RISKAFRICA

Issue 01 October / November 2011 ISSN 1812-5964

COUNTRY PROFILE: Namibia

M&A SPECIAL Marsh execs talk about AF deal Analysis of activity in Africa

Why key man insurance is crucial

African Tales Wildlife cover focus

CHOOSING the right reinsurer

Dear Reader YOUr FiNANCiAL sErViCEs PLATFOrM iN AFriCA

I love Namibia. I was born in Windhoek (too many years ago) and cannot begin to describe the pleasure it has brought me to launch RISKAFRICA in this wonderful place. Some of you may know that I also publish RISKAFRICA’s sister publication in South Africa, RISKSA (along with INVESTSA, TaxTalk and several other niche publications). It is RISKAFRICA though that has really stirred the blood in my veins.

The registration of our Namibian company and the training of our Namibian staff over the next few months will ensure your financial services publication is uniquely positioned to bring you news, stories and training information all packaged with a local flavour not previously available in our country.

THE RISKAFRICA MAGAZINE PUBLISHER CC 10 Old Power Station Building Cnr of Nobel & Armstrong Street Southern Industrial Area Windhoek Namibia Editorial enquiries info@riskafrica.com Advertising and sales Michael Kaufmann | michaelk@riskafrica.com Tel: +2721 555 3577 | Fax: +2721 555 3569 Tel: +264 61 400 717

RISKAFRICA is published by

We kick off with a look at mergers and acquisitions (M&As) as the scramble to buy market share amongst businesses in our sector continues. We also take a look at the Namibian insurance landscape and intend placing a focus on the very high cost of motor repairs that our insurers and the public face come claims time.

We are very keen to hear your feedback, especially with our early issues as we try to find the most comfortable balance between investigative news, education and social events. Please drop me a mail on publisher@riskafrica.com with your suggestions, comments and story ideas. We will do our best to include your suggestions at our next editorial meeting.

Ground floor, Manhattan Tower, Esplanade Road Century City, 7441, Cape Town, South Africa www.comms.co.za

Publisher & editor in chief Andy Mark Editorial director Angelique Ruzicka Managing editor Nicky Mark Copy editor Margy Beves-Gibson Feature writers Lize van Coeverden Bianca Wright Angelique Ruzicka Art director Dries van der Westhuizen Copyright THE RISKAFRICA MAGAZINE PUBLISHER CC 2011. All rights reserved.

Opinions expressed in this publication are those of the authors and do not necessarily reflect those of the Publisher, Cosa Communications (Pty) Ltd, COSA Media, and or THE RISKAFRICA MAGAZINE PUBLISHER CC. The mention of specific products in articles or advertisements does not imply that they are endorsed or recommended by this journal or its publishers in preference to others of a similar nature, which are not mentioned or advertised. While every effort is made to ensure accuracy of editorial content, the publishers do not accept responsibility for omissions, errors or any consequences that may arise therefrom. Reliance on any information contained in this publication is at your own risk. The publishers make no representations or warranties, express or implied, as to the correctness or suitability of the information contained and/or the products advertised in this publication. The publishers shall not be liable for any damages or loss, howsoever arising, incurred by readers of this publication or any other person/s.

The publishers disclaim all responsibility and liability for any damages, including pure economic loss and any consequential damages, resulting from the use of any service or product advertised in this publication. Readers of this publication indemnify and hold harmless the publishers of this magazine, its officers, employees and servants for any demand, action, application or other proceedings made by any third party and arising out of or in connection with the use of any services and/or pro-ducts or the reliance of any information contained in this publication.

Enjoy the read.

Andy Mark Publisher

CONTENTS 6 10 12 16 18 24 26 28 30 34 40

Finding the perfect match Swallowing a big fish Choosing your reinsurer African tales: wildlife insurance Digging deep: insuring mines Stock watch: Bulls vs. Bears Key man insurance Aviation: the cost of cover Country profile: Namibia News Sales strategies riskAFRICA

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• Mergers & Acquisitions

Finding the perfect match If your business has the funds at its disposal, it’s a buyer’s market out there. Angelique Ruzicka and Bianca Wright peruse the African mergers and acquisitions landscape and ask whether the continent is keeping up with the momentum of the rest of the world. They scratch around Aon’s acquisition of Glenrand MIB, among others, to find out if any lessons can be learnt from it and speak to industry experts to get advice on how best to close a deal.

“This year is almost over but already industry commentators believe that 2011 will surpass the record R316 billion cited in Thomson Reuters’ 2010 report.”

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ast year, general merger and acquisition activity in the sub-Saharan region reached a record $44 billion (R316 billion), according to Thomson Reuters.

Its 2010 sub-Saharan Africa Investment Banking Analysis report revealed that South Africa was the most targeted country in the area. Nigeria ranked second and Namibia third. South Africa was also the most acquisitive subSaharan nation for 2010, capturing 93 per cent of deals. The largest deal recorded was not in the insurance industry but rather in telecoms with Nigerian business Zain Africa BV being snapped up by India’s Bharti Airtel for an impressive $10.7 billion (R76 billion).

Telecommunications was the most active industry. Energy and power ranked second with deals such as the Brazilian company, HRT Participações em Petróleo S.A.’s agreement to acquire UNX Energy Corp operating in Namibia for approximately C$730 million in February this year. The financial sector ranked third.

This year is almost over but already industry commentators believe that 2011 will surpass the record R316 billion cited in Thomson Reuters’ 2010 report.

Analysts from international financial conglomerate, Citigroup, said it expects a pickup in activity in a recent research note.

Certainly, the Walmart/Massmart deal is set to ensure that 2010’s record figure is surpassed – despite caution from both the South African and Namibian governments and Competition Commission.

According to the African Economic Outlook 2011 report, mergers occur in all sectors in the Namibian economy with two to three mergers taking place every month. A study is currently underway to investigate the impacts of the abuse of dominance in businesses on the competitiveness of the economy and the impacts of increasing mergers and acquisitions.

Mergers are not always plain sailing, however; in 2010, the Bank of Namibia rejected a bid by South Africa’s Absa Group to acquire a 70 per cent stake in Capricorn Holdings, the parent company of Bank Windhoek. According to the 2011 Investment Climate Statement – Namibia, the Bank of Namibia argued that “Absa’s acquisition would make all banks foreignowned, as Bank Windhoek is the only bank in Namibia that has majority domestic ownership”; thus the bank maintained that permitting the merger would have exposed Namibia to single country risk and would make the “banking system more susceptible

to cross-border shocks through the risk of contagion”.

The insurance industry in Africa is certainly not a stranger to M&A activity. In August, Marsh, a wholly-owned subsidiary of Marsh & McLennan Companies, announced that it would acquire the brokerage business of Alexander Forbes (AF) for a consideration of up to R1 119.1 billion, subject to certain conditions. The deal includes Alexander Forbes Risk Services (AFRS) and certain local and correspondent operations serviced across sub-Saharan Africa, including Botswana and Namibia.

Aon’s purchase of competitor Glenrand MIB and the merger between Momentum and Metropolitan created the third largest life insurer in South Africa, MMI Holdings.

The merger also had implications for neighbour, Namibia. The announcement that Aon was going to purchase its rival was first made in December 2010, but the deal itself was only approved this year, creating one of the largest broking and risk management companies in South Africa and Africa. The deal was structured in such a way that around R523 million was paid for Glenrand MIB, consisting of R2 an ordinary share, plus R24 million payable to BEE shareholders. With organic growth proving difficult in the current climate, the best way for Aon to get ahead, particularly in Africa, was to snap up its rival. “The acquisition has created more critical mass not only in South Africa, but also on the continent.

Glenrand wasn’t as distributed as we were but it did give us an owned operation in Namibia, which is an important country to be involved in. Through the Africa network, we now have a seamless network of offices in all the key centres. Through those means we are able to roll out our global best practice across various industry segments and bring innovation and access to insurance market capacity for clients who are regionalising,” said Guy Scott, CEO of Aon’s risk solutions business.

Changes After a merger or acquisition, the parent company usually initiates several steps to integrate the purchased company into the fold. The Aon Glenrand MIB deal was no different. After getting permission from the Competition Commission to purchase its rival, Aon subsequently delisted Glenrand from the Johannesburg Stock Exchange (JSE), ending its 12-year listing.

Some changes are not so straightforward to implement. Aon’s next move was to rationalise information technology and operating systems (a step it is still following through on) and installing a new management structure. This is, however, where Aon hit a wall. Sensing

the job cuts, the Competition Commission fettered Aon’s plans, preventing it from making sweeping retrenchments following its acquisition of Glenrand MIB. The Competition Commission proved a thorn in the side for MMI’s merger plans, too.

In January this year, MMI was forced to withdraw its appeal against employeerelated conditions imposed by the Competition Tribunal, which stipulated that there would be no retrenchments resulting from the merger in its South African operations for a period of two years starting 1 December 2010. The condition, however, does not apply to senior management.

But Aon continued fighting, appealing to the Competition Tribunal and winning its case. In August, the Competition Tribunal ruled in favour of Aon’s proposal, with conditions attached. The company had to agree that there would be no retrenchments of employees earning below R15 000 and that it would cap the number of retrenchments of those earning between R15 000 and R30 000 at 24 for a two-year period.

“We wanted unconditional approval, we didn’t get it, we had to appeal and we won our appeal. The issue was around employment and the loss of jobs,” said Scott. He explained that in some cases it was crucial to eradicate duplication. “Obviously [there were] different business models. We work on a centralised accounting model, whereas Glenrand works on a decentralised model so you had accounting staff in its branch infrastructure. Looking at synergies, they have an impact but to a lesser extent on our employee numbers. To realise the benefits of acquisitions you have to generate synergies.”

Aon and MMI are not the only companies to suffer under the might of the Competition Commission’s rules and regulations. US retail giant Walmart got the go-ahead to purchase a majority stake of Massmart, a leading South African retailer of household goods but it had to reinstate the 503 retrenched workers that Massmart cut in anticipation of the merger. The Commission added that existing labour agreements with Massmart had to be honoured for three years.

Scott said that reaching an agreement with the Competition Commission was a difficult hurdle to overcome. He warned that restrictions could scare off future investors and interest from abroad. “We need to be in the business of job creation but you also have to allow for foreign direct investment and understand that synergies need to be created.”

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He acknowledged that job cuts would be inevitable in some situations but argued that if companies were allowed some autonomy there would be opportunities further down the line for more job creation.

“A larger business at a point in time will feed the economy in various ways in terms of skills development and ongoing growth will require more employment. We have been a net employer of people and created jobs, but when it comes to integration you have to ensure that your business model is sound and sustainable and from there you can launch a platform to continue to grow and look for talent,” he said.

Fuelling the fire With such notable M&A activity in 2010, 2011 and more set to follow, it begs the question: why now? There are several reasons behind the M&A frenzy. One of them is the fact that in today ’s volatile and soft market conditions it’s tough to grow organically, forcing companies to look at buying established businesses. Scott said the purchase of Glenrand MIB accelerated Aon’s growth. “Organic growth would have been slow especially in the difficult economic circumstances that we are all faced with. Over the past two to three years, we have made an acquisition in tough economic times and we are now in a good position once the economy does turn round.”

Regulation is another reason for the increase in M&A activity, particularly in South Africa. For smaller brokers, the burden of complying with regulatory exams, Conflict of Interest (COI) and Treating Customers fairly (TCF), to name but a few, has been enough to encourage owners to throw in the towel and sell their businesses.

larger parent company to cover the costs. If events in Europe are anything to go by, SAM is set to be quite costly. In Europe, Solvency II is creating massive headaches for companies struggling to become compliant with the regulation.

Then, for some companies, acquiring another business is a sure way of increasing their presence in Africa. Even though Aon already has a presence on the continent, the Glenrand purchase has increased its reach, particularly in Namibia. “Namibia is significant in terms of its minerals, natural resources and leisure industry and it was a missing link for us in the SADC region,” said Scott. “We were in Botswana, Zambia, Mozambique and Angola and now we have completed the SADC region footprint.”

He believes, given time, Zimbabwe could turn return to its former glory, too. “We are still in Zimbabwe ... we are committed to it because we still have an office there of close to 100 people.”

Scott points out that the country has benefited since it dollarised its currency and that there is business to be done there. “You can’t externalise profits but it’s still a reasonable environment to operate in.

When the politics comes right we believe it will return to what it once was – the bread basket for Africa.”

With so many reasons for companies to merge or acquire other businesses, Africa is set to continue to see a hive of M&A activity for the foreseeable future. If businesses are able to obtain capital and overturn or comply with Competition Commission conditions, there will be no stopping them.

In June, Clint Harker, managing director of Gen-Assist Insurance Brokers cautioned that on top of regulatory exams, the rising costs and skills shortages would also contribute to M&A activity over the next five years among smaller short-term insurance brokers in South Africa. He said these factors will force these operators to seek partnerships and may result in 300 000 job losses in the financial services industry.

For smaller insurance companies, implementing Solvency Assessment Management (SAM), South Africa’s version of Europe’s Solvency II, may be enough to force them to seek the solace of a partner or a

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“Namibia is significant in terms of its minerals, natural resources and leisure industry and it was a missing link for us in the SADC region,”

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• Mergers and Acquisitions

Swallowing a big fish Following rumours in the industry, there was little surprise when Marsh announced that it is snapping up the brokerage business of Alexander Forbes. Angelique Ruzicka interviews Marsh’s executives to find out what the company has in mind following the merger.

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hortly after Aon bought rival Glenrand for R523 million, rumours intensified about a Marsh/ Alexander Forbes acquisition. Not long after tongues started wagging, Marsh announced that it is to acquire the brokerage business of Alexander Forbes (AF) for a consideration of up to R1 119.1 billion. The announcement, which was made in August, includes the purchase of AF’s Risk Services business (AFRS) and certain local and correspondent operations serviced across sub-Saharan Africa, including Botswana and Namibia. The transaction, which is due for completion in the fourth quarter of this year, is still subject to regulatory and other approvals.

Edward Kieswetter, group chief executive of AF, said in a statement that the deal was consistent with the company ’s growth strategy and would be mutually beneficial. “Alexander Forbes will gain access to the expertise of the world’s leading international insurance broker, while Marsh will develop its African footprint through our on-the-ground expertise and extensive client relationships.”

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With all this talk about consolidation, it begs the question whether Marsh was ever interested in Glenrand or if AF’s business was more of an appeal. Now that the dust has settled somewhat, David Batchelor, CEO of Marsh’s Europe, Middle East and Africa region, admitted that Marsh has flirted with many organisations about the possibility of an M&A deal but he said the serious candidate was always AF. “We are an organisation always talking to potential candidates and Forbes was the quality acquisition we always wanted.

We had conversations with them over a period of time, and now we think it’s a great fit.”

“It’s common knowledge that the top three or four South African insurers are crystallising strategies to move into certain African territories or invest in Africa.”

Batchelor revealed that Marsh had been in discussions with Forbes over a deal “at one level or another” for a couple of years but the seriousness, in terms of a transaction, manifested itself only earlier this year. He denies the deal was accelerated after Aon’s purchase of Glenrand. “It was not a knee-jerk reaction to the Aon/Glenrand deal. M&A is a tortuous exercise for any business and therefore our search was for the right acquisition. Our heads were not turned by Aon/Glenrand at all.”

Job cuts?

The South African Competition Commission proved a thorn in the side for MMI and Aon’s merger plans. In January this year, MMI was forced to withdraw its appeal against employee-related conditions imposed by the Competition Tribunal, which stipulated that there would be no retrenchments resulting from the merger in its South African operations for a period of two years starting 1 December 2010. The condition, however, does not apply to senior management.

Sensing the job cuts, the Competition Commission fettered Aon’s plans too, preventing it from making sweeping retrenchments following its acquisition of Glenrand MIB. However, Aon continued fighting, appealing to the Competition Tribunal and winning its case.

When Batchelor was asked if Marsh could run into similar problems, his response

was an emphatic no. He explained that the plan was to grow the business, that Marsh complemented AF and that it would try to ensure that talent is retained rather than cut. He added: “There will be efficiencies but it will be at a level that, in our view, won’t make the radar screen.

The deal does not hang on us having to exit a whole raft of people from the business.”

Into Africa Jurie Erwee, CEO of AFRS, will be appointed CEO of the combined business in Africa, which will be called Marsh Africa. He will report to Batchelor. Brian Blake, CEO of Marsh South Africa, will be appointed vice-chairman of Marsh Africa with a remit to develop African business outside South Africa. Blake will report to Erwee. “By aligning the local strengths of Alexander Forbes with Marsh’s global resources, we are bringing the world’s best to Africa. Marsh Africa will provide a broader offering to our clients and ensure that we can provide them with the risk solutions best suited to their needs,” said Erwee.

Marsh is by no means a new player in Africa. It has, for example, been in Nigeria since 1955 and Blake has been in the region for the last 30 years. There are places where Marsh has not yet ventured, but the company is keen to make sure that it does so, soon. “We are not in Ghana but on the back of the oil discovery, it is emerging and really starting to invest its money. The question is should we be there? Personally, I think we should.

It makes more sense if we can motivate an operation in Ghana on the back of the regional footprint we are trying to create rather than grow our businesses in countries one at a time. That’s a very arduous process,” said Blake.

The company is keen to cater to clients and insurers’ appetites for expansion into the continent. “It’s common knowledge that the top three or four South African insurers are crystallising strategies to move into certain African territories or invest in Africa. I’d like to think with our combined business going forward it will present more opportunities for our local partners as they enter markets and as we look to improve our offering,” said Erwee.

With foreign direct investment coming in from China and elsewhere, it is clear that Marsh and other insurers will have their hands full chasing opportunities in Africa.

“Global headwinds are affecting everyone, but there is growth potential in those territories [Africa],” added Batchelor.

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• Reinsurance

choosing your reinsurer Ratings, relationships, favourable terms and conditions and price are just some of the things reinsurance brokers and other businesses look at when deciding whether or not to deal with a reinsurer. Angelique Ruzicka delves deeper into these criteria and finds out how important they are in making business decisions.

Judging reinsurers on their rating is a very common tactic. “Rating is an imperative, it’s becoming more of an issue because people look at counterparty risk [which will be a focus] with Solvency Asset Management (SAM),” said Johann van Niekerk, head of business at life reinsurer RGA.

“Very little business, as far as I am aware, gets placed with reinsurance security below international A grade.

There may be a few placements with BBB+, but I don’t think there are very many,”

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Anna Nakale-Kawana, managing director of the Namibia National Reinsurance Corporation (Namibre) added that ratings are good for gaining business internationally. While Namibre started out providing reinsurance capacity in 2001, it has since branched out to provide reinsurance, together with lead reinsurer Munich Re, to other African countries, particularly in East Africa: “[Ratings] are very important. We got our rating when we started writing business outside of Namibia. It’s an important tool for marketing outside of your country.”

Standards vary from country to country in Africa. However, in South Africa, very few players place business with a reinsurer that has a rating below A. “Very little business, as far as I am aware, gets placed with reinsurance security below international A grade. There may be a few placements with BBB+, but I don’t think there are very many,” said Steve Smith, managing director of Flagstone Re.

As it’s often difficult to distinguish between reinsurers based on their ratings alone, price has become quite a hot potato.

Some companies operate without a rating and, while this may not necessarily mean that they are bad for business, it’s probably wise to take extra precautions. “If I was a reinsurance buyer and there was no rating I would want different forms of collateral; that would be a letter of guarantee from the parent company, withholding funds for potential future claims, or a letter of credit from a bank. If this is not requested, it opens companies up to not being protected,” warned Achim Klennert, managing director of Hannover Reinsurance Group Africa.

While ratings are important, it’s not the only thing to consider when deciding with which reinsurer to do business. Relationships and good service also come into play in ensuring that tenders and new business is won repeatedly. “It’s become so competitive that it is really difficult to differentiate yourself. What it really comes down to is level of service and personality – the customers must like working for you. There are certain things that are a given and technical expertise should be evident.

The most important component is service and on that companies definitely do differ,” added Van Niekerk.

Sweetening the deal with favourable terms and conditions can also swing business in the way of reinsurers. However, this is not always possible if you are a South African-based reinsurer.

“There is more focus on terms and conditions within treaty today. A lot of markets say they have been restricted by certain reinsurance conditions but these haven’t been applicable in the international market. We have seen

international companies in the last couple of years who have come to write business here in South Africa and given much wider coverage to insurers because their treaty reinsurance is less restrictive than those of the local market.

Insurers widen their treaties in order to get a competitive advantage. So that is something else we’re looking at. We ask who would be prepared to offer wider coverage,” explained Lee Ellis, CEO of reinsurance broker Guy Carpenter’s South African operations.

Partnering on price As it’s often difficult to distinguish between reinsurers based on their ratings alone, price has become quite a hot potato. To gain more

market share, some reinsurers have reduced their prices in order to attain more business, but should you necessarily partner with a business that adopts this strategy?

Ellis believes the market has become very price sensitive. “It’s a function of companies trying to secure and grow their top and bottom line. The market has also avoided large losses and the time when you really test the quality of security is when you have large claims and losses. As we have had a largely benign claims environment, the reinsurer’s ability to pay has not really been proven and focus has shifted to cutting costs.”

But choosing who to do business with based

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purely on price has put more pressure on local players. This has certainly happened in South Africa. “I would say that insurers do pay lip service to preferring local reinsurers but at the end of the day their decisions are more driven than what they admit. The last time I looked at it, 60 per cent of non-life premium is placed outside of the country. Larger insurance companies also want to spread their risk,” pointed out Klennert.

Klennert argues that overseas players can benefit from low tax rates and are not burdened by regulation in the same way as South African reinsurers are, for example.

These benefits tip the scales in favour of international players because they can save on costs and pass those savings onto their clients.

“As a local reinsurer, we have to fulfil a lot of requirements here but companies are free to place business internationally as they wish. I don’t mind competition as long as there is a level playing field. You can run a business much cheaper from overseas. That is a problem and I don’t see signs of that improving. If anything it is going the other way. There is one large competitor that closed its business in South Africa and said it could do this better from Switzerland. It’s not something I would want to do,” added Klennert.

Ellis agreed there should be more support for local players, but expecting the market to follow suit to this recommendation is perhaps not realistic. “Because there is a price-sensitive market, we probably don’t support them as much as we should. Often local reinsurers have to write at a sub-standard price because they have to protect their local interests. I would love to see more support for the local market but that would be at the price of the insurers.

Obviously every reinsurer has a different return on capital model. But if you are in a tax efficient place and cost to capital is cheaper, you can pass it onto the client. It’s a very simple reality.”

The issue of price is unlikely to go away in the short term but it appears that reinsurers will benefit to some extent from hardening rates worldwide. A few experts have already said that reinsurers are set to push rates up due, in most part, to the natural disasters we have seen around the world in 2010 and 2011.

However, there is no overall agreement yet as to whether we will see double digit rate increases in Africa. Some believe that countries like South Africa won’t be affected. “Reinsurers

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When relationships sour have already pushed up rates in certain markets.

If you look at New Zealand, Japan and Australia, all of those markets have seen a hardening of rates. But there hasn’t been a knock-on effect in this market yet. Unless we have major storms in the US and Europe, rates are unlikely to harden globally,” explained Ellis.

Still, there are some advantages to being based locally. In South Africa, for example, locally registered businesses under the Financial Services Board regime automatically qualify for solvency calculations and that gives them an advantage. “However, other reinsurers can get approved for solvency purposes through retaining cash reserves deposit or obtaining solvency guarantees. But it’s a hassle to obtain that, so if you can automatically place with someone it may help with the decision-making process,” pointed out Smith.

When relationships sour It’s important that reinsurance brokers, insurers and other businesses think carefully about the reinsurer with whom they do business. It’s

When a reinsurer goes into run-off, it means that it actively stops trading and ends its underwriting operations.

rare, but not unheard of for reinsurers to go into run-off in Africa.

When a reinsurer goes into run-off, it means that it actively stops trading and ends its underwriting operations. Taking on new risks from ceding insurers will not happen at this point. In certain cases, the entire business will be sold to a company that specialises in buying companies in this stage. This doesn’t mean that the run-off business is completely off the hook because it still has a contractual obligation to the ceding insurance companies to pay claims.

But obtaining outstanding payments can be tricky because paying reinsurance recoverables is not the immediate priority.

A handful of players have gone into run-off in

South Africa. Gerling Re SA went this way in 2002 and has since been bought by Saxum Group; it has three different related businesses which specialise in portfolio management and acquisition as well as short-term insurance and reinsurance (life and non-life). It was renamed Saxum Re after Saxum bought the business from Cologne-based Gerling Konzern in January 2003.

“Gerling’s run-off was triggered after its parent went into run-off and as far as I am aware it has met all its obligations,” said Smith, who used to be managing director of Gerling Re up till 2002.

Gerling is not the only company that has gone into run-off in South Africa. But Smith points out that because the South African market has always been very strict about security there haven’t been any major problems other than the ones created by external influences.

“Years ago there was Central Re, which again went into run-off because of the parent company in the early 90s. Then there was a local subsidiary of Zim Re that also went into run-off.” Ultimately, it’s essential to scrutinise both the local subsidiary as well as the parent company. “This is usually done by the security committees of major brokers,” said Smith.

Namibre: A brief history The Namibian Reinsurance industry struggled to obtain capacity in the past, which meant that most companies had to get reinsurance from abroad. To provide businesses with local capacity the Namibia National Reinsurance Corporation was established by an Act of Parliament (Act No.22 of 1998) to curb the capital outflow to international players.

Nakale-Kawana said Namibre doesn’t compete on price because it provides capacity together with other reinsurers such as Munich Re, Everest Re and Africa Re. “Our main treaty is led by Munich Re, but there are other reinsurers on our programme with whom we work and our broker Aon Benfield. Pricing is determined by the lead reinsurer.”

Namibre, as it is now also known, became operational 10 years ago in September 2001.

It transacts facultive and treaty business in the following classes: fire, marine, motor, guarantee, personal lines, medical, special riot risk underwritten by Nasria (National Special Risks Insurance Association) among others.

According to Namibre’s website, Global Credit

Ratings (GCR) currently rates the reinsurer as AA- (national) and BB (international). But it doesn’t only provide cover locally in Namibia.

Namibre currently offers capacity in east Africa, too. “We are writing in Kenya, Zambia, Tanzania, Malawi, and Angola, but not in South Africa,” explained Nakale-Kawana.

Namibre has enjoyed some rapid growth.

At its inception, Namibre’s corporate gross written premium stood at just over N$ 5million and some five years later that figure exceeded N$ 50 million. Today the company has achieved several milestones including building its own two-storey building in Windhoek for N$ 20 million. Nakale-Kawana, who has been with the company since March 2004, said the company now boasts a risk premium of N$ 90 million. “We have grown to write business outside of Namibia and are doing well in those markets. However, our predominant focus is still to write business in Namibia.”

“Gerling’s run-off was triggered after its parent went into run-off and as far as I am aware it has met all its obligations.”

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• Wildlife insurance

African Tales – a focus on wildlife insurance

Gugulethu Mkhabela and Lize van Coeverden speak to game reserve managers about their insurance cover experiences and what they are looking for in a product. They also get input from insurers and highlight what brokers need to bear in mind when dealing with this type of insurance.

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frica is famous for its unspoiled beauty and tourists and adventurers come from all over the globe to see large wildlife in their natural habitat. Initially, conservation in Africa was viewed as an ethical luxury, but people soon realised the commercial benefit of conservation and the idea that we should ‘protect wildlife because it’s our responsibility’ transformed into: ‘let us protect wildlife so that we can exploit it even more’. The resulting competition (be it in the shape of national game reserves or private game farms for tourism or hunting) has become driven by financial gain. A wild animal is no longer just a beast to be admired; now it is a valuable asset to be protected at all cost.

The wildlife legislation of African countries, though, is as varied as the landscape and this affects available insurance cover.

Brokers who are keen on offering wildlife insurance products need to understand that it is a rapidly growing market with new challenges and changes every day. Despite wildlife insurance being quite complicated, a few have entered this marketing thinking it’s easy. “There are a lot of insurers or UMAs who have given this type of insurance a go, only to have it fizzle out eventually,” remarked Caroline Swanevelder, executive head of commercial at Risk Guard Alliance. “It is a profitable market; however, if you are not specialised in this type of insurance and treat it as an extra, it will soon become apparent to your client and business will not materialise.”

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Poaching is a contentious issue in Africa and has escalated into serious organised crime. However, poaching isn’t the only or biggest risk; there are several risks and factors that one is exposed to.

Dawid Fourie is the owner of Nyembe Boerdery in South Africa’s Vryheid area of KwaZulu-Natal. He feels that some insurance companies don’t offer the right products. “Even though I have not experienced any loss of wildlife or theft, my experience with wildlife insurance is that there are so many products and features available, you are never quite sure if you are covered the way you want or need to be.”

Fourie feels that few people understand game and game farming. “You need someone who understands the different aspects of managing game and to write a policy according to that. Not give you a policy and have you manage your game farm accordingly,” he said. “If you want to insure game on your farm, they take the normal household insurance and adjust it a bit,” he added. “However, the insurance company I moved to is highly experienced and knows what it is doing.”

Alan Feldon, game reserve manager in the Eastern Cape, has not had many positive experiences with insurance providers either. “In all my time as a game reserve manager, I haven’t been satisfied with wildlife insurance. Two months ago we experienced flooding on our game reserve, where the fence was badly damaged,” he revealed. As a result game has escaped, roads have been washed away and a bridge was

destroyed. “I’m not particularly happy because they [insurers] don’t always cover what we would like them to cover.” He said even though they are covered, they now have to provide substantial proof as to what the damage was and it ends up not being worth it.

Feldon said the terms and conditions of wildlife policies are arduous and very vague about what they will and won’t cover. He pointed out that it’s quite costly to fix the fence and thinks insurers and brokers are not in touch with the costs involved in fencing a reserve. They lost quite a large number of kudu and wildebeest; he estimated the value to be in the region of R60 000. “We have to prove we had the game; that the animals escaped; where they are; and why we haven’t recaptured the animals.”

Feldon’s other major critique is that the premiums are too high. “I think public liability is important but the rest is not worth it, because you won’t get the game back and they won’t pay for the game.”

Julian Freimond, head of SATIB’s (Safari and Tourism Insurance Brokers) wildlife business unit, thinks Feldon raised good points in terms of onerous terms and conditions and premiums being too high. However, he said that there were other factors to consider. “I feel this is a bit of generalisation. There are various products on the market that are vague. However, there are others which, if read correctly, are very clear and understandable. As far as premium rates are concerned, you must bear in mind that rates are calculated according to loss ratios as with any insurance product,” he said.

Freimond asserted that insurers cannot survive if losses exceed income – so they need to rate risks according to historical losses taking into account all factors. “Wild animals are generally highly strained and susceptible to various stress-related diseases when translocated or restrained in any way and risks of mortality are high. There is, however, room for reduction in premium if the consumer is willing to reduce the insurer’s risk by excluding certain perils such as poaching, lightning strikes, fire, etc.”

As far as theft or missing animals is concerned, SATIB’s cover specifically excludes mysterious disappearance or theft as this, if included, exposes underwriters to potential abuse.

“The cover we offer includes only mortalityrelated perils and, in order for a claim to be considered, a carcass needs to be produced and positive identity of the insured animal would have to be proven.” This offers a possible explanation as to why Feldon’s claim for missing animals may be rejected.

Some wildlife insurance has certainly evolved.

Seven years ago, when VEA (now Etana Wildlife and Tourism) decided to design specialist products for the wildlife industry, corporate products were being tweaked to suit wildlife

needs. This was totally inadequate according to Joan Jackson, head of Etana Wildlife and Tourism. “Wildlife operators had very little choice because the market was dominated by a very small bouquet of products that consisted of generic wording, extended agricultural or transit cover or a Lloyd’s policy.”

“There are a lot of insurers or UMAs who have given this type of insurance a go, only to have it fizzle out eventually.”

Add-ons are also entering the market.

Insurance underwriter Risk Guard Alliance launched its hospitality platform in 2006.

The product specifically caters for the game lodge owner who needs the normal cover for buildings plus cover pertaining to the risk of having wildlife on the farm. Liability cover for the guests in open game drive vehicles, should an animal storm the vehicle, as well as damage to property by wild animals are just a few of the specialised covers it offers. The knowledge required from brokers who want to distribute this type of insurance cover includes a basic understanding of their clients’ needs as well as what the policy actually covers. “Fourie’s case is the worst case scenario because he thought he was buying an insurance product which covers everything, only to find out when a claim arises that the policy covers only certain perils or conditions,” Swanevelder remarked.

Freimond believes an extensive knowledge of the wildlife and game ranching industry is essential. “A very good knowledge of the perils and risks associated with wildlife diseases, stresses and perils associated with translocating game, as well as a good relationship with the major players such as veterinarians, game transport operators, game brokers and auctioneers in the industry are vital.”

“Another essential feature of effective wildlife insurance is a full and thorough needs analysis,” Jackson pointed out. Etana advises brokers to be thorough without taking shortcuts for continuous satisfaction and retention of clients.

In terms of affordability, Freimond stated that wildlife mortality cover is priced according to risk potential and rated accordingly. “Wild animals are fragile when captured and removed from their natural habitats and environments and so the risks associated with this type of stress are high. Factors which influence risk and rates include species; experience of handlers (vet, transporter, game capture outfitter); weather conditions at time of translocation;

value of animal; adaptability to proposed new site; type of cover required – this could be fully comprehensive or all risks of mortality to restricted as in fire, storm and lightning risks only; and so forth,” he explained.

Brokers should ensure that they understand the potential effect that loss of wildlife could have on their client’s business, and warn them that having wildlife presents many other potential problems. For example, the game farm’s fencing could be damaged (as indicated by Feldon) and the wildlife could escape.

The days when the wildlife industry was considered to be a sideline business are long gone. Jackson strongly believes that entering this business often needs an attitude adjustment. In the wildlife industry, animals need to be seen as assets just like high-priced jewellery, requiring well-kept records of value and ownership to make claims quick and efficient. Unfortunately, recordkeeping is often neglected. “This industry is highly regulated and well-organised with various structures in place to drive this market within various economies throughout Africa. Brokers have huge potential to explore and venture into new markets as well as expand their offerings to appropriate clients.” Jackson concluded that specially designed products are flexible, industry-specific and are definitely not a one-size-fits-all for mass market needs. “Brokers need to have a specialist competitive edge when they approach wildlife operators,” she advised.

Poaching in Africa Poaching – the illegal killing or theft of animals – is almost always commercially motivated. The local and international meat trade, trafficking of animals (locally and cross-border), the trade in live animals and body parts and the traditional medicines market, are the main economic motivators. In January 2011, the World Wildlife Foundation (WWF) reported that poaching, in Southern Africa particularly, has reached record highs. Sophisticated criminal networks, similar to human trafficking syndicates and drug cartels, use helicopters, night-vision equipment, veterinary tranquilisers and silencers to evade detection and overcome security measures. The international illegal trade of wild animals today is estimated to be almost as big as the drug trade. Sadly though, no organisation or government body keeps a central database of comprehensive poaching statistics on a provincial, regional or national basis.

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• Mining

DIGGING DEEP Explosions, fires and flooding, acid mining drainage and fracking (hydraulic fracturing) are some of the biggest risks when it comes to insuring mines. Gugulethu Mkhabela and Lize van Coeverden dig deep to find out what insuring mines entails.

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“Shaky mining safety regulations in some countries (such as South Africa) and the risk of unknown threats and disasters haven’t dissuaded some brokers from entering the sector.”

M

ining has never been a safe exercise. Last year’s Chilean mine disaster shocked the world and put a spotlight on the safety of mines. A methane gas explosion in New Zealand and explosions in collieries in China and USSR have resulted in damage to equipment and the loss of lives. Africa has had its fair share of disasters. In the 1960s, 400 mine employees were killed and sealed underground at the Coalbrook Colliery in South Africa’s Free State province.

Previously, canaries were used in mines as an early warning system to indicate danger to human lives from gasses, but with the modern sophistication of mining operations and new dangers, different kinds of alarms and safety regulations are required alongside sophisticated insurance to manage risk.

Shaky mining safety regulations in some countries (such as South Africa) and the risk of unknown threats and disasters haven’t dissuaded some brokers from entering the sector. In fact, some say there’s still room for more insurance companies and brokers in the mining sector. Hamtern Financial Services has been appointed to broker insurance for a number of JSE-listed companies. Two of its new clients represent mining holding companies and each have a number of individual mines under management.

Iain Lindsey-Renton, consultant at Hamtern Financial Services, said that experience was essential for brokers: “A combination of engineering knowledge, perhaps a work period in a mining environment or, in my case, many years working in insurance specifically with mining risks can be invaluable. Knowledge of the international norm of best practices is also beneficial.”

Hamtern is up against giants such as GIB, Glenrand MIB, Alexander Forbes, Marsh, Aon, and Barker and Associates. Historically, the majority of capacity for the insurance of mines was situated offshore in markets in the UK and Europe. This has been a sad reflection on South Africa and other African countries where mining is still a substantial contributor to GDP (gross domestic product) and is a major employer. “What is pleasing is that there now seems to be a greater willingness for some of the local insurance companies to become significant insurers in this field and we hope that more will follow,” added Lindsey-Renton.

After careful consideration of a number of operations, Hamtern formed a joint venture with Willis SA, one of the leading mining brokers globally. It currently has a significant mining list of clients including those placed as number one, number three and number seven in the world (BHP Billiton, Companhia Vale do Rio in Brazil and Newmont in the US). “Initially relationships play an important part; but you have to be able to show that knowledge and expertise to provide a service to the mine and its management, to prepare accurate policy documentation, to correctly market the business, to assist in a meaningful manner when claims occur and to obtain a competitive pricing for the insurance product are all in place.”

Mining is an industry fraught with a variety of risks and African countries active in mining each have their own unique challenges.

Official mining activities in Namibia started as early as 1855 in the Walvis Bay area.

Today, Namibia produces a variety of mining commodities including gold, silver, copper, lead, zinc, salt, graphite, marble, granite, fluorspar and limestone, as well as some semi-precious stones. Diamonds and uranium, however, account for the bulk of Namibia’s total export sales. Despite

the dangers of mining radioactive material, the frequency and severity of accidents in Namibian mines are generally quite low. But there was a recent spike in accidents in the first quarter of 2011. (For more information, see table: ‘Mining accidents, fatalities and average number of shifts lost per accident’).

Safety records are also improving in South Africa, where mining safety regulations have been a point of contention for some years.

According to South Africa’s Chamber of Mines, a 24 per cent reduction in fatalities was recorded in 2010, the best in South Africa’s history. Improvements, however, do not make the business of insuring mines any easier. Insuring mines is a complex procedure. “Within the mining sector, there are a wide range of risks and exposures which need to be identified, understood, quantified and, as far as possible, managed or mitigated, before structuring an insurance portfolio,” said Jane March, division executive for mining metals and minerals division of Marsh’s risk management practice.

So what exactly does the process of insuring mines entail? RISKAFRICA spoke to March, a rock engineer (who refused to be named) and Russell Davis of Aon Risk Solutions SA, to find out more.

What are the biggest risks when it comes to mining insurance?

JM: Fires in any critical areas for example, MCCs (motor control centre – from where the electrical reticulation system is controlled for the operation), transformers, electrical sub-stations, conveyor belts, plant and machinery and so forth. Explosions including furnace explosions, seismicity causing damage and flooding of the underground works are all top risk.

RD: Mining companies have various top risks, but can be classed differently between

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insurable and business risks. With insurable risks, major mining risks all depend on the commodity and whether the mine is opencast or underground. Most mines also have surface risks such as processing plants. Major risks could be any that have the potential to halt mining and production for a long period of time. This could include failures of machinery and equipment, or if a mine face collapses. With business risks, mines need to consider government and legislation changes, complying with environmental legislation, as well as commodity prices and exchange rate changes.

Rock engineer: The biggest risk when insuring mines is the unknown. It is on this that all of the decisions regarding the establishment of the mine are based and this represents a significant risk. You can imagine what the impact would be if a company was to sink a shaft, costing billions, only to find that the deposit is not continuous underground, which may mean that the shaft has to be abandoned.

What specialist knowledge do you think is needed when it comes to insuring mines?

RE: I believe the specialists would have to include one of each of the following: the mining engineer, geologist, rock engineer, mechanical engineer (engineer in practice on the mines, sometimes an electrical engineer), accounting personnel and the input of an actuarial scientist.

What requirements need to be met before you can insure?

JM: • A good understanding of the operation, and identification of key risks and the potential losses that could arise from these. This is normally achieved by a site visit by one of our specialist mining risk consultants.

• There needs to be a risk management programme in place.

• An understanding of any previous loss incidents and what mitigation measures have been implemented to prevent future losses of a similar nature.

• Accurate property damage valuations, based on new replacement value.

• A projection of estimated revenue to be insured.

• The ability and the appetite of the client to bear risk. Insurers are not prepared to cover ground-up losses, and this is also not cost effective from the client’s point of view.

What is the biggest mining disaster you’ve ever had to deal with?

JM: Globally, Marsh is very involved with the mining losses resulting from the Queensland floods. Locally, we have dealt with a number of major losses such as seismic events and shaft infrastructure damage. The biggest loss

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was in excess of US$ 100 million. We have also dealt with a number of smelter losses, the largest in excess of R600 million.

What [knowledge] gaps and exclusions exist when it comes to insuring mines?

RD: Only a limited insurance market understands these risks and can write this type of cover worldwide. These underwriters tend to limit their cover or potential loss exposure, especially when assessing underground mining risks. Fluctuating commodity prices are a concern in the mining industry, especially when a claim arises. This can be overcome if the policy is structured correctly at placement.

JM: From an underground perspective, there has to be physical damage. While the plant, machinery and infrastructure underground are insured, the actual hole in the ground is not. Usually the biggest portion of any claim is the resultant loss of profits and the physical damage is the trigger for this.

Flooding of an underground mine is usually not covered unless the water enters the mine via a man-made surface opening. For open pit mines, high wall slip is excluded, unless it damages plant and equipment or permanent access roads. It is important for clients to be aware of the coverage the policy provides.

Is equipment stolen in the mines covered?

JM: Generally, the larger mining companies insure for catastrophe losses only, so most thefts are within the client’s retentions (deductibles). The exception to this would be theft of product, especially precious metals, which is insured separately.

RD: Our recommendation is that mining companies take out a bespoke property all risk insurance policy that will cater for theft and the consequences thereof (i.e. copper cable theft and the implications due to site stand-down time until electricity is returned after the event). A good risk management plan will include mitigating measures to prevent these commonly recognised risks.

Have you ever been involved in an incident where you anticipated a mine disaster that could have been prevented but wasn’t?

RE: I have seen accidents which might have been prevented if the proper advice was heeded. It’s the nature of mining that problems will occur, it’s just a question of how well you anticipate them, communicate their possibility and deal with the consequences. I am not implying that accidents should happen, it can be prevented, but things do happen on a mine that you cannot anticipate. If you manage mines properly and responsibly, there is almost always a way of dealing with accidents.

Mining in Africa at a glance Area: 30 221 532 square kilometres Population: 922 000 000 (estimated 2005) Mineral resources: Bauxite, coal, cobalt, copper, diamonds, gemstones, gold, iron ore, lead, nickel, oil, salt, silver, tin, uranium, zinc Factoids: • The Central African Copperbelt extends from Zambia into the Democratic Republic of Congo. The Copperbelt is one of the world’s greatest metallogenic provinces, containing over 30 per cent of the world’s greatest reserves and over 10 per cent of copper reserves.

• South Africa is one of the world’s largest producers of gold and diamonds.

• In Botswana, the diamond industry accounts for one third of the gross domestic product (GDP), 45 per cent of government revenue and 75 per cent of export earnings.

• Mozambique has thousands of artisanal workers mining for alluvial gold and gemstones.

Information taken from http://africa.infomine.com

Mining accidents, fatalities and average number of shifts lost per accident 2010

2009

2008

2007

2006

2005

2004

Number of accidents

48

40

61

83

44

50

44

Fatalities

0

2

0

2

1

2

0

Shifts lost per accident

23.85

325.43

19.48

167.13

160.86

259.08

23.50

From the 2010 Annual Review of the Chamber of Mines of Namibia

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Prepare for life’s certainties We all know there are certain inevitabilities in life, inevitabilities that can be milestones or millstones.

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• Stocks

Bulls vs. Bears Our man in London, Clem Chambers, CEO of ADVFN, will be casting his expert eye over global markets and events on a monthly basis. He will investigate how insurance companies listed on the London Stock Exchange have fared over the month and provide insight and analysis into what the future holds.

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FTSE: UKX (FTSE 100 (GBP)) Open: 5157.81 High: 5287.42 Low: 5157.81 Cur: 5283.67 (+ 126.83/+02.40%) 6500

6000

5500 5283.67

5000

Oct 10

A

Jan 11

Apr 11

Jul 11

Black = FTSE100 Grey = FTSE 350 Life Insurance Index Red = FTSE 350 Non-life Insurance Index

ugust proved to be a volatile time for global markets. Standard and Poor’s (S&P) threw a grenade into the bunker of the world economy when it announced a downgrade on the US’s long-term credit rating, leading to daily swings of up to 13.3 per cent on the FTSE100.

Later in the month, a Euro debt crisis hit Europe. French President Nicolas Sarkozy and German Chancellor Angela Merkel said a lot about nothing. The market fell heavily and fears grew around the Swiss Franc, a safe haven currency that was growing too strong against the Euro. The Swiss Government intervened by putting 80 billion Swiss Francs into its banks through fear of a recession due to concerns that a strong Franc would impact exports.

Since then the world markets have bounced back. After a Dow low of 10700, the Dow Jones index has clawed back over eight per cent and Brent oil remains at over $110 a barrel.

Inevitably, August’s volatility fed its way into markets and impacted upon insurance companies on the LSE Main Market. Looking at the fate of the FTSE life and non-life insurances indexes demonstrates just how dramatic a month it proved to be.

When the markets are this volatile, even profitable companies are vulnerable to outside market forces. Life insurer Prudential, which had announced a first half IFRS operating profit of £1.06 billion, fell and rose in relative parity to the FTSE100 by suffering the same blows from external events and announcements.

There have been some positive figures coming from the insurance sector. On the day the FTSE100 slumped in August, just two companies saw a rise in their share price, one of them was Old Mutual. Announcing its 2011 interim results in early September, Old Mutual posted an interim dividend increase of 36 per cent to 1.5p and profits up 15 per cent at £845 million, compared to Hiscox’s interim results of a 0.1p dividend increase and a £85.6 million pre-tax

loss. Old Mutual ended August at 5554.37, ahead of the FTSE100 at 5425.53 and Hiscox at 5099.62, with all three dipping down at the beginning of September.

During the chaos, insurers on the Alternative Investment Market (AIM) fared better than the Main Market, suffering less of an impact from the market volatility. Abbey Protection remained steady between 81.262 at the start of August and 81.525 at the end; the THB group, while taking a hit following the crash, recovered ending the month on 116.125.

Following the announcement that the US did not create jobs in August, falls on the LSE in early September were seen. A giant sell programme ran riot in the markets in August and chances are it has been switched live again. If this turns out to be the case, September will be bloody.

Looking forward, the key all-clear signal for market investors will be when the volatility suddenly drops off and market swings to normal.

This may be many months in the future. When it does, it will be a good time to invest as buying after chaos is always a good strategy.

However, the market is still far from regaining its natural balance and, until such time, the market will lurch up and down and a falling trend is highly likely.

“Inevitably, August’s volatility fed its way into markets and impacted upon insurance companies on the LSE Main Market.”

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Man Down:

Why Key Man Insurance is a Must

• Key man insurance

Business owners, particularly SMEs, could be underinsured when it comes to key man insurance as well as death and disability cover. Angelique Ruzicka and Bianca Wright get to the bottom of why these types of policies are not often discussed with owners or taken up by them and explore how brokers could give the best advice.

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W

hen it comes to insuring a business, owners generally acknowledge the importance and value of insuring the company ’s contents, products and perhaps even the building in which the company operates. But sometimes not enough thought goes into ensuring that the business can carry on as normal should one of the partners, directors or key personnel die or become disabled. So often, key person insurance as well as life and disability cover isn’t front of mind. This appears to be a global problem and was laid bare in several business surveys conducted by UK-based insurer Legal and General (L&G), which questioned around 1 000 members of the British Chamber of Commerce back in 2009 and the Institute of Directors (IoD) in 2011.

The findings of the 2009 study revealed that the business protection gap stood at around £1.1 trillion and that almost half of businesses had no formal agreement to establish what would happen in the event of death of a business owner. Two years later in a survey conducted through IoD members, L&G produced similar findings with more concerns. Clare Harrop, head of specialist protection at L&G, said in the report that the protection gap remains at least as big as it was in the survey conducted in 2009.

Worryingly, the 2011 survey found that a third of respondents had not taken out cover to protect themselves or the business in the event of the death or serious illness of a key director or business owner. It was found that 58 per cent of respondents have no formal agreement to cover this situation and 41 per cent have no provision for protecting cash flow.

Few have a clear picture of what would happen if a key individual were to pass away with 37 per cent assuming that the remaining shareholders would buy the business. But 33 per cent have no provision to protect shares and 21 per cent believe that the company would not survive such an incident. Smaller companies were most vulnerable with 60 per cent of firms with fewer than 10 employees thinking the business would disappear within a year in the event of a key director dying.

Employees from bigger businesses, however, were more confident that the business would

not fail, with 98 per cent of companies with more than 250 employees believing the business would remain open.

Locally, there’s low take up Back in Africa, there is also a low take up of cover in the event of death or disability. The Life Assurers Association of Namibia (LAAN) does not keep statistics on the uptake of key man insurance, but general consensus is that it is relatively low. “Business assurance, although an established concept, is not a widespread practice yet. It is generally the more established medium-size enterprises with two to four members who make use of this type of transaction. Business insurance is, however, strongly marketed by financial advisers and not something that is generally initiated by business owners,” said Irvin GW Möller of Sanlam Life Insurance Namibia.

A survey conducted by high-tech market research company World Wide Worx in 2009 found that SMEs see insurance, such as key man agreements, as optional in times of financial stress, such as during a recession.

Only 56 per cent of SMEs took out key man insurance in 2009, down from 70 per cent in 2008.

However, cash flow problems are not the only reason for low take up of insurance products. Death and disability products are not always top of mind for brokers when they advise business clients. Brokers can therefore play an important role in making businesses aware of the necessity of this type of insurance.It’s the SMEs that are at most risk when it comes to the death or disability of a key director or worker in the businesses.

“Owners of small to medium-sized businesses often take on business risks in their personal capacity, exposing both the business and themselves to loss when an owner, partner, key shareholder or member dies, leaves or becomes disabled. This threatens the continuity of the business for co-owners and the liquidity or financial soundness of their own estates,” said Somerset Morkel, wealth management consultant, Alexander Forbes Financial Services. “The current legislation around company owned-type insurance is very favourable, however, due to the size and nature of SMEs as well as the structure and requirements for key man insurance, it is not something that is aggressively marketed or taken up by SMEs,” said Möller.

Ideally business owners should have contingency plans in place should something happen to a key director, and one of the most common and cost-effective ways of protecting the business is through a buy and sell agreement. This is either an addendum (or part of an agreement) between shareholders, members or partners, that governs what happens in the event of death or disability of one or more of the owners. Importantly, it creates an obligation on the part of the deceased estate to sell the shares of the deceased to the surviving owner at a predetermined price. In turn, it obligates the surviving owners to buy the shares, creating peace of mind for both parties.

Buy and sell assurance, which is effectively life and disability cover tailor-made for business owners, can play a crucial role in cementing and funding this sort of agreement. Not all business owners, especially those from small- to medium-sized businesses, would have the cash at hand to purchase their deceased or disabled partner’s share of the business. “Buy and sell assurance is taken out (and owned by) the business owners to create the cash to allow the surviving owners to pay the money specified in the buy and sell agreement. Policies are always taken out on the lifeof-another basis. To explain: if there are three business owners, A, B and C, then A and B will take out a policy on the life of C, etc. Premiums will be paid by the owners in proportion to their shareholdings,” said Morkel.

Most life assurance companies offer products which can be used in this space. However, brokers need to ensure that business owners are aware that they are comparing like with like particularly when it comes to disability cover warned Morkel. “Disability policies pay out in different eventualities and business owners could have more expensive disability insurance that covers anything. There are other disability policies that talk about total disability and different types of disability – you can also get severity-based disabilities.

Buyers must beware and understand that they are not always comparing apples with apples.”

Offering businesses key man insurance is also overlooked. This is taken out by the business to secure the company ’s prospects in the event that one of their extremely skilled, and not easily replaceable, employees becomes ill, dies or disabled. “Very often companies don’t think about it,” said Morkel. “They will insure the tangible stuff like their buildings or contents but not their key experts. In the absence of key man assurance, the business could face severe cash flow problems created by the loss of special skills.

In some instances, this could lead to a closure of the business.”

insurance in the form of buy and sell arrangements,” said Möller. It is important to ensure that the policy is structured correctly.

Structuring the policy incorrectly is not unheard of. “I’ve had a client whose brokers structured a policy incorrectly. The implication was that while the company thought it was getting the R2 million, it was in fact going to go to the estate of the person whom they were getting cover for. So it’s more complex and you need the right skills,” said Morkel.

The right training in the field is vital for insurers and brokers wanting to operate in this space. Brokers should also be careful of mis-selling. “Financial advisers must ensure that they have done a proper financial needs analysis for both the business and its members, to ensure that the product fits the solution at the time it is required,” Möller cautioned.

“Disability policies pay out in different eventualities and business owners could have more expensive disability insurance that covers anything.”

“Like all other insurance products, businesses should ensure that a proper financial needs analysis has been carried out, that the business and/ or members can afford the investments, but most importantly that it needs the insurance depending on the cycle in which it finds itself; and that they understand the legal implications for their personal estates as well as for the business in terms of funding of the insurance,” he added.

Some have got the basics wrong, too. “The other thing we often find is that the policy is in place but there is no buy and sell agreement. Or you have a buy and sell agreement in place but not signed,” added Morkel.

Getting the right legal expertise is important and experts warn that brokers should not believe they are able to structure the buy and sell agreement without the right qualifications. The company lawyers are better positioned to draft such an agreement.

Providing the right advice There is a lot of potential for brokers thinking of entering this market and selling insurance to SMEs. In South Africa, for example, there are around 650 000 active registered companies according to World Wide Worx. But possessing the specialist skills needed to provide advice in this area is paramount.

“Buy and sell insurance is a more known concept, and more businesses generally understand the need for ‘estate planning’ for businesses, and therefore make provision by way of business

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• Aviation

The high price

I

of aviation cover

f you were to ask a broker or insurer where they ’d prefer to insure an aircraft in Africa, they ’d probably say South Africa.

The reason, according to data from Alexander Forbes, is that there are more risks attached to insuring an aircraft outside of South Africa. Because of the extra dangers it’s more expensive to insure aircraft based or operating in Africa than to insure them in South Africa. For example, insuring a Beechcraft 1900 with 19 passenger seats would receive a hull rate of around 1.2 per cent a year in South Africa; underwriting that same plane based in Sudan could receive a hull rate of anywhere from three per cent.

also a challenge due to the lack of facilities, expertise and availability of spare parts,” said Penderis. Landing on poorly constructed or maintained runways could increase the chance of hull damage; therefore, planes flown in Africa fetch a higher premium.

Alison Penderis, senior aviation broker from Alexander Forbes, explained that the difference in price is almost entirely attributable to the conditions and areas in which many African aircraft operate. The way in which planes are used and how planes fly in Africa can differ as well. It’s more dangerous as plans are often required to land on grass, dirt or broken runways. “There is usually no, or very limited, flight control at the smaller airfields. Aircraft maintenance is

Cover for loss of use will also be expensive.

“Loss of use increases since the delays in repairing and servicing aircraft result in loss of earnings as aircraft spend more time on the ground. Even though deductibles are fairly standard, insurers will request larger deductibles if an area of operation is particularly dangerous. This is because of the potential costs involved in getting a damaged aircraft from a remote or inaccessible location to where it can be repaired,” said Penderis.

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Hull premiums are subject to increases if the planes are not stored in hangers or regularly exposed to rain, wind and hail. Owners operating in areas where violence and political unrest are common will see a hike in their premiums. “Personal accident cover will require higher premiums due to the inherent risks posed by the environment as well as limited access to good medical facilities,” added Penderis.

“Loss of use increases since the delays in repairing and servicing aircraft result in loss of earnings as aircraft spend more time on the ground.”

Penderis added that it is essential to understand the specific risks on a caseby-case basis. “Knowing the different conditions and circumstances under which aircraft operate in Africa enables an accurate identification of the real risks that each individual aircraft faces. This, in turn, allows the risk to be matched with the risk appetite of the right underwriter at a suitable price.

In short, knowing and understanding the particular risk that each individual aircraft is facing, as well as those that it isn’t, will ensure that only the right risks are covered and the costs of underwriting aircraft in Africa are kept to a minimum,” she concluded.

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• Country Profile

Inside story the Namibian insurance landscape

African economies are developing rapidly and making their presence felt in the global economy. Yet many of them shy away from the public eye and there is much that we don’t know about how our neighbours function, especially those that are further afield.

RISKAFRICA has taken up the challenge to investigate and report back on the insurance and business landscape in Africa, profiling a different country for each issue. This month Lize van Coeverden puts the spotlight on Namibia.

The Namibian economy does not resemble its dry, desert landscape. Numerous multi-national corporations and mining giants have staked their claims here and utilise the abundance of natural resources and the industries they create to build a lively economy. This also makes for a healthy insurance industry, and an environment inviting investment and the establishment of new enterprises.

“Namibia’s active economy is supported by a flourishing insurance industry with many South African and international insurers staking their claims here with associations.”

Land of opportunity In 1990, when Namibia gained independence from South Africa, a strong infrastructure, a market economy, rich mineral resources and a relatively strong public administration were already in place. It has demonstrated economic growth even during the recent global economic downturn, with reports that the GDP grew by 4.8 per cent in 2010 (source: World Bank). Namibia has proven itself to be attractive to foreign direct investment and well-established in the global commodities industry, some of its chief exports being diamonds, copper, gold, zinc, lead, uranium, cattle, processed fish and karakul skins.

Namibia’s active economy is supported by a flourishing insurance industry with many South African and international insurers creating a presence here and becoming members of associations, such as Namibian Financial Institutions Supervisory Authority (NAMFISA) and the Namibian Insurance Association (NIA) , which help to keep the industry in check. The country also has its own state-owned reinsurance company – Namibia National Reinsurance Company.

Strong and co-ordinated counter-cyclical fiscal and monetary policies have helped to shield the country ’s economy from the effects of the recession and with policies such as the Transformation of Economic and Social Empowerment Framework (TESEF) on the cards, Namibia has shown that it isn’t afraid of change and has a strong

interest in maintaining and developing its economic prosperity and the wellbeing of all stakeholders and individuals.

RA: It is an advantage since there is a specific privately owned business segment in Namibia which prefers to be advised in German.

RISKAFRICA asked three figures from the industry for some insight into the Namibian insurance landscape.

JH: It’s not critical, but it may help.

RISKAFRICA: How difficult is it for a new insurer/broker to enter the market in Namibia?

HS: Potential insurers are required to submit applications to NAMFISA with all the applicable documentation plus the necessary capital deposit. Brokers are also required to submit an application to NAMFISA containing specific criteria. In principle, if you meet the necessary legislative requirements, you will not have a problem entering the market whether as an insurer or a broker.

RA: Not difficult at all. At this point no qualifications are required.

RISKAFRICA: Is it expensive to operate a business in Namibia? Is the cost of office space and telecommunications high compared to South Africa?

HS: Running costs in Namibia are far higher than in South Africa and the main reason is that many services are being sourced from SA. RA: We can only comment on rent which, in Windhoek, is more expensive than in most main cities of SA. JH: Yes it is. A lack of qualified staff is a problem here and existing staff is very expensive.

RISKAFRICA: Who are the major players in the industry against which new companies will need to compete?

JH: From an authority point of view it is relatively easy, provided that you have a Namibian office and staff.

RISKAFRICA: How important is it to be able to conduct business in German?

HS: English is the official language and most business is done in English or Afrikaans. To speak German is not a necessity but it will obviously enhance client service if you are able to speak German.

HS: Sanlam/Santam, Old Mutual/Mutual & Federal, Hollard, Western National Prosperity Guardrisk and Corporate Guarantee to mention a few.

RA: As far as short-term insurers go, there are (in no particular order): Hollard Insurance Company, Mutual & Federal Insurance Company of Namibia Ltd, Santam Namibia

RA = Richard Ashton, CEO, Glenrand MIB Namibia • HS = Hester Spangenberg, CEO, Investmed Namibia • JH = Jurgen Hellweg, managing Director, Western National •

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Limited, Prosperity Insurance Limited and Western National Insurance Company Limited. The major brokers will be Aon Namibia, Alexander Forbes Risk Services, Marsh (Namibia) (Pty) Ltd, Welwitschia Nammic Insurance Brokers, FNB Insurance Brokers Namibia (Pty) Ltd and Standard Insurance Brokers Namibia.

JH: Hollard, Santam, Mutual & Federal and soon Regent.

Pointers from the World Bank In June 2010, the International Finance Corporation of the World Bank Group (IFC) completed a project to collate information on the life cycles and the cost and time frames of setting up a new small- to medium-sized business in 183 economies around the world.

Careful planning is essential and to successfully start your business in Namibia, they advise that an entrepreneur or company expanding operations into Namibia should be prepared to jump over the following legal and administrative hurdles.

1. Obtain the approval for a company name from the Registrar of Companies.

The Registrar of Companies, located at the Ministry of Trade and Industry, will reserve a company name for 60 days if it is available.

2. Pay the registration fees and buy revenue stamps at the Receiver of Revenue.

Certain fees for the registration of a company can or should be paid to the Receiver of Revenue. Proof of payment of such fees, additional fees, annual duty, or other monies must be affixed to the relevant form or documents submitted.

or since 27 November 2000, and whose taxable turnover in any 12-month period exceeds or is likely to exceed ND 200 000 must apply to register for VAT. 8. Register for PAYE with the Receiver of Revenue.

The registration for pay-as-you-earn tax is separate from registration for VAT, but both are registered by the Receiver of Revenue at the Ministry of Finance.

9. Register workers with the Social Security Commission.

A percentage is deducted from all employee salaries, of which the employer pays the same share, with a maximum of ND 27.00 and a minimum of ND 2.70.

10. Register workers with the Workmen’s Compensation Commission.

An employer must file an application with the Workmen’s Compensation Commission for all employees earning less than ND 72 000 a year, with special circumstances for those employees earning above that amount. The annual amount payable is based on a wage rate scale and on the company ’s industry.

The good news is that once your business is up and running, the IFC rates Namibia 69th in the world for ease of doing business.

Quick facts about Namibia

3. Hire an attorney to register the company with the Registrar of Companies and obtain the certificate to commence business.

Section 63 of the Companies Act stipulates that the memorandum and articles of association must be filed and uplifted by a subscriber or by a local accountant or company attorney and the required documentation must be filed before the Registrar will issue a certificate to commence business.

The Registrar of Companies automatically forwards a copy of the memorandum and articles of association to the Receiver of Revenue, which in turn registers the company as a taxpayer and issues a tax identification number. Taxation of 35 per cent of all profit is payable to the Receiver of Revenue.

4. Deposit the initial capital in a bank account.

No legal requirements are mandated for the minimum start-up capital for a private company; however, the funds must be paid into a bank account.

5. Apply for a town planning certificate.

The municipality carries out municipal inspection and approves business premises occupancy by reviewing applications for, and issuing, a town planning certificate.

6. Apply for a trading licence from the local municipality.

A health certificate must be obtained from the Health Division.

7. Register for VAT with the Receiver of Revenue at the Ministry of Finance.

Capital: Windhoek Official language: English Other languages: German, Afrikaans, Bantu and Khoisan Government: Multi-party democratic Republic Head of State: President Hifikepunye Pohamba Date of independence (from South Africa): 21 March 1990 Area: 824 292 square kilometres Population: Approximately 2.2 million (from the Namibia Tourism Board)

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NEWS Nigeria and Egypt could overtake South Africa For a long time, South Africa was the economic forerunner in Africa, accounting for around 23 per cent of Africa’s GDP. Recent growth forecasts by Coface, however, have shown that a number of countries are competing for the top position in Africa, most notably Nigeria and Egypt. Nigeria is expected to assume the top growth position in Africa by 2025, and even now represents substantial competition for foreign direct investment (FDI).

The relative stability of many African economies during the global economic crisis, interesting infrastructure projects, the mobilisation of natural resources

for export and the possibilities of new consumer markets, have attracted muchneeded FDI to African countries. Ethiopia, Chad, Mozambique, Angola and Rwanda have all experienced significant growth and are now among the fastest growing economies in the world over the last 10 years. Going forward, it is predicted that Ghana, Zambia and Tanzania will join this list.

South Africa’s main competitive advantage is its stable environment. Other African countries are still in need of substantial work to achieve and maintain political and social stability. The availability, accuracy and transparency of corporate information

in South Africa, along with a functional legal and judicial system and world-class business infrastructure in the form of the banking sector (the largest employer after government), set South Africa apart from most of its African counterparts.

Democratic reform and a focus on corporate governance in other African economies, such as Kenya (which now has more advanced legislation in terms of carbon credits than South Africa), Zambia, Tanzania and even Nigeria, are narrowing the competitive advantage South Africa has in this area and is setting the stage for South Africa to be dethroned as the gateway to Africa.

News analysis: is microfinance right for Africa?

Since the idea of microfinance – lending small sums of money to poor people – was pioneered in Bangladesh in the 1970s, this type of finance took the world by storm. Microfinance has provided multitudes, typically from low-income households, with access to finance where traditional financial institutions would not ordinarily provide assistance.

But offering these products is not so straight forward. In India, controversy has arisen over a large number of suicides resulting from over-indebtedness and led to a political crisis in India’s fifthlargest state. Now the question remains whether microfinance has a significant role to play in the development of African economies, where access to traditional financial institutions and products are still limited.

seen the world’s most rapid growth in the use of mobile money.

Launched in 2007, the service known as M-Pesa had more than 13 million customers by the end of 2010 who are able to use their mobile phones to make payments and transfer money. Customers can now earn moderate interest on mobile bank accounts. Farmers can insure their crops against adverse weather conditions, with payouts made directly to their mobile accounts if weather conditions indicate crop failure.

There is much space for development though and criticism of the industry is still significant.

Take up of microfinance products has been huge though, with microfinance institutions in sub-Saharan Africa acquiring 16.5 million depositors and 6.5 million borrowers by the end of 2008. Today, microfinance institutions offer a variety of products.

The spread of mobile phones, in particular, has transformed the sector, extending it to previously unbanked areas in Cote d’Ivoire, Ghana, Mali, Senegal and elsewhere. Most famously, Kenya has

Absa acquires Mozambique’s Global Alliance In August, Absa announced that it had reached an agreement to acquire 100 per cent of the share capital of Global Alliance Seguros SA (Global Alliance), a prominent insurance business in Mozambique. Global Alliance has been a provider of non-life insurance in Mozambique for over 20 years and generated premium income of over US$ 25 million in 2010. The company also recently launched a life insurance offering. Willie Lategan, chief executive of Absa Financial Services (AFS), said: “We are excited about the acquisition of Global Alliance as this forms part of Absa’s Africa expansion strategy. We recognise that the African continent offers exciting prospects and we will continue to pursue opportunities beyond our borders where we are confident that we will generate acceptable returns on our investments.”

Absa already has a presence in Mozambique, through its majority stake in Barclays Bank Mozambique (Barclays Mozambique). The acquisition of Global Alliance will enable Absa to offer a full suite of insurance products and services in the Mozambican market and will also allow Barclays Mozambique to strengthen its value proposition to banking clients.

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Kenyan insurer sees 75 per cent increase in profits

Namibia commits to encouraging local investment Deputy Minister of Finance for Namibia, Calle Schlettwein, appealed to the retirement fund industry to contribute more to economic development through increased investment in the local economy, at the Retirement Funds Institute of Namibia (RFI) annual conference in August. He said that it was ironic that foreign direct investment (FDI) in the country had increased in recent years while local savings were being used to invest elsewhere.

Schlettwein added that the Pension Funds Amendment Act legislation, which is expected to come into force this year, proposes amendments to regulations constituting a national effort

to mobilise domestic resources to finance productive investment, while retaining the business imperative of fund management. Namibia’s capital outflow from institutional investors alone is estimated at N$ 27.4 billion in 2010 and the new regulations are meant to curb this excessive outflow at the expense of local economic development.

The new regulations give the minister the powers to prescribe the minimum and maximum amounts that a pension fund can invest in Namibia’s local economy or in any particular asset class, and retirement funds will be subject to penalties for non-compliance.

Uganda: Working towards sound and stable insurance The Uganda Insurance Commission has announced plans to publish a public list of insurance companies and brokerage firms that default on payment of claims in an effort to promote high ethical standards and transparency in the insurance industry in Uganda.

Insurance is undoubtedly an industry set with immense scope for growth in Africa. In Kenya, east Africa’s biggest economy, only about seven per cent of the 40 million people are covered by any form of insurance.

It is therefore not surprising that Kenya’s CFC Insurance Holdings has seen a 75 per cent increase in pre-tax profits arising from growth in premium revenue. The company comprises of Heritage Insurance and CFC Life, both of which were previously units of CFC Stanbic Holdings and listed on the Nairobi Stock Exchange in April. The company has since reported that for the first six months of 2011, pre-tax profit has risen to 441.81 million Kenyan Shillings (Ksh), approximately US$ 4.68 million.

Gross premium revenue rose from Ksh 1.78 billion to Ksh 3.10 billion in this period with total income rising from Ksh 2.15 billion to Ksh 3.32 billion.

The company reported its unaudited results showing strong resilience in a market characterised by a declining stock market, rising interest rates as well as a number of internal operational changes that have taken place. South Africa’s Liberty Holdings, majority-owned by Africa’s biggest bank by assets, Standard Bank, has a controlling stake in the company.

The Commission, established in 1996 with the mandate to supervise and regulate the insurance industry in Uganda, has in the past 15 years taken numerous steps to improve the industry. These include drafting insurance regulations and assisting with the effective implementation of the Insurance Act. The move to publish a list of non-paying insurers follows numerous complaints from the public that a number of companies were failing to pay claims, thereby tarnishing the image of the insurance industry in the country.

Support for rehabilitation centre in Botswana The Thuso Rehabilitation Centre in Maun, Botswana, recently became one of the biggest beneficiaries of donations from the Japanese Embassy and Botswana Insurance Holdings Ltd (BIHL). The Japanese Government donated a classroom and cold room, while BIHL donated a Toyota Quantum mini-bus.

Botswana’s Minister of Transport and Communications, Frank Ramsden, speaking at the ceremony to hand over the donations (22 August), praised both the Embassy and BIHL, for not ignoring the plight of people in Botswana despite the hardships in Japan and the current economic downturn experienced by financial institutions. BIHL’s acting chief executive, Gaffar Hassam, reiterated his company ’s commitment to giving back in a meaningful way to the communities that support their business. The Japanese Embassy ’s Charge d’affaires, Hisashi Nakatomi, said that his government was able to fund the Thuso projects through their Grant Assistance for Grassroots Human Security Projects scheme and that it was an honour to hand over vocational skills training facilities and equipment to the centre for the benefit of people with disabilities in Maun and surrounding areas.

The Thuso Rehabilitation Centre was established in 1988 and provides physiotherapy, occupational therapy and speech therapy to persons with disabilities.

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Santam rebrands

good and proper Santam has announced its rebrand in Namibia and Angelique Ruzicka interviews CEO Riaan Louw about the campaign. She also reports on the success of the rebrand in neighbouring South Africa and finds that some competitors were not willing to sit idle while Santam boasted about its progress.

S

antam unveiled its new brand positioning in Namibia, complete with modern logo, corporate identity and slogan ‘Insurance Good and Proper’ in August. The company said its rebrand incorporates a lot more than just a facelift, saying it consolidates its leadership position and unclutters its messaging in the insurance market.

Riaan Louw, chief executive officer of Santam in Namibia, said the response so far from the industry had been very positive. “We have only just launched the above-the-line campaign and the initial feedback, especially from intermediaries, has been very positive.

He added that it was too soon to tell how

successful the campaign had been. “We are certain that the refreshed brand will communicate our absolute commitment to integrity; to certainty; to our single-minded focus on short-term insurance; to excellence; and to delivering insurance with stature.”

In a thinly veiled swipe at direct insurers, the company pointed out that a large number of competitors have entered the market in recent years, which has exposed consumers to a myriad choices, created confusion and eroded the value of the short-term insurance industry.

“At the core of our success as a business lies a single-minded focus on excellence,” said Louw. “We have always been and will remain, fully committed to the financial security of clients; mutually profitable relationships with brokers; and the wellbeing of staff. Ours is a

Santam announced its rebrand ambitions in South Africa in May with an above-the-line campaign on radio, print and television featuring the Academy Award-winning actor Sir Ben Kingsley.

The advert, featuring Kingsley walking on a beach in Cape Town, appealed to consumers to check their policies, warning them that they may not be properly insured with their present insurance company.

However, Santam’s campaign hit a setback after competitor Dial Direct retaliated with an advert mocking Santam’s advert. It featured ‘hand heads’ in a similar suit to Kingsley, walking on a

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solid offering with a track record unmatched in Namibia.”

Louw said Santam is the biggest insurer in the Namibian market with a 30 per cent share.

“We have grown the market share by four per cent in the last four years. Santam was initially perceived as only a personal lines short-term insurer, but that perception has vastly changed with the bulk of our business now in the commercial and specialist areas.

We have also seen excellent growth in the new or entry level segment of the market.”

When asked whether Santam has any ambitions to expand anywhere else in Africa, Louw said: “Santam continues to make good progress in India and Africa despite delays on completing transactions in Africa. Here we are cautiously entering new markets in the technical partner capacity.”

beach with the same dreary weather unfolding in the background.

Dial Direct’s advert was aired at 17h00 on a Friday and flighted continuously over the weekend. It became an instant hit on YouTube and set the social media chat rooms ablaze.

But as competitive advertising in South Africa is forbidden under South African law, it was no surprise that Dial Direct came under fire. The advert was also challenged by Santam’s legal team and an interim order to stop the advert was issued. At the time of going to print, Dial Direct and Santam have both refused to comment further on the matter.

• Advertorial

Bold Brand Shi f t for Mutual & Federal “The rejuvenation of the brand, which Mutual & Federal embarked on in November 2010, is an integral part of the company’s three-year strategic programme.”

I

n a bold move, Mutual & Federal, a member of the Old Mutual group, announced in August that it has refreshed its brand to reflect the evolution of the company and the insurance market.

“Our brand refresh was a direct response to research which we had conducted into perceptions of the Mutual & Federal name and brand identity,” said Peter Todd, managing director of Mutual & Federal. “The research revealed that, while the Mutual & Federal brand was well-established and entrenched, it lacked recognition and relevance for the younger market and emerging markets.

This was something which we were eager to change.”

our stakeholders. This is why trust is a core value for Mutual & Federal, which we build on a dayto-day basis, be it in settling claims or developing market-leading products.”

This emphasis on relationships and trust is clearly reflected in the brand’s repositioning around the broker. Todd elaborated, “Mutual & Federal recognises that the advice given by our brokers has become vitally important in an increasingly crowded insurance market space. Guidance from brokers is key to help enable our clients to navigate their way through Namibia’s changing insurance landscape. In our logo, we illustrate this broker-centric approach with an accentuated ampersand between ‘Mutual’ and ‘Federal’ to depict our relationship marketing thrust.”

The rejuvenation of the brand, which Mutual & Federal embarked on in November 2010, is an integral part of the company’s three-year strategic programme. The aim of this programme is to ensure that Mutual & Federal becomes the market leader in short-term insurance. One of the ways to achieve this goal, according to Todd, is to focus on partnerships.

Another relationship which Mutual & Federal highlights is its link to the parent company, Old Mutual. The distinctive green of the logo, along with its font, are now aligned to the group’s brand identity. Being 100 per cent owned by the Old Mutual Group, it was important for Mutual & Federal to acknowledge its connection to its parent company while still maintaining a distinctive identity.

“For Mutual & Federal, the most important part of our business is relationships; relationships with our brokers, our customers, our reinsurers and

A further significant change in the logo which supports the repositioning of the Mutual & Federal brand is the exclusion of Namibia’s Spitzkoppe

Mountain in the background. “As our company expanded into the rest of Africa, its relevance waned as it was too region-specific. In order to ensure that the Mutual & Federal brand is seen as a unified offering across all of Southern Africa, we believed that it was essential to have one visual identifier which could apply to all our regions,” explained Todd.

This does not mean, however, that Mutual & Federal is abandoning its heritage and current customer base. “The rebrand is all about building on our current offerings. Mutual & Federal has been a constant in the insurance industry for 180 years, which means we have secured the trust and confidence of millions of South Africans and Namibians over the decades. We are not looking to change our core values.”

Perhaps the biggest testament to the shift in focus for Mutual & Federal is the addition of the payoff line, ‘Protecting what’s important to you’. “It is the ultimate acknowledgement of our promise to our customers and brokers and the fact that they all have different individual needs. What’s important to them is important to us,” emphasised Todd.

“The repositioning of the Mutual & Federal brand reflects our renewed commitment to delivering unrivalled personal advice and service to each and every one of our customers, through fostering close relationships with our strategic partners.”

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USA Hurricane Irene’s hefty price tag Hurricane Irene’s damage may have been small compared to what other storms have inflicted (especially those experienced on the west coast), but she still left behind vast destruction of property, with early estimates of the damage set at between US$ 2 billion and US$ 7 billion.

Unfortunately, due to a lack of flood insurance coverage in the northeast of the US, and a flawed federal insurance programme, a great chunk of this damage will come out of taxpayers’ pockets, reported the Los Angeles Times.

The state of Vermont is a good example: this state faces some of the worst flooding in its history and – according to one analysis of 2010 flood insurance data – could have as few as 3 600 federal flood insurance policies. That means people looking to rebuild will rely on pay-outs from the Federal Emergency Management Agency and subsidised loans from the Small Business Administration.

Those loans and pay-outs are unlikely to cover the cost of reconstruction as fully as a federal insurance policy would have.

In other states though, such as New York and New Jersey, which have hundreds of thousands of

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policies, much of the damage will be paid out of the National Flood Insurance Programme's coffers which is ultimately funded by taxpayers.

The National Flood Insurance Programme is the largest flood insurance provider in the nation, with US$ 1.2 trillion in covered property. The programme began in 1968 as a way to provide flood insurance to shield taxpayers from paying for policy owners in floodprone areas. But today, analysts surmise that the programme is more than US$ 17 billion in debt since the devastation of Hurricane Katrina and the storms that followed.

If the programme borrows from the Treasury to cover pay-outs for Hurricane Irene, it will deepen the programme’s need for a bailout, meaning US taxpayers will bear a greater brunt of the storm's damage on the Eastern Seaboard than they would have otherwise.

ASIA Asia Insurance Industry Awards finalists announced The annual Asia Insurance Industry Awards is in its 15th year and will take place on 31 October.

Judges have whittled down more than 500 entries and chosen the finalists. For the first time

in the history of the awards, the organisers have announced the finalists in each of the 15 categories: • Life Insurance Company BOC Group Life Assurance Co Ltd, Hong Kong Great Eastern Life Assurance Co Ltd, Singapore Samsung Life Insurance Co, South Korea • General Insurance Company Chartis Singapore Lonpac Insurance Bhd, Malaysia MS&AD Insurance Group • Educational Service Provider ANZIIF, Australia Micro Insurance Academy, India Singapore College of Insurance • Reinsurance Broker Aon Benfield Guy Carpenter • Broker Aon Benfield Guy Carpenter • Risk Manager Aviva Investors Asia Bharti AXA General Insurance; India Doug Caldwell from ING Insurance Asia/Pacific, Hong Kong • Innovation AIR Worldwide ING Insurance Asia Pacific and Life HK Macquarie Adviser Services, Australia • Service Provider AIR Worldwide BELFOR Asia

Crawford & Company, Singapore • Life Reinsurer Munich Re RGA Swiss Re • General Reinsurer Asia Capital Re Munich Re Swiss Re • Corporate Social Responsibility PT AIA Financial, Indonesia Cathay Life Insurance, Taiwan Samsung Life Insurance Co, South Korea • Green Company ACE Group HSBC Insurance • Technology Initiative Bravura Solutions, Australia eBao Tech, China NextIX, Singapore RMSI, India • Personality of the Year David Fried, group general manager and group head of insurance, HSBC Holdings Syed Moheeb Syed Kamarulzaman, president and CEO, Takaful Ikhlas Sdn Bhd Geoff Riddell, chairman for AsiaPacific, Zurich Financial Services Group Entries were drawn from big and small, old and new players from markets all over Asia, stretching from Australia to China and India.

The awards were launched in 1996 by Asia Insurance Review and The Review Worldwide to

recognise and salute excellence in the insurance industry.

AUSTRALIA National disability insurance initiative The Australian Government has conceived a new multi-billion Dollar insurance initiative targeting the nation’s disabled. The Victoria region has been chosen for this insurance plan which is targeted at the nations disabled. The National Disability Insurance Scheme (NDIS) will seek to provide highquality, long-term care for those who have significant disabilities regardless of the origin of the disability and will cost in the region of AU$ 6 billion.

The plan comes on the recommendation of the Productivity Commission, the government’s independent research and advisory board.

The commission conducted a study of the existing insurance industry and how it serves those with disabilities and, after an 18-month investigation, the Commission found the insurance industry lacking and the NDIS was conceptualised.

The initial stages of the NDIS will be implemented in Victoria in 2014 and will be funded by Commonwealth revenue as

opposed to drawing upon taxes levied on residents. The local government will be responsible for setting up and staffing an insurance agency which will oversee the programme. Pending the results of the initial testing, the programme may be expanded beyond the borders of Victoria.

an increase in motorists driving illegally without insurance.”

NORTHERN IRELAND

NORWAY

Cost of car insurance investigated

Lockton expands into Norway

Northern Ireland’s Consumer Council has launched a campaign to scrutinise and reduce the cost of car insurance.

Privately owned, international insurer, Lockton, has announced the establishment of its first branch in the Nordic region, with the opening of a new office in Norway.

Premiums across the region have reportedly increased by almost 73 per cent in the last two years, with younger drivers worst hit and typically paying more than double what someone in a similar position would have paid in 2009.

The council has requested that the Office of Fair Trading (OFT) grant it permission to examine the market in Northern Ireland, and has invited consumers to give their support via an online petition.

The council’s chief executive, Antoinette McKeown, commented: “The average yearly car insurance premium is now £923.90 and, with the increasing cost of fuel, the Consumer Council is concerned it will force some people off the road altogether, or lead to

Historically residents of Northern Ireland have paid on average £300 more for their car insurance than in the rest of the UK, and have also paid the highest price within the UK for petrol and diesel.

new office to grow successfully, in accordance with the principles the firm has used over the last 45 years.

From 1 September, the Oslo office will employ nine associates and focus primarily upon professional and financial lines, risk management services, with an affinity programme capability also provided. The new Norway operation is headed up by Cato Aamodt, who brings more than 25 years of experience to the table, including 13 years at Marsh.

Stephen Reid, COO of Risk Solutions in the UK, commented that the firm’s investment in the staff at Oslo marked a significant step forward for Lockton.

Reid went on to express his confidence in the ability of the

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• Sales strategies

Talk their

language

W

e see so many sales people who are continuously attending courses. They know their products very well and work very hard, yet they still battle to close deals. They know their products and/or services, they follow the best sales process, yet year after year they battle to make it happen.

“We all differ in the way we communicate. Some people like to blast facts while others think it is boring.”

And then you get sales people who just keep on closing deals.

So what’s the difference? The difference is that great sales people know how to do the psychological sale.

They understand and know how to change their style and behaviour of communication depending on the person they are dealing with, and they do it well. I am not saying the sales process is not important, but the sales process alone will not do the trick.

We all differ in the way we communicate. Some people like to blast facts while others think it is boring; some people like to follow a strict process while others think it is too prescriptive; some people like to talk about emotional issues while others think it is too soft; and some others like to talk about new ideas while others think it is too risky.

The issue is we communicate our way and do not even try to communicate in the preference of the person we are dealing with. Changing to the preference of the person you are dealing with will greatly improve your success rate and ensure that you turn that person on.

There are four major communication styles that exist. Below, I provide a graphical representation of them.

Analytical Facts Reason / Rational Quantities Is logical, but critical Methodical Order Process Gets things done Follows procedure

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Visionary Future / facts Imagines Big picture Takes risks Connected Feeling Empathetic / Sympathetic Approachable People

Most people have a preference in one or two of these areas, and so does the customer. If you want to be more successful, then communicate in their preference.

The worst is that you could be turning that person off without even knowing it. For example: analytical people want all the facts and like to analyse. When talking to them use logic and prepare your facts; don’t be too informal and don’t create answers if you dont know them.

Visionary people are opportunistic, risk takers and enjoy new ideas. When talking to them talk about the future and the bigger picture; don’t be inflexible and don’t play it too safe.

Connected people focus on people and are emotional. When

Analytical 12.4 per cent Compound over five years 20 per cent resources, 30 per cent technology, 50 per cent bonds Number two investor for last three years Methodical 11 per cent Minimum growth guaranteed. Life cover can be added Monthly report on performance Customer service process

dealing with them talk about people and family, be supportive and maintain eye contact; don’t be insensitive or impersonal.

Methodical people want order and get things done. Take each point to its conclusion and stick to an agenda; don’t be disorganised or introduce too much change.

So without knowing it you could be barking up the wrong tree, or consciously up the right tree. Let’s illustrate, for example, how you would talk about insurance products to the different styles below: In all four scenarios we are talking about exactly the same product, but the way we talk about it differs according to the preference of the person we are dealing with. By doing this you will greatly enhance your success rate.

Visionary Brand new product, state of the art Has all the latest needs and more Very flexible product Company going places Connected You and your family are important to us I like the person Free life cover Helpful company Care for the community

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Ensuri n g growth in tourism in Africa

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t’s hard to really gauge how the tourism industry in Africa is faring these days considering the conflicting information out there. JSE-listed Sun International wants to expand, according to local South African paper Business Day, but it can’t as it’s struggling under a burden of debt thanks to South Africa’s post-World Cup tourism slump. But elsewhere, tourism appears to be flourishing somewhat with Kenya Airways announcing plans that it will double its fleet over the next five years and Zimbabwe’s Victoria Falls reporting a 20 per cent increase in occupancy levels compared to January 2010.

But there are clearly concerns when it comes to promoting tourism in Africa and generating growth. The ongoing threat of tourists opting to holiday in ‘safer’ climes rather than in Africa for fear of inadequate treatment and care is a real one. This issue was raised at the 2011 HATAB Conference in Kasane by Joan Jackson, head of Etana Wildlife and Tourism, South Africa. She asked, “How can insurance companies or products assist in the growth of tourism in Botswana or any other African nation?” It appears specialist medical and emergency evacuation insurance is key [to have] in Botswana as well as many countries in Africa where appropriate medical services are limited.

Jackson was invited to be a guest speaker at the conference earlier this year where the main purpose was to get government ministers and role players in the Botswana tourism sector together to network, communicate and arrive at a common vision. The programme facilitated the exploration and discussion of challenges and disagreements believed to be hindering growth in tourism in Botswana.

“The audience responded energetically and positively to the explanation of how important insurance for medical evacuation and intervention services are in encouraging tourists to feel safe when choosing out-of-the-way destinations,” Jackson told RISKAFRICA. “This turned out to be a robust part of the discussion in the context that appropriate medical facilities within Botswana – which are suited

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to First World tourist requirements – are scarce, as they are in many other African countries.

“In addition to ‘normal’ emergency health problems, such as heart attacks or a ruptured appendix, harmful encounters with elephants and other wild animals are also possible. The average sophisticated tourist is used to easy access to medical treatment and needs to feel safe and protected against unforeseen medical emergencies in a bush environment.”

“In addition to ‘normal’ emergency health problems, such as heart attacks or a ruptured appendix, harmful encounters with elephants and other wild animals are also possible.”

Jackson explained that brokers should be aware of opportunities to effectively protect all tourism operators as well as the travelling public.

“This is an indispensible role of specialist tourism insurance, including emergency medical evacuation, which removes the safety worry when a person chooses a destination in Africa.”

She also explained the insurance protection implications before and after a fire, the need for liability insurance and the fact that negative media publicity can result in tourists choosing a safer and more pleasant destination.

Also on the agenda was feedback from various related ministries who spelled out the progress made during 2010. The leading players in the tourist industry and brokers also had ample time to quiz ministers and raise concerns.

44647/Mortimer Harvey/E

Insurance may be our turf, yet we get that to achieve something remarkable you have to take calculated risks. That’s why, in our neck of the woods, fence sitting is a no-no. Courageous thinking is never nipped in the bud and brave ideas are nurtured into bold solutions.

For clued up insurance solutions contact Hollard Windhoek +264 61 371 300 www.hollard.com.na An authorised Financial Services Provider.

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KINGJAMES 22118

Good and proper.

Just two short words. But when it comes to insurance, they’re two words that can make all the difference. At Santam, we believe they’re more than just words. They’re the foundation on which we stake our reputation. Because that’s what insurance should be. Insurance that leaves no doubt. Not half or sometimes insurance but full-blown insurance that’s consistent, reliable and that delivers on its promises. Santam. Insurance good and proper.