by foreign investors. If proper systems of directing and controlling companies exist, the companies gain the trust of investors. There is often a misalignment between the interests of management and investors/shareholders. There must be clear segregation between the duties of management and the Board. Board committees must add value through providing insights into winning business strategies and governance issues. Sound corporate governance structures are essential for decision making. Non-adherence to good corporate governance tenets can spell doom to the survival of reinsurance companies. Corporate governance must be addressed in our companies if we are to win the hearts of international and other stakeholder groups. 24 May 2013

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Infrastructure • Lack of proper infrastructure often militates against the effective operation of reinsurance companies in Africa. • Distance and travel problems often make it difficult to communicate making business interactions difficult among African countries themselves and outside the Continent.

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Risk Management Systems • African reinsurers are gradually embracing Enterprise Wide Risk Management (ERM) which allows companies to better understand the different types of risks faced. • The function is however not quite appreciated and some companies have not yet appointed dedicated staff to the function. • The risk management function in the insurance operations side is often not strong enough resulting in high cost of claims due to inadequate information about the risks at underwriting stage. • The increased crime and deteriorating moral hazard experiences can only be managed through creating strong risk management structures within the insurance companies. • There is need for African reinsurance companies to create strong risk management services to be available to the African insurers and economies. 24 May 2013

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MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Micro Insurance Sector • More than 60% of Africans do not have access to insurance products and services. • The conventional insurance companies do not provide products and services to the poor, especially those in the rural areas and informal sectors. • Africa has a large sector of its working population in the informal sector, and there is need for insurance companies to access this huge market. • Micro insurance could be used as a tool to increase insurance penetration in Africa. • The reinsurers in Africa have not done much to assist the development of this sector. • Reinsurers could also protect the sector against accumulations. • Experts say that the micro-insurance sector could generate premiums that could easily surpass that generated by conventional insurers. • There is a services mismatch between insurance provision and socioeconomic activities, and Reinsurance Companies are challenged to provide 24 May 2013 38 the lead.

MAJOR CHALLENGES FACED BY AFRICAN REINSURERS • Industry Bodies • Some African countries do not have strong insurance bodies that could assist and lead the way in lobbying governments to change policies and to interface with consumers. • African Reinsurers, although they do not interface directly with consumers, could play a pivotal role in creating consumer awareness on insurance issues. • As the insuring public increases, there is need to make them more informed and knowledgeable about insurance issues. • Reinsurers must also intensify the training they are offering to the direct market and to the public, rather than play a passive hidden role, waiting to follow the fortunes of insurers.

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CONCLUSION /CLOSING REMARKS • Africa is clearly one of the regions where prospects for the growth of the insurance industry are very high. • The value of insurable assets is growing as the resurgence in economic activity gains momentum. • Population is growing which should be insured and reinsured. • Competition for business is also expected to rise as the number of players seeking business in Africa increases. • African reinsurers are expected to position themselves through increased capacity and enhanced skills in order to take advantage of emerging opportunities. • Reinsurers in Africa are expected to face new challenges and losses as they venture into uncharted territory. • African reinsurers must face the challenges head on and first look for internal solutions at Company, Country and 24 May 2013 40 Continental levels to tackle the problems.

CONCLUSION /CLOSING REMARKS • The focus should be through : • The pooling of resources in order to enhance capacity in Africa • Regular exchanges of information and expertise • Development of reinsurance relations.

• Insurance business must be responsive to the broader needs of societies and make a positive contribution to the economic development of the Continent. • The future is bright for the African reinsurers and they must be positioned to reap the rewards of a booming African economy. • The time is coming when African reinsurers must stand shoulder to shoulder with those in the advanced economies. • Other Continents have demonstrated that it is possible. 24 May 2013

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THANK YOU

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