RISKAFRICA December 2011

Dear Reader As we look to the west of our shores across the Atlantic, we see a world in turmoil. The Occupy Wall Street Movement occupied Wall Street (amongst others) demanding who-knows-what.

When we look north, we see the Eurozone rushing towards the brink of collapse.

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

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New leadership has taken the reins in Italy and Greece in a bid to secure bailout funding (ushering in austerity measures which some analysts predict could last for a decade or even longer). It all really came home to me when one of our production crew mentioned that her husband’s sister was arriving from Europe the next day to come live in Southern Africa.

What has happened to our kids flocking to Europe looking for work? How the wheels have turned. And how fortunate we are to be weathering this global financial storm in one of the best places on Earth; Africa – no wonder the Wal-Mart’s of the world are looking to our shores for their continued survival.

We hope you enjoy this issue of RISKAFRICA as much as our team enjoyed putting it together for you.

Andy Mark Andy Mark - publisher 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.

CONTENTS 04 08 12 14 18 20 22 24 28 34 38

Counting the cost of repair Ripe but not rosy: the landscape of microinsurance Big Brother is watching Farming: not for the faint-hearted Getting to know NIBA Arrrrgh! Industry attacks piracy Future perfect?

News Reinsurance news round-up Botswana: A land of opportunity Events

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• The cost of repair

Counting the cost of repair Repairing a vehicle in Namibia is very costly and the insurance industry is reeling from the expense of it all.

Many say it’s far cheaper to repair a car by taking it across the border into South Africa, getting it fixed there and driving it back. Is this true or simply an urban myth?

“I am certain that panel beaters are pushing up the prices. We think they are ripping off the insurance companies, especially the larger panel beaters as they are the ones with the market share.”

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he exorbitant cost of repairing a motor vehicle in Namibia is an issue that is constantly brought up. When it comes to talking about it with insurers and brokers, they are happy to relay their concerns and experiences, but many are nervous about spilling the beans and are only prepared to do so, provided that their name is withheld. The reason, they say, is because they fear a backlash from the repair and panel beating industry in Namibia. Apparently they rule the roost here, mafia-style, or so I am told.

It’s easy to see why and how panel beaters have been able to call the shots when it comes to clients, insurers and brokers. The simple reason is that Namibia’s a small market. There are very few places where insurers, their clients, and even the uninsured can get cars repaired, and this is probably even more the case in the rural areas the further one gets away from the capital, Windhoek.

One marketing manager of a brokerage, who refuses to be named, relayed how a client had an accident in a bakkie. The car was so damaged that around 70 per cent of it needed some kind of repair work. It was, in effect, a write-off. But despite this, there was a buyer for the bakkie, so the company went about researching how it could repair the vehicle.

With the cost of spare parts front-of-mind, the brokerage went about sourcing the parts needed for the bakkie from South Africa. It found that, including delivery, bringing parts in from South Africa was still cheaper than paying for the parts here in Namibia. Thinking they could save the client and insurer even more money, they approached a panel beater armed with this information. However, the panel beater concerned refused to repair the vehicle if they sourced the material and brought it in from South Africa. Upon questioning the workshop, the broker was assured that the workshop doesn’t make a profit off spare parts, but still refused to fix the vehicle if parts were imported.

The marketing manager questioned the logic of this approach and further stated: “It gets me thinking about how many cars are really a write-off and which are just declared a write-off. I am certain that panel beaters are pushing up the prices. We think they are ripping off the insurance companies, especially the larger panel beaters as they are the ones with the market share.”

Riaan Louw, chief executive of Santam in Namibia was not surprised when I relayed this story to him.

He said that part of the problem is that there are too many middlemen and that prices are marked up in the region of 60 per cent. “What we have picked up is that it’s far more expensive to repair vehicles than it is in South Africa. Somewhere

we’ve been unsuccessful in getting the cost down, whether it’s the cost of labour or the cost of spare parts,” said Louw.

Louw explained that it’s the Namibian consumer who suffers at the end of the day as the insurance industry passes on the high cost of repairs in the premiums they charge. This, unfortunately, creates a further problem in that it prices a lot of people who want to get insurance for their vehicles out of the market. It’s likely to remain this way as it’s not compulsory to get vehicle cover in the country.

“We have only 30 per cent of people insured here in Namibia. We could, however, push that figure up to 50 per cent if we make it more affordable,” said Louw.

Cheaper without insurance There’s another reason why consumers goes without insurance. It’s just cheaper that way. Both brokers and insurers confirm that panel beaters and repair shops have one price for those who have insurance and another for those who don’t.

Insurers are trying to find solutions to the problem but it is slow going. In South Africa, Santam has tackled the problem of high repair costs by launching its own branded drive-in centres for clients who have damaged their vehicles. There are 15 new and revamped assessment centres around South Africa and clients can repair their vehicles almost anywhere. The service centres range from the basic drive-in centres (where vehicles are assessed and referred to external motor body repairers), to dual assessment centres (where vehicle repairs are assessed and panel beating work can be done on the premises or referred to an external motor body repairer).

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South Africa, there is the added problem of taxes and levies on imported goods. Again talks with the government are a possible answer, but Louw said that this hasn’t happened yet.

“We have not talked to government but the Insurance Association Claims Committee has talked with Nissan about importing parts.

However, there hasn’t been success there either,” explained Louw.

“She added that there are some insurers that are stuck in their old ways and aren’t really attuned with what was happening in the country.”

In addition, Santam has two mega assessment centres in Pretoria and Cape Town, where most vehicle repair needs can be met.

At the time of writing, Santam Namibia has only introduced one such centre in Windhoek. “We have a drive-in centre in Windhoek already,” confirmed Louw. “We will definitely look at introducing additional drive-in centres as it does save us a lot.”

Solutions to the problem

A continental problem

So what can the industry do to solve this problem of escalating labour and spare parts prices in Namibia? The marketing manager who refuses to be named said the solution would be to get the industry to speak to the panel beaters and get them to negotiate a fair deal for all. She said the onus was also on the insurance industry to get its act together and obtain more information on the cost of parts. She added that there are some insurers that are stuck in their old ways and aren’t really attuned with what was happening in the country.

Namibia is not the only country suffering at the hands of panel beaters and the increasing costs of spare parts. “Prices are going up every year thanks to increasing freight charges and the fact that we don’t manufacture too much in Africa,” said Peter Donald, marketing director and cofounder of Paladin Underwriting Managers, a South African niche motor business underwriter specialising in commercial fleet motor insurance.

As a Santam-affiliated broker she appealed to the insurer to get their own panel beaters.

“They have different prices for different insurers and some panel beaters definitely have favourites’. We know we can get parts in South Africa for one-third of the price, including deliveries,” she added.

Louw agreed that there needed to be more talks and engagement between insurers and the panel beating shops and also with the associations that represented them. However, he said the problem was that the associations are fragmented. One way of addressing the collusions against the insurers is to draw up direct contracts and service agreements. But this, again, doesn’t always work. “We rate the panel shop and agree on a labour fee we are prepared to pay. But Namibia is small and in some instances you are forced to still do business with panel beaters that charge more so that’s the issue we have to deal with,” said Louw.

In terms of bringing in cheaper parts from

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When it comes to fraud, South Africa has experiences to share, too. In May this year, our sister publication, RISKSA, reported how one insurer caught repairers committing fraud red-handed. Apparently, after charging for the genuine OEM parts, the repair shop staff members secretly used generic parts in the damaged vehicle. They then sent the spares back to the manufacturer and received credit.

Tackling this problem is not easy.

But it’s not only fraud that racks up the bill. Cars are more sophisticated now than what they used to be. “A bumper used to be a bumper but now some have sensors and a whole lot of other modern fittings. Increased sophistication has made the cost of repair too expensive,” explained Donald.

Even though costs are being passed on to the consumer, insurers and underwriters are still struggling to maintain profitable books. Donald highlights the state of the roads, poor driving behaviour and the resultant high volume of motor claims, together with escalating price of spare parts, as the main challenges for the industry.

There are a number of factors pushing the cost of repairs up: some panel beaters and

workshops are undoubtedly taking advantage of insurance companies; spare parts are becoming more expensive; and technological advancements have increased the cost of repair.

But blame can be laid at the insurance industry’s door, to some degree. Some in the industry agree that not enough is being done by insurance companies and underwriters to tackle the high cost of repair.

70 per cent of the cost of motor claims is accident-related and around 70 per cent of the repair cost is in spare parts. R14 billion was spent by insurers in 2010 on repairs alone (up from R13 billion in 2009). Africa could certainly benefit by introducing a similar initiative to R2RC for starters.

Perhaps Africa could learn some lessons from abroad? The Right to Repair (R2RC) campaign in Europe is an example of an industry-wide initiative to lower costs and demonstrate the value of a multi-brand automotive market. The campaign is pushing for a fair and competitive regulatory environment that enables freedom of choice for consumers and that gives aftermarket small to medium enterprises (SMME) a chance to stay in business. Additionally, R2RC aims to prevent legislation that denies consumers the right to have their vehicles serviced, maintained and repaired at competitive prices in the workshop of their choice.

In May, RISKSA found out from the South African Insurance Association (SAIA) that around

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• Microinsurance in Africa

Ripe but not rosy: the landscape of microinsurance

by Hanna Barry

Of the approximately one billion people living in Africa, an estimated 60 per cent live below US$2 a day (N$16)*. Yet microinsurance in Namibia and throughout Africa is reaching this market. RISKAFRICA takes a closer look at the microinsurance market in Africa and the challenges facing those wishing to enter it.

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he Microinsurance Innovation Facility, housed at the International Labour Organisation’s (ILO) social finance programme, defines microinsurance as an “insurance product accessible either by price or delivery channel to people earning less than approximately US$2 per day”.

By definition, microinsurance is challenging. It caters to those with little to spend on insurance, often with volatile income streams and limited access to financial services. The low-income market differs greatly from the traditional insurance market and therefore requires specialised product offerings.

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In order to design products that meet the needs of this market, having a good contextual understanding and thinking out the box is vital. For instance, doing away with monthly premiums and unpacking the influence of culture and tradition, such as witch doctors and sangomas, are just some of the factors to consider and understand in catering to this market.

“According to the study, microinsurance is not an appropriate product for the poorest group of 200 million Africans, but instead serves the needs of the working poor and the vulnerable non-poor, which together constitute a market of approximately 700 million people.”

Know your market These and other topics were discussed at the Programme in Microinsurance Strategies for African Markets. The programme was hosted by the University of Stellenbosch Business School (USB-ED) and the Centre for Financial Regulation and Inclusion (Cenfri) at the end of July 2011 in Cape Town, South Africa. Attendees included regulators, brokers and insurers from all over Africa, with representatives from the Namibia Financial Institutions Supervisory Authority (NAMFISA).

One of the speakers at the programme, Dr Mélani Prinsloo, emphasised the value of contextual understanding. Dr Prinsloo is the founding partner of the non-profit organisation, the Centre for Democratising Information (CDI), a communitybased research project that focuses on issues within the South African context. She said that too often insurance companies take products into a market, ‘educating’ consumers through advertising and consumer education campaigns, rather than finding out how people live and what it is that people actually need from their insurance.

The message was: rather than trying to change the mindsets of millions of people, change the products and the mindset of your company.

Various studies have revealed just how radical a mind shift needs to take place, even to the point of doing away with monthly premiums. According to a FinMark Trust study conducted in Malawi, Zambia and Namibia, in Malawi and Zambia, the most common source of income cited is from farming, while in Namibia the most common source of income is from friends and family. This translates into fluctuating income levels, which means that regular payments are one of the biggest barriers in product designs.

Meaningful research is necessary in gaining a thorough contextual understanding, which will ultimately result in relevant and feasible products.

The landscape of microinsurance in Africa One such research study, entitled the Landscape of Microinsurance in Africa, presents the findings of a 2009 study conducted by the ILO’s Microinsurance Innovation Facility and the Microinsurance Centre in collaboration with various other organisations. Based on 2008 year-end data, the study includes data and survey results from over 250 microinsurance practitioners in Africa.

According to the study, microinsurance is not an appropriate product for the poorest group of 200 million Africans, but instead serves the needs of the working poor and the vulnerable non-poor, which together constitute a market of approximately 700 million people. The annual income of this group is approximately US$500 billion (N$4 trillion), according to 2007 World Bank figures. Assuming a potential for insurance expenditure levels of five per cent of GDP, the value of the market for microinsurance in Africa is approximately US$25 billion (N$200.6 billion).

However, the current outreach of microinsurance in Africa falls far short of these figures, with only 2.6 per cent of the target population using microinsurance products (14.7 million people), accounting for US$257 million (N$2 billion) in received premiums. This is only one per cent of its potential value.

The majority of providers surveyed by the ILO’s study recognised this potential, with around 40 per cent agreeing partially or fully that market penetration will double in the next five years.

But the question remains: what is hindering market growth?

Growing pains Survey respondents were asked several questions regarding the limitations to microinsurance expansion in their markets. Eighty per cent of respondents felt that potential clients’ lack of understanding about insurance hindered expansion and 72 per cent put it to their limited ability to pay premiums. When a large share of household resources is allocated to basic necessities, a budget for insurance is limited.

Accordingly, the study noted the importance of recognising that a gap in risk management coverage does not equate to a demand for microinsurance. Until people see that microinsurance is a valuable solution, its growth will be limited.

Microinsurance growth in Africa has largely been limited to life insurance products. However,

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Namibia is one of the countries in which a range of microinsurance products is available, such as health and agriculture, together with Kenya, Cameroon and Senegal.

Products and providers Of their estimated potential market size, credit life products cover close to 9.5 per cent and other life products cover about 3.2 per cent.

Health products cover only about 0.3 per cent of the low-income population, with property and agriculture covering significantly fewer in numbers, at about 0.2 per cent and 0.1 per cent respectively.

Microinsurance products for health and agriculture seem to have the greatest potential to improve people’s quality of life, as these risks are listed to be most troublesome by low-income people in Uganda, Kenya, Tanzania, Nigeria, Ethiopia and Zambia.

The study identified a wide variety of providers: 134 schemes run by regulated insurers; 386 health mutuals or community-based schemes; and 24 insurance programmes managed by other risk carriers. The vast majority of the health mutuals are found in West and Central Africa, while the geographical spread of regulated insurers is more consistent, though they are slightly more prevalent in West and East Africa. Regulated insurers dominate the microinsurance market in terms of premiums received, representing 88 per cent of premiums received in 2008.

Mutuals or community-based organisations and microfinance institutions (MFI) appear to be the most significant delivery channels, but there is a substantial effort to broaden the range of delivery channel types. Particularly in South Africa and Kenya, there are experiments with alternative channels such as retailers or mobile phone providers. According to the study, taking microinsurance to the mass market will require improved penetration through MFIs, as well as expansion through other potentially untested delivery channels.

One of the regulated insurers in Namibia, Trustco Insurance, provides life cover to lowend consumers through the purchase of mobile telephone airtime, known as Trustco Mobile.

Trustco Mobile’s microinsurance product has been exported to Zimbabwe where 1.6 million registered mobile subscribers now have access to free life insurance.

Rising to the challenge The study reported that the majority of the African continent remains a vast and untapped market. Critical components included in a successful microinsurance model were a

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diversity of providers, informed clients who understand the value of microinsurance, innovative distribution channels, improved efficiency and human resource management.

The support of donors and governments was listed as important, highlighting the need for a co-ordinated effort.

There is certainly no shortage of challenges for insurers wishing to enter the microinsurance market, but there is enormous potential, too.

“Have a fascination for people and the larger market; not just insurance,” advised Dr Prinsloo.

The individuals that make up the microinsurance market in Africa are complex and far from homogenous. Insurance providers need to understand and embrace this if they wish to design the right products.

“Microinsurance products for health and agriculture seem to have the greatest potential to improve people’s quality of life, as these risks are listed to be most troublesome by low-income people in Uganda, Kenya, Tanzania, Nigeria, Ethiopia and Zambia.”

at a glance Insured lives in Namibia** Category Credit life Other life Health Agriculture Property Total number of lives covered

Number of lives covered 17 709 91 969 54 479 50 000 0 141 969

Penetration rate*** Category Credit life Other life Health Agriculture Property Total percentage of penetration

Percentage of lives covered 10.6 per cent 12.1 per cent 4.3 per cent 33.3 per cent 0 per cent 11.2 per cent

*Figures taken from the report by the International Labour Organisation’s Microinsurance Innovation Facility: The Landscape of Microinsurance in Africa. ** The number of people covered by the product does not match the total number covered due to microinsurance programmes offering multiple products to the same clients. *** Penetration rate = current outreach divided by total market size calculated as follows for specific risk areas: credit life = share of poor households (below US$2) having credit needs (assuming 50 per cent); life = share of poor population (below US$2) aged 15-64; health = poor population (below US$2); agriculture = share of poor households (below US$2) living in rural areas; property = poor households (below US$2).

• Fim Bill

Big Brother is watching I n the wake of the current global economic crisis, Europe and the USA have reviewed their regulatory approaches, bringing new legislation to bear, such as Solvency II. These efforts to bring a measure of stability in the hope of avoiding similar financial crises in the future have been taken up in a number of countries. South Africa has seen the introduction of the Solvency Assessment and Management (SAM) regime, and the Namibia Financial Institutions Supervisory Authority (NAMFISA) has drafted the Financial Institutions and Markets Bill, which is soon set to become law.

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In addition to the knock-on effects of the economic meltdown, Namibia felt the shortcomings of its own legislation and regulation in a very clear and public way with the collapse of Prowealth Asset Managers. After the founder of the Prowealth group, Riaan Potgieter, committed suicide in December 2008, Prowealth Asset Managers came under investigation and was subsequently declared insolvent and liquidated. The Namibian recently reported that, to date, 98 per cent of the money invested with the company still remains unaccounted for, amounting to a staggering N$101 million of clients’ funds and investments.

As the retirement fund industry changed, the need for other specialised service providers grew and today it is common practice for the trustees of a fund to appoint investment managers, investment consultants who provide advisory services, and administrators in a bid to ensure the maximum return on investment. These individuals and the trustees of the funds are therefore entrusted with the duty of managing retirement savings and any accompanying risks.

Some do this adequately and perform well, but it also opens the door for fund mismanagement and the downward spiral to insolvency.

The ways in which retirement funds have evolved over the past few years, together with the demonstration of how great the risk can be in the bankruptcy of Prowealth, has sparked renewed vigour for the FIM Bill.

Old-style legislation can no longer adequately address contemporary practices in the different financial services sectors and so the FIM Bill was born. NAMFISA, in its 2010 Annual Report, renewed its commitment to its mandate to safeguard the nation’s wealth. The monstrous Bill (more than 500 pages in its draft form), is set to usher in a new age in the Namibian financial services industry – an age of greater regulation and strict enforcement.

The Financial Institutions and Markets Act (FIM Act), as it will be known once it is enacted, is intended to cover regulatory gaps that originated from new developments in the financial services industry and to give NAMFISA more powers to deal with non-compliance and flexibility in adapting to future developments in the market.

One of the changes contemplated in the FIM Bill is that a risk-based approach to regulation will be taken. This means that NAMFISA will consider the risk that the pension fund and the members are exposed to and then apply appropriate prudential and business conduct rules to ensure that funds have adequate measures in place to manage these risks.

It also aims to put into practise certain disclosure

obligations on pension funds and will prescribe qualification criteria for trustees. NAMFISA will further be empowered to remove trustees who do not meet these criteria. Furthermore, service providers such as administrators will have to register with NAMFISA and become regulated entities that comply with the conduct rules relevant to them.

The FIM Bill addresses not only retirement funds, but takes a stand on every type of policy and how financial services providers operate. From the holding of assets by long-term insurance businesses and protecting life policies ceded to spouses, to the financially sound condition of short-term insurers, marketing of medical aid funds, the authorisation of Lloyd’s underwriters and even credit practices, NAMFISA has left no stone unturned. The large scale overhaul has been met with mixed responses and criticism (see ‘Industry perspectives’ below).

The process has not been plain sailing for NAMFISA though. This ambitious project has seen reports of it being short-staffed and the executive committee is almost permanently out of office to address issues surrounding the finalisation of the bill. Speaking at the first conference for the Namibian short-term insurance industry in September, NAMFISA’s general manager of provident funds, Maria Nakale-Gaomas, said that in addition to drafting standards and regulations, NAMFISA is upgrading its electronic regulatory system (ERS). The longstanding uncertainty in the industry about the capacity and ability of NAMFISA to control and regulate the industry is now being addressed, Nakale-Gaomas said.

At the time of going to press, the bill is still in the process of being finalised. NAMFISA’s representatives were not available to give comment – perhaps not surprising in light of the massive task it has undertaken. It remains to be seen what the actual regulations and standards will be when the FIM Bill is finally law. One thing is clear though: Big Brother is watching.

Industry perspectives RISKafrica asked a few key figures in the Namibian insurance industry for their perspectives on the impending FIM Bill and how they think it will affect the way the industry conducts its business.

Riana Gous, director of the Insurance Institute of Namibia: “Unfortunately our office was not part of the consultative working group nor did we receive a copy of the draft proposed FIM Bill and therefore cannot express an opinion on how its implementation will affect insurers and brokers.”

Wally Jacobs, CEO of Prosperity Insurance: “I do think that it is time for the FIM Bill to be a standard; however, the authority that is proposed to be given to NAMFISA is serious and I do feel that this bill should rather allow less power to NAMFISA and enforce independent appointments, such as an insurance specialist ombudsman, to provide independent rulings.”

Mike Baartman, executive director of Investmed: “From my side I think that it would be a good thing if the right actions are taken when non-compliance occurs, so that we can have a clean and regulated industry with no grey areas.”

Riaan Louw, CEO of Santam Namibia “I do believe that the reasoning should be to protect the consumer and to make our industry sustainable for years to come (although we still await clear guidelines why Namibia needs the FIM Bill). We (the industry) have seen the draft and commented, but have not seen the inclusion of industry proposals yet. Unfortunately, the regulations and standards have not even been discussed. Therefore I would not like to comment on how the bill will affect the way business is conducted in Namibia.”

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• Farming

Farming: not for the faint-hearted

by Hanna Barry

In a country where agriculture (including livestock, crops and forestry), contributes to 5.1 per cent of gross domestic product* (GDP), the insurance industry has an indispensable role to play in securing this sector. RISKAFRICA dug up the facts on agricultural insurance in Namibia and discovered just how complex the risk management considerations can be and the importance of brokers and underwriters in managing these risks effectively.

About 10 years ago on a farm in the Klerksdorp area in South Africa, a big feeding lot caught alight after a piece of carbon dislodged from the front-end loader that was mixing the feed. The carbon flew into a haystack and R3 million (N$3 million) worth of food was lost in a fire.

According to Hollard Namibia, some of the most common assets farmers want to insure range from immovable property (such as buildings and boundary fences) and movable property (such as contents of buildings and solar panels), to vehicles, grazing, crop, livestock, game and various types of consequential losses (such as loss of revenue following a fire).

A range of risks Farming brings with it a range of complex and sizeable risks. Chief executive officer of Prosperity Insurance, Wally Jacobs, said that the risks most commonly faced by farmers in Namibia across all sectors, and especially in livestock farming, include veld fires, storm, impact by vehicles on farm land, snake bites, wild animals eating livestock and to some extent poaching.

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Some of the key perils they want to insure these assets against include fires (including veld fires), special perils (including wind damage, storm damage, water damage, hail damage and lightning damage), theft, diseases (such as Slenkdal Fever and Foot-andmouth disease), mortality cover on livestock and game, goods in transit insurance, liability insurance (for example, possible liability claims following spread of veld fires originating on their property), and stated benefits insurance for their workforce.

Riaan Louw, chief executive officer of Santam Namibia, said that price fluctuations are also a risk that farmers face. He said that drought risks are very expensive and in some cases not insurable.

Flood damage to crops and hail damage to livestock or game represent large risks that are simply too expensive to insure. According to Jacobs, insurers in Namibia do underwrite hail damage, but Namibia is not in a hail belt, making this less of a risk.

Some of the more expensive risks to cover occur frequently so it is vital to ensure that there is adequate cover in place for them.

Risk of fire cover is a case in point. Fire can damage both crops and assets, making it a high risk that can potentially cost a fortune. In September this year,

to understand the processes involved in a particular farmer’s operations and it’s very difficult to be generic. Even farmers farming the same product will cultivate it differently, and therefore need different implements and ultimately different insurance.

Insurance products need to be flexible enough to accommodate this wide-range of farming types and techniques. For instance, developments in technology have led to motorised tractors and combine harvesters that are operated like computers. This is known as ‘precision farming’.

Ordinary motor policies (under which many tractors are insured) don’t make provision for such electronic equipment, which may cost the farmer large sums of money if it means he loses production time and capacity. Similarly, livestock farmers need specific products that address challenges such as illness and liability.

In the know Brokers should not underestimate the knowledge that farmers have and the potential risks they face. Many of them have a tertiary education and will quickly catch out ill-informed brokers and underwriters. Farmers want a broker who will appreciate that he is different from his neighbour and therefore needs a bespoke solution.

Hollard explained that brokers play a key role in the value chain, acting as the enabler by bringing the client’s complex and very specific insurance needs to the various insurers and ultimately ensuring the most comprehensive solution is offered to the client in relation to his needs.

veld fires in the Blumfelde vicinity killed at least 2 300 sheep and 28 cattle, according to the Namibia Agricultural Union (NAU).

protect their assets with GPS tracking,” said Jacobs.

Louw also listed solar panel theft as common, as well as house break-ins.

Spread of fire is viewed as a serious concern by Prosperity and is considered when the insurer assesses and underwrites farming risks. In Prosperity’s experience, Namibian farmers are not generally well-insured. “Farmers have the tendency to believe that the loss will never happen to them so they insure the minimal,” said Jacobs.

However, Louw said that farmers are well insured but noted the importance of amending farming insurance annually.

Hollard, on the other hand, list theft of livestock as a well-known risk and a frequent subject in the news. “Regular theft of solar panels, pumps and machinery is also experienced,” said Hollard. The insurer said that cable theft is not a major problem and that theft is a greater risk for weekend farmers who are not on their farms during the week.

With so many different risks and perils that vary from one farm to another, specialised solutions are paramount.

What about theft? According to Prosperity, theft is not a major problem. “We did establish that solar panels were being stolen, but farmers generally

Bespoke solutions There is no one-size-fits-all option. It is important

The insurer said that brokers are able to service clients who are not easily accessible to insurers due to the lengthy distances that must be travelled. The information given to the insurer by the broker is very important in the rating of risks, which is why capturing comprehensive information regarding a risk is very important.

“Brokers are probably the most important part when it comes to the agri insurance sector in Namibia,” said Louw. He explained that things can go wrong when insurance is placed for the first time as values are not always calculated correctly and farmers complain that renewal of their insurance only comes via a letter in the post. However, this is not always the case and Santam has brokers that do a great job of insuring and renewing agri policies.

“You cannot take an insurer to a farm who doesn’t understand the farming risk,” said Mutual & Federal.

“An ordinary commercial risk loss adjustor would be lost if you asked him to look at crop risk,” the insurer added. It is vital that the broker and/

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Fodder for thought Assessing a farmer’s risks is a complex business.

If you’re not yet convinced, below are a few considerations that illustrate just how nuanced the process can be.

• A farmer’s water supply is often a combined unit supplying the household, those of the staff and labourers, as well as the irrigation system. Since this is not strictly a household or commercial risk, your insurance product needs to make provision for it.

• Consider the transport risks on the property. If the farmer is transporting a load of fertiliser worth thousands of Rands, there needs to be cover for it should it topple off the tractor or the driver have an accident.

• If the farm is on two sides of a national highway, make sure their vehicle is registered for public roads and all drivers are licensed.

or insurer covering the farmer have extensive knowledge not only of farming risks but also of the agricultural industry and issues affecting this industry.

For example, climate change and the energy crisis are everyday realities affecting farmers that insurers need to make provision for in their services and products. Facilitating a switch to solar-powered geysers, for example, demonstrates the type of agility that can

accommodate various risks with effective solutions. “It’s about becoming practical about real-world issues,” said Mutual & Federal.

Intermediaries and insurers need to be sufficiently involved and responsible as farming is not a static risk. Since most farmers still prefer to deal with brokers face to face, the role of the intermediary remains critical in guiding a farmer through the process of securing the correct cover.

• If the farmer is a livestock farmer, they need to have liability cover for roaming cattle and cattle in public roads should one of the herd break loose and cause a road accident.

• Ensure the cattle insurance includes cover for illnesses or even impotency (especially if your client is a stud breeder).

• Centre pivots may fall over in windy weather, bend and be rendered useless. One centre pivot could easily cost upwards of N$100 000, and most farmers have got three or four. *As per 2009 figures from the Namibia Central Bureau of Statistics.

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• Interview with...

Getting to know

NIBA

president of the Namibia Insurance Broker Association (NIBA) admits that there are still a lot of challenges for the Namibian broker and that NIBA has a lot on its plate. However, after just three months at the helm of NIBA, Visser is keen to switch things on.

1. How long have you been president of NIBA and who was your predecessor?

It’s only been three months; I am still finding my feet. Riaan Vermeulen (MD of Welwitschia Nammic) was my predecessor.

2. What have you done differently from your predecessor since you took up this position?

We have a few ideas to try and get more member participation. The newsletter (NIBAnews) was the first step. We appointed a part-time editor from the industry (Elphia Pool) and want to use the newsletter as a forum to share, inspire, challenge and innovate.

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3. What is NIBA’s function?

• To provide a recognised central organisation for all Namibian insurance brokers.

• To safeguard the interest of the community and improve efficiency.

• To promote professional and ethical conduct.

• To provide input to government and watch over legislation.

• To afford a means of arbitration.

This non-profit association is recognised by government, consumers and the insurance industry as being the authoritative voice of Namibia’s insurance brokers. NIBA members are independent insurance brokers (short and long term) across Namibia who believe that co-operation enhances their ability to provide excellent service to their clients.

4. Has it achieved most of what it has set out to do or is there still a lot of unfinished business?

There is still a substantial amount of unfinished business. As the market evolves, so new challenges arises. The main aim would be to address these challenges in a collective industry effort.

5. Describe (briefly) the Namibian broker market and the challenges it faces.

At present, NIBA has 86 registered members, of which 65 per cent is on the short-term side (or short-term and life) and only three reinsurance brokers.

watch and learn from SA as there is no need to reinvent the wheel. There are a lot of similarities between our markets.

7. How is the industry dealing with the FIM Bill?

Both NIBA and NIA were involved in the consultation sessions, and made a concerted effort to enable government to produce practical and clear legislation.

8. How do you think the Namibian market will react to the Consumer Protection Act (CPA)? Will it be welcomed by the insurance and broker community?

At this stage, CPA is considered as a huge challenge which will impart more compliance and financial implications on industry which may take its toll on the smaller players.

9. What should the broker community be striving for in 2012?

11. How is the industry trying to attract new and young talent?

At present we have no strategy in place and it certainly is a shortcoming. We are excited about the progress which IIN has made with training. This will enable industry to canvas talented youngsters and fast track their careers to ensure the insurance becomes a sought-after career option.

12. What is NIBA doing to promote the insurance broker in Namibia?

The FIM Bill has taken our eye off the ball for some time, and that is one of the things the 2011 Council would like to address. The public needs to be reminded of NIBA and what we (all our members) stand for. We want to convey a message of unity, trust and professionalism at a time when direct insurers have become a serious threat. We also need to take up our social responsibility and will be looking for ways to combine this with sound promotion and added value.

To raise the bar on training and expertise.

10. How difficult is it for a newcomer to become a broker in Namibia and is it difficult to get into the industry?

At present it is fairly easy to register as a broker and no formal insurance qualification is required.

However, it is a difficult market to enter (clients tend to be loyal to their broker) and competition is fierce, particularly on the commercial side.

There is a skills shortage. We do not see the next generation of properly trained insurance people coming through from the insurers as was traditionally the case. I think SA has similar challenges. This shortage is being addressed by the NQA (Namibian Qualifications Authority) in conjunction with the IIN. I think we will begin to see formal training in our sector within the next 18 to 24 months. The levels are being drawn up at present.

6. Namibia is constantly watching what South Africa is doing and you said to me that it has learned some lessons from how the RE exams are conducted/rolled out. What lessons has the Namibian Government and its financial services industry learned?

What will it do differently with its version of the exams?

This is a difficult one to answer, as the process is just starting. This process is driven by the IIN (Insurance Institute of Namibia). We will certainly

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• Piracy

Arrrrgh!

Industry attacks piracy

Today, nothing much has changed. We still have pirates and they are more dangerous than ever.

Instead of cutlasses they brandish AKMs, RPG-7s, AK47s and semi-automatic pistols such as the TT-30. They use other types of weaponry too, such as hand grenades and knives and apparently generate all types of support and funding from places such as Yemen, Mogadishu and terrorists from the Middle East.

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Piracy is “a stain on our world” said Prime Minister David Cameron in a speech in October. He announced that armed guards will be allowed on British merchant ships to tackle Somalian piracy. According to London-based weekly magazine, Insurance Times, those involved in the shipping industry would previously rely on anti-piracy measures such as using barbed wire and water cannons to ward off pirates. Travelling in convoy was also adopted as a deterrent.

Warships from joint naval task force EU NAVFOR would, and still are, patrolling high risk areas.

But the insurance industry has recognised that this alone is not enough. Insurance brokers, Jardine Lloyd Thompson has started an antipiracy scheme, the convoy escort programme (CEP) due to be launched in 2012. The initiative will provide patrol boats, which will escort ships in the Gulf of Aden, while insurers backing the scheme will provide war risk, and kidnap and ransom cover.

“The project has been talked about for a while and promoted by underwriters at Lloyd’s of London,” confirmed Angus Campbell, chief executive officer of CEP Ltd. The JLT initiative has been launched to accompany merchant vessels travelling through the Gulf of Aden, an area of concern for merchants, insurers and naval patrols.

Campbell assures that this initiative is not meant to be a substitution for any kind of security measures the companies already have in place. Instead, this is meant to complement security enforcement and serve as a deterrent from any would-be pirates thinking of attacking the vessel for its cargo or who intend to hold the people onboard hostage.

“Naval forces are doing an excellent job, but unfortunately, there is not enough [protection] to go around.” The CEP will also not react unless provoked.

“If a patrol boat is challenged, we will and should be able to act according to the law and act defensively. We have strong procedures in place,” explained Campbell.

This is not the first time the insurance industry has consolidated to sort out a problem and protect the people and things that they insure. In 1666, after the Great Fire of London devastated 13 200 houses, 87 parish churches and many other historical buildings such as St Paul’s Cathedral, property insurers got together and this resulted in the creation of the London Fire Brigade. As the CEP has been created as a result of a ‘new’ threat, it is a similar story to how the London Fire Brigade began.

Since JLT embarked on this project, a number of underwriters have come forward and indicated their interest in supporting this project. They include Ascot, Griffin, Marketform and RSA. “Others include Watkins, Montpelier and Brit. These three are not involved just yet but when it goes live I think they will come forward,” added Campbell.

The CEP will be run just like a company.

It will make a return for its investors but Campbell assures that it will not set about attempting to profit from piracy. Instead, he said, it will be giving something back to not only the industry, but those who have been victims of this atrocity. “A portion of funds will go towards supporting those with posttraumatic stress if the CEP is successful.”

According to London-based weekly magazine, Insurance Times, those involved in the shipping industry would previously rely on anti-piracy measures such as using barbed wire and water cannons to ward off pirates.

While the commercial impact of piracy has been one of the main drivers behind this project launch, Campbell wants to ensure that the CEP remains cost effective for its clients. “We want to launch something that is affordable and keeps the costs as low as possible. We will contract with individual ship owners and charge a fee which will include the insurance, training, escorts and an audit service,” he said.

So what is Campbell’s advice for clients that may be interested in signing up for this scheme? It’s not an exclusive programme only for JLT clients, but for now it will be operational for vessels that move through the Gulf of Aden in order for the project to remain sustainable. The CEP will bolt on to existing security and measures and become a hybrid strategy that merchants can adopt to fight piracy. “Anyone using a Lloyd’s broker can use it. But it may not be exclusive to Lloyd’s. Those interested can contact JLT. But JLT is not our customer, the owner of the ship will be.”

Although there is an increase in overall piracy activity, according to Aon the good news is that there has been a general decline in successful attacks on vessels over the last year. Aon’s latest piracy update explains a shift in regional activity, which has been attributed to an increase in anti-piracy measures. The most notable is in the Gulf of Aden, historically a piracy hotspot, to the Arabian Sea, which has experienced a 267 per cent increase of attacks year on year.

With these statistics it’s essential that politicians, insurers and sea merchants adopt this kind of programme and similar ones to fight the pirates of our seas and oceans. “It’s a problem that is getting worse as pirates receive increased funding. The industry has to step up to the plate because it’s a fundamental problem for all,” said Campbell.

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• Future perfect?

Future perfect?

RISKAFRICA asked a selection of those working in the Namibian insurance market what they thought 2012 held in store for their companies/ institutions and for the industry as a whole. They gazed into their crystal balls and this is what they predicted.

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Alexander Forbes Risk Services, a division of Alexander Forbes Group Namibia We will stick to what we know best – professional client service. With the current electronic age, we are looking to implement web-based customer relationship management (CRM) tools. We will also be introducing various business initiatives during the course of next year.

We would like to retain and strengthen our position as the market leader in Namibia.

In terms of changes in the Namibian insurance industry, we can expect to see the Namibia Qualifications Authority (NQA) implementing minimum standards, similar to the Financial Advisory and Intermediary Services Act (FAIS) in South Africa. We expect this to happen over the next 18 to 24 months. The new Financial Institutions and Markets (FIM) Bill is to be tabled during the course of next year. Changes in legislation and regulation could spell a different insurance landscape in the near future.

Growth in the Namibian economy is expected to be fairly slow over the next 12 months, as foreign direct investment has contracted the global economic flu. Some major uranium mining projects will come on line over the next 18 months, so we expect a mini economic boom in the Erongo region. Talk of an off-shore oil discovery is also exciting news.

- Bennie Visser, chief operations officer

AON Namibia Our strategy for 2012 will be to promote the Aon Brand in Namibia and to increase our representation in Namibia. We expect even more competition between insurers, seeing that most insurers made healthy profits this year. This will put severe pressure on broking houses whose income on their existing book of business has already shown no growth for the past two years.

We also foresee further mergers of smalland medium-sized brokerages with larger broking houses. Our goals for 2012 will be to grow our revenue line and to decrease our operating cost. We expect the Namibian economy to grow by about four per cent despite the financial problems in Europe.

- Richard Aston, chief executive officer

Santam Namibia Personal lines underwriting will become stricter, with fewer discounts being awarded, based that the underwriting margins on the book is becoming lower.

Currently, according to the Namibia Financial Institutions Supervisory Authority (NAMFISA) results, the industry operates at a 73 per cent loss ratio. My prediction for commercial lines is that competition will increase and brokers will be more aggressive on retention.

- Franco Feris, chief executive officer

The Insurance Institute of Namibia The year will see some changes in the way we conduct insurance business in Namibia. It will be exciting and forwardthinking. The Insurance Institute of Namibia (IIN) has planned a number of technical insurance training workshops, business breakfasts and a glamour event or two for next year. I don’t want to reveal too much, but we will also roll out a membership loyalty programme in the first quarter of 2012.

- Riana Gous, director The Namibia Training Authority (NTA) The NTA was established by the Vocational Education and Training Act, Act 1 of 2008, to regulate the provision of Vocational Education and Training (VET) by ensuring that VET programmes and services meet the current and emerging needs of industry, business and the broader community.

There is a growing understanding that accelerated economic development depends on increasing the productive capacity of industry and that this, in turn, depends on developing a vocational education and training system that provides people with the skills needed by industry and which will provide our citizens with access to employment. The way forward for the NTA is to transform the VET system.

At present too many young people leave the education system without the skills required to enter vocational training. In 2012, the NTA will continue to focus its efforts to address this issue through the supplementation of the bridging programme through the introduction of the foundation qualifications programme. These two initiatives will increase the enrolment rate

at vocational training centres from 8 500 to 12 000 during 2012 and future plans are to increase enrolment by 60 per cent over the next five years.

The second mandate is to fund vocational education and training through the imposition of a training levy. A national consultation process between industry and government has been conducted and recommendations from the consultations are being used in the design and development of the associated systems and processes, working towards collection of the levy to commence in 2013. The task for the NTA moving forward is to build on the foundations and to work with our partners in government and industry to deliver the necessary transformation so that the VET system delivers the skills needed to develop the Namibian economy and accelerate economic growth, which will translate into the creation of jobs and address the current scourge of unemployment.

- Maria Nangolo-Rukoro, chief executive officer

National Special Risks Insurance Association (NASRIA) NASRIA is busy restructuring its operation.

It is converting to a specialised insurer still covering riot, strikes, etc. but it will add more products, for example, war risks and broaden NASRIA-product covering in order to allow it to venture into any other products not offered by other insurers in the market.

The association is planning to build revenue and profits from a number of different resources such as gross premium fees from insurance cover of natural disasters, agricultural schemes and marine schemes, individual and corporate clients and investment from excess cash funds through investments.

- Ndjoura Tjozongoro, chief executive officer

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NEWS Kenya: Pastoralists paid out for livestock losses An insurance programme for poor livestock keepers made its first pay-outs to 650 herders in Marsabit district, Kenya. Some farmers have lost up to a third of their animals. Known as Index-based Livestock Insurance (IBLI), pay-outs are triggered when satellite images show that grazing lands in the region have deteriorated to the point that herders are expected to lose more than 15 per cent of their herd.

The Marsabit district is home to some 86 000 cattle and two million goats and sheep that generate millions of Dollars in milk and other products and serve as the main source of sustenance and income. The current readings, for which indemnities are now being paid, show that between 18 and 33 per cent of livestock has been lost to drought this season.

“It’s terrible that we are seeing this level of loss, but gratifying that the policies are doing what they are supposed to do, which is to help herders avert disaster when weather

conditions dry up pasture lands and animals begin to perish,” said Isaac Magina, head of agriculture insurance at UAP Insurance Ltd. The insurance project was developed in partnership by the Nairobi-based International Livestock Research Institute (ILRI), Cornell University and the Index Insurance Innovation Initiative (I4) programme at the University of California at Davis. Commercial partners Equity Bank and UAP Insurance Ltd implement the programme. The IBLI project is funded by USAID, the European Union, the British Government, the World Bank, the Microinsurance Facility and the Global Index Insurance Facility.

In East Africa, an estimated 70 million people live in the dry lands, and many of them are herders. In Kenya, the value of the pastoral livestock sector is estimated to be worth US$800 million. The Inter-governmental Authority on Development in Eastern Africa,

which takes a regional approach to combating drought in six countries of the Horn of Africa, estimates that over 90 per cent of the meat consumed in East Africa comes from pastoral herds. Under the terms of the policy, insured herders are compensated for any losses above 15 per cent, with the 15 per cent threshold acting as deductible. For example, a cattle herder who lives in an area with a livestock mortality rate of 33 per cent receives a payout covering 18 per cent of their animals.

“Drought insurance is one important way to help livestock keepers maintain food security even in very harsh environments,” said Andrew Mude, the IBLI project leader at ILRI. “Insurance is not sufficient,” he added, “But if it is accompanied by other risk-reducing strategies, such as better access to grazing lands and watering areas, then the pastoralist approach, which some people dismiss as a backward lifestyle of the past, emerges as a very effective way to meet future food needs.”

Ghana: Santam to acquire stake in EIC The South African National Trust and Assurance Company Limited (Santam) has indicated that it is in the process of acquiring a stake in Enterprise Insurance Company Limited (EIC), a pioneer within the Ghanaian insurance industry that has been active since 1924.

Santam, one of South Africa’s largest short-term insurers, announced that it will be spending approximately US$28 million on three acquisition deals in Africa before the end of 2011, including acquisitions in Ghana, Nigeria and Malawi.

The 93-year-old Santam recorded a 16 per cent growth in its headline earnings of 593 cents a share for the six months ended June 2011 on the same period last year, declaring a 200 cents interim dividend a share, according to its first half-year financial results released at the end of August 2011.

Zambia: Only one Nyimba accident victim compensated Hollard Zambia’s head of client relations and motor claims, Ian Malilwe, said that it has compensated just one family to date, for the loss of a family member in the Nyimba bus accident. More than 30 people died in the accident that occurred in July when the overloaded bus collided head-on with a truck and 48 other passengers sustained injuries.

Malilwe explained that one family had been compensated, while payments for two other families were being processed.

Hollard Zambia is acting on behalf of Kobs Motors, the operator of the bus involved in the accident. Malilwe said the insurance firm was ready to compensate the 38 families who lost their relatives in the accident but added, “We have not yet received complaints from the other families who lost their relatives, including the 48 injured passengers.”

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Zambia: Smooth political transition wins S&P approval Standard & Poor’s (S&P) Ratings Services has affirmed the foreign- and localcurrency long-term ratings on Zambia at B+, with foreign- and local-currency short-term ratings affirmed at B. Standard & Poor’s transfer and convertibility assessment for Zambia remains B+. As such, the outlook is stable.

This comes after the presidential elections in September, which appointed Michael Sata the victor. President Sata has promised to implement major reforms during his first few months in office, including measures to promote transparency in governance. International observers declared the elections to have been well-organised and the handover of power from former-President Banda and his party (who had been in power for 20 years) was smooth and uncontroversial.

However, in spite of the positive feedback and promises coming out of the elections, in S&P’s view, President Sata’s victory has created further uncertainty in Zambia.

A long-standing opposition figure, he has supported changing regulation and taxation of the mining sector, possibly with the reintroduction of a windfall tax.

He has also favoured more expansionary fiscal policies, and called for higher redistribution and lower taxes.

S&P’s ratings on Zambia have to date been constrained by the country ’s

low prosperity, balance-of-payments vulnerabilities to shifts in copper prices, and political risks. The ratings are supported by promising investment and economic growth trends, a strong external balance sheet in the wake of debt relief, and a modest debt burden, which has also benefited from debt relief and bouts of double-digit inflation.

There is also some concern about increased political interference in monetary policy after the dismissal of the central bank governor shortly after President Sata’s victory, particularly as the governor had just six months left in his second term.

While the outlook at this point is stable and Zambia’s economic performance so far in 2011 has been positive, buoyed by an increase in copper production and higher copper prices, the S&P ratings could be lowered if the new administration’s policies shift macroeconomic policies radically, weakening external, fiscal and monetary fundamentals, or impairing copper production. The ratings could also be lowered if Zambia’s external liquidity was to deteriorate significantly, for instance, as a result of an extended depression of copper prices. Conversely, the ratings could be raised if Zambia’s external liquidity becomes less vulnerable to copper prices and if investment in infrastructure raises trend economic growth.

Farmers receive first drought insurance pay-outs Over 100 farmers in Embu received insurance pay-outs via M-PESA recently, marking the first pay-outs issued through the mobile phone payment system M-PESA by Kilimo Salama (Kiswahili for ‘safe agriculture’), an innovative microinsurance programme that protects farmers’ investments in improved seeds and farm inputs against drought and other extreme weather.

The payments under the Kilimo Salama programme were triggered when weather stations at Siakago Rural Technology School registered rainfall for the current season that was slightly below average. Kilimo Salama is a partnership involving the Syngenta Foundation for Sustainable Agriculture, UAP Insurance and Safaricom. The insurance programme offers farmers who plant on as little as one acre an opportunity to pay a five per cent insurance premium on

their purchase of seeds or fertiliser. The insurance policy protects their investment by calculating losses incurred when insufficient or even excess rains have been detected by a nearby weather station.

The pay-outs issued were commensurate with the farmers’ projected losses. In this case, the projected losses, and thus the pay-outs were fairly small. In seasons with less rain, the pay-out could be far greater.

By using M-PESA, the programme has found a safe and simple way of disbursing the pay-outs to farmers without a long claims process. In fact, by using the weather stations to monitor the rainfall, farmers did not have to lodge a claim at all.

The programme currently covers 11 000 farmers in areas across Kenya. Further possibilities include insurance for a wider range of crops and threats to harvests.

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Zimbabwe: Old Mutual’s dilemma intensifies Zimbabwean authorities have threatened Old Mutual with expulsion despite the diversified investment group’s involvement in joint-venture investments with Zimbabwe State companies if they fail to honour an indigenisation compliance agreement struck with the government last year.

The Old Mutual group was recently criticised for holding investments in controversial Zimbabwe ventures such as diamond mining and the Statecontrolled Zimpapers media group.

Old Mutual also has several other investments in the property, pensions and insurance sectors in Zimbabwe. In September, the Old Mutual investment group was reported to have received

an ultimatum from the Zimbabwean empowerment minister, Saviour Kasukuwere, to submit a compliance plan under the controversial policy.

Interestingly, the ultimatum has lapsed and it remains to be seen what the next move will be, Several Zimbabwean analysts claim that Kasukuwere is selectively applying the law. “Old Mutual has several investments in the country and most of these are in partnership with State institutions and this is why they were never doubtful of their future. Although they have been given an ultimatum, their situation is much different from that of the other major foreign firms, which explains the firm’s close ties with the State,” said economist Jeffrey Kasirori.

Namibia: Moody’s assigns first-time ratings of Baa3 Moody ’s Investors Service has assigned first-time local- and foreign-currency issuer ratings of BAA3 to the Namibian Government.

The low investment grade ratings reflect the government’s track record of responsible budget management and maintenance of low public debt as well as an investor-friendly policy framework. This is balanced against structural legacy challenges posed by wide income disparities, very high unemployment and dependence upon the mining sector for foreign exchange earnings. The outlook is stable.

At the same time, Moody ’s assigned Namibia’s long-term country ceiling for foreign currency debt at A3. The debt ceiling represents the highest rating that could generally be assigned to any debt issuer domiciled in Namibia that would issue bonds in the global capital markets. Namibia’s ceiling for foreign currency banks deposits is set at BAA3, equivalent to the government’s issuer ratings. Finally, Moody ’s has assigned A1 country ceilings for local-currency debt and deposits to Namibia.

Since achieving independence, Namibia has prudently managed its abundant natural resource assets despite the challenges of the country ’s vast size and sparse population. The BAA3 rating is based on Moody ’s expectation that the country ’s credit profile will continue to be supported by prudent management.

Policymakers have maintained an investorfriendly environment that has encouraged significant exploration and development by a variety of mining companies from all over the world. The rating agency also said that the government’s policy predictability and disciplined management of its finances are important drivers of its creditworthiness. The government is also careful to limit its foreign exposure to a relatively small proportion of its debt, in order to minimise volatility for debt service in view of the fluctuations of the exchange rate. The central bank’s foreign exchange reserves are also more than adequate to maintain the Namibian Dollar ’s parity with the South African Rand.

Good economic management aside, Namibia’s ratings are constrained by the negative socio-economic consequences left over from the colonial era and especially from apartheid policies. The related legacy policy challenges include very high unemployment rates, a preponderance of business ownership in white hands, wide income disparities and a large segment of the population still involved in subsistence farming in the rural areas. These issues pose long-term risks for economic and political stability unless they are successfully addressed over time.

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Buildings iguard nsurance – against claims rejection A home is often the individual’s most valued asset and it should be adequately insured at all times. More importantly, both broker and client should take all the necessary precautions to ensure that a claim will be paid should disaster strike.

Denise Shaw, director of Standard Bank Insurance Services, South Africa, urges brokers to continue to guide their clients when it comes to building and homeowner’s insurance. She warns that while homeowners might be looking to save costs right now, when it comes to buildings insurance, the cheapest policy is not necessarily the best one.

“In the insurance market it’s easy to be driven by price alone, but the first thing to do is find a policy that provides all the cover the client needs.

Check the policy wording to confirm that both the standard cover and any additional cover the client might need are present. Choosing, or allowing the client to choose, a policy with a cheaper premium and less coverage is pointless,” Shaw said.

Shaw added that there are a few common reasons for property claims being rejected. The first is that the policyholder claims for something they aren’t covered for and often was not aware of the limitation in cover. “The broker needs to ensure that the client understands the policy and knows what they are covered for.”

The second most common reason for repudiation is poor maintenance on the property. A claim can be rejected if an

W

hile the recent strenuous economic conditions have taken its toll on many Namibians – citizens borrowed record high amounts of money in 2011 – this is no time to neglect the housekeeping. It’s important that brokers help clients ensure that their biggest assets are protected in the event of a tragedy.

investigation reveals that the damage being claimed for could have been prevented by basic maintenance on the property. Brokers should advise their clients accordingly.

“Maintenance-related issues are not covered by the homeowner’s policy (or any other buildings insurance policy); and nor is preventative maintenance covered, such as periodic rewaterproofing, the cutting of trees and provision of suitable drainage,” Shaw warned.

Reporting any changes to the property is equally important. Insurers have the right to reject a claim if the building does not comply with legislative requirements. Often the building differs to the original building plans. The slightest change or addition to the house may require the owner to resubmit the building plans for approval. If this is not done, the insurer could reject the claim.

It’s not only structural changes that your insurer needs to be aware of. Shaw said that anything that could potentially affect the policy cover, like installing an extra geyser, needs to be noted.

broker guides the client so that the claim can be settled as quickly and painlessly as possible.

“Don’t let the client exaggerate or try to increase the value of the claim for personal gain, because any dishonesty will make the insurer question the validity of the claim. Lodge the claim as quickly as possible and follow the right procedure – for example, don’t let the client phone a repairman before work has been approved by the insurer.

And should the client have a break-in, flood or fire etc., they should always take pictures to prove it,” Shaw concluded.

“Don’t let the client exaggerate or try to increase the value of the claim for personal gain, because any dishonesty will make the insurer question the validity of the claim.”

When submitting a claim, it’s vital that the

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• Reinsurance

“Natural catastrophes were the main reasons given for losses in the first quarter and challenging market capital conditions were blamed, too.”

Reinsurance news round-up RISKAFRICA provides a quick review of Hannover Re’s latest results, reports on Swiss RE’s $130 million natural catastrophe deal and finds that analysts are still uncertain about a drop in reinsurance rates.

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Hannover Re sees six per cent increase in GWP Gross written premium: Up six per cent (8.1 per cent at constant exchange rates) Net burden of major losses: €743. 2 million Combined ratio (non-life reinsurance): 105 per cent for the third quarter Net investment income: €950.8 million Operating profit: €487.8 million Group net income: €381.7 million Earnings per share: €3.16 Natural catastrophes were the main reasons given for losses in the first quarter and challenging market capital conditions were blamed, too. However, chief executive officer, Ulrich Wallin, appeared upbeat saying that despite the losses, the company succeeded in generating a group net income of €381.7 million for the first nine months. “This puts in place a good platform for achieving our profit target of at least €500 million for the full financial year,” he said.

Hannover Re enjoyed some organic growth with GWP premium increasing by six per cent as at 30 September 2011 to reach €9.1 billion. Net premium went up by 5.5 per cent to €7.9 billion. The company said the group net income was in line with expectations but revealed that the operating profit suffered thanks to reduced profitability in life and health reinsurance producing €487.8 million, which fell short of the strong performance in the comparable period.

According to the company, the non-life reinsurance results were satisfactory despite heavy major loss expenditure. Hannover Re said: “In view of the substantial natural catastrophe events that occurred in the first quarter, the treaty renewals during the year brought the anticipated sharp surges in rates – especially under programmes that had suffered losses. In the area of casualty covers, however, at best moderate improvements in conditions can be observed for reinsurers, although the lowest point has now passed.” The combined ratio stood at 105 per cent, which was less favourable to the 99 per cent it reported last year.

Life and health reinsurance was particularly hard hit by the adverse capital market climate. But despite this, Hannover Re reported that the life and health reinsurance markets continue to offer attractive business opportunities. “Germany, France and Australia are generating heightened awareness of the need for provision. Yet, in leading emerging markets such as China, India and Brazil, demand for retirement provision solutions is also rising.”

Diversification is key according to Wallin.

“The operating profit (EBIT) of 138.6 million Euro generated despite the adverse factors is a testament to the good quality and excellent diversification of our book of business emphasised. “In most markets the business development was as anticipated, pleasing.”

Outlook Hannover Re reiterated that there were market opportunities in international reinsurance business and that it was looking to grow its net premium volume for the current year by seven to eight per cent at assuming exchange rates remain the same.

It had confidence in non-life reinsurance market conditions thanks to rates hardening in some areas. “In view of the heavy losses from natural disasters, especially in the first quarter, the market hardening observed across the board – albeit to varying degrees – in the renewals during the year appears set to continue. This tendency was confirmed not only by the industry gatherings in Monte Carlo, Baden-Baden and the United States, but also by the most recent round of renewals in North America.”

Swiss Re obtains $130 million in nat cat protection After entering into a transaction with Successor X Ltd (Successor X), Swiss Re has obtained $130 million in natural catastrophe protection covering North Atlantic hurricane and European windstorms. This is the fifth time that Swiss Re has used the programme to transfer risks into the capital markets.

The payments from Successor X will kick in when European windstorms and North Atlantic hurricanes hit a certain magnitude.

Swiss RE said this contract helps it to react quicker in response to market conditions and helps it to secure multi-year protection that are at attractive rates to its investors.

The contract ends in November 2015. The transaction, together with prior contracts with Successor X, means that Swiss Re has obtained $2.39 billion of protection against natural catastrophes.

Martin Bisping, Swiss Re’s head of non-life risk transformation, commented: “After a brief dip in returns in the wake of the Japan earthquake, the ILS marketplace has rebounded, demonstrating the commitment that investors have to catastrophe bonds. Successor X allows us to seize opportunities to transfer risk at favourable terms and to support growing demand for natural catastrophe capacity from our clients.”

the US Securities act of 1933. “Insurancelinked securities remain a cornerstone of our hedging strategy, giving us a competitive advantage by allowing us to manage peak catastrophe risk more effectively,” said Matthias Weber, Swiss Re’s head of the property and specialty division.

KBW’s Hitchings – price falls unlikely Despite natural disasters, low interest rates, the continuing financial crisis and a reduction in reserve surpluses, KBW insurance analyst Chris Hitchings was of the opinion that there were no tell-tale signs of the market fall. He was speaking at this year’s Baden-Baden Reinsurance Symposium in Germany.

According to London-based insurance magazine Insurance Times, Hitchings doubted that this would happen, “The fixation on this question of when the reinsurance cyclical upturn will arrive seems somewhat premature. We do not appear to have had a cyclical downturn yet.”

He pointed out that US catastrophe rates are unchanged from post-hurricanes Katrina, Rita and Wilma [in 2005], and they are 30 per cent ahead of where we were in 2004. Although non-US catastrophe rates had fallen, Hitchings said they were now back at 2004 levels.”

About the Baden-Baden Reinsurance Symposium The conference is a key event in the reinsurance calendar and is attended by reinsurance professionals across the globe. It was originally the annual German Marine Conference for many years until 1978. From 1979, the event moved away from BadenBaden, but reinsurers and brokers continued to meet in the south German town in October each year.

The Successor X notes were sold in a private placement pursuant to Rule 144A of

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United Kingdom Friends Life joins forces with Best Doctors

agreement and demonstrate our continued commitment to offering quality propositions for our customers.”

Bondholders are unprotected

Friends Life has signed a new long-term agreement with Best Doctors to include its service in the company ’s new individual protection policies sold through recognised independent financial adviser (IFA) channels. Friends Life was launched in March 2011 and is a provider of pensions, investments and insurance to over five million customers.

The new agreement means that Friends Life will work in partnership with Best Doctors by developing services in the IFA market. Best Doctors is a medical information service for policyholders and their families.

The service, which will be available to all individual protection customers and their immediate family during the lifetime of the policy, will be an option on the new FriendsLife Protect+ Defaqto 5-starrated critical illness and income protection products. Steve Casey, head of marketing and proposition development at Friends Life, said: “Having seen first hand the difference this service makes to the lives of so many people, I am delighted that we are able to sign this

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Four out of 10 mortgage holders in Britain (41 per cent) do not have their mortgage contributions covered by life insurance, according to new research from Sainsbury ’s Life Insurance. The findings suggest that there are nearly seven million people, with a collective outstanding mortgage balance of £245 billion, who have no life insurance to cover their mortgage and provide support to their dependents in event of their death. On average, those who pay towards a mortgage and aren’t covered by life protection are currently personally responsible for an outstanding balance of over £36 000. Worryingly, many of those in age groups who are likely to have dependents are unprotected, with the research showing that one in three (33 per cent) 35- to 44-year olds don’t have life insurance to protect their mortgage payments, and nearly a third (30 per cent) of 45- to 54-year olds do not have this type of cover.

Towergate buys aggregator Towergate has bought caravan and motorhome insurance

comparison site caravanquoter. co.uk. The company said the acquisition of the online brand will boost its plans to grow in the niche sector. Retail chief executive Michael Rea told weekly intermediary publication Insurance Times, which is based in London: “Our success in the caravan and motorhome market makes caravanquoter an ideal acquisition for us. It is a respected brand and a welcome addition to the Towergate online portfolio.”

have a leader such as David to guide our international business into a new era. With over 30 years in insurance and risk management consulting, David is respected and trusted by colleagues, clients and industry peers alike.”

Batchelor appointed head of international division

Previously embattled insurance giant, AIG, announced it has repaid the US Government $972 million, at the beginning of November. AIG’s payment to the Treasury came primarily from funds released from the escrow held in connection with AIG’s sale of American Life Insurance Company to MetLife last year.

The remaining liquidation preference Treasury holds in the AIA special purpose vehicle (SPV) was reduced to approximately $8.4 billion. “We continue to make steady progress towards our goal of America’s taxpayers recouping their entire investment in AIG,” said AIG president and chief executive officer, Robert H Benmosche. “I am confident that AIG’s employees will continue to work hard so we can achieve this goal.”

Insurance broker and risk adviser Marsh has appointed David Batchelor as head of its international division. The business, which comprises all of Marsh’s operations outside North America, includes the Europe, Middle East, Africa (EMEA); Latin America and Caribbean; Asia; and Pacific regions. Batchelor, who will relocate to New York from London in early 2012, will remain CEO of Marsh’s EMEA region through 2011. He will report to Peter Zaffino, president and CEO of Marsh, Inc. Zaffino said: “Marsh’s international division comprises an exciting, dynamic and diverse range of countries. With his deep expertise and broad global experience, I am delighted to

United States AIG repays government $972 million

United States/Asia Guy Carpenter expands into Asia Global risk and reinsurance specialist, Guy Carpenter and Company announced the expansion of its risk management capabilities in the Asia Pacific region with a number of senior-level appointments. Christian Schirmer has been appointed head of GC Analytics – Asia Pacific and is based in Sydney, Australia. Schirmer has 18 years of reinsurance industry experience in both the UK and Australia, including roles at McKinsey and Company, Bain and Company and Beazley Insurance, where he was head of ceded reinsurance.

Sampo Group’s profit before taxes for January – September 2011 decreased to €906 million (€959 million in January to September 2010) as a result of impairment losses of €189 million on the equity portfolios.

Total comprehensive income for the period, taking changes in the market value of assets into account, decreased to €162 million.

“In the third quarter, Sampo’s performance was well in line with our expectations. The result of €906 million was only five per cent below the same period previous year. With the impairments that affected it, it was still a very good result,” said Kari Stadigh, group CEO and president.

“Reuters reported that Finland’s Sampo’s posted weaker than expected profitability for its insurance business due to an above-normal number of large claims as well as a heavy cloudburst in Denmark.”

Europe Sampo posts weak insurance ratio in Q3 Reuters reported that Finland’s Sampo’s posted weaker than expected profitability for its insurance business due to an above-normal number of large claims as well as a heavy cloudburst in Denmark. The group was slightly more upbeat in its announcement saying that the business performed well in line with expectations.

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• The Market

The market is always right Clem Chambers, CEO of ADVFN

Our man in London asks whether we are going through our version of the 1930s stock market crash and asks some rather interesting questions.

When the stock market is volatile, it is very easy to believe that it cares only about today. Actually the market has little interest in the world as it is today; instead it is looking a year ahead.

An emergency will affect stock prices immediately. It is not the immediate impact that is priced into the index, but rather the likely long-term effects discounted back to today. Following October’s Eurozone crisis meeting, the markets showed a strong rally around the globe as European leaders, or rather Germany and France, came out and promised a solution to the debt crisis.

During the last decade’s credit bubble, governments took advantage of the new financial engineering machinery to completely cook the books and deep fry them in debt.

In the process of doing so they ransacked all kinds of assets. Those days are long gone; Germany is

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now following the UK’s austerity programme, with the US entering the early stages in the run up to next year’s presidential election.

What we are currently experiencing is almost a replay of the 1930s. The good news is that if the 2007 crash was the ‘Wall Street Crash’ we are already five years into the slump, putting us at about the 1934 stage of the Great Depression. As it was then, a new economic era is unfolding in front of us.

Another potential indication that a new economic era is unfolding is the news that the Royal Bank of Scotland (RBS), one of the banks nationalised by the UK Government in 2008, has been offered £4 billion by private equity group CVC Capital Partners for its insurance arm RBS Insurance. RBS first sought to sell its insurance interests in 2008, a then joint deal between CVC and Swiss Re was proposed before being cancelled in 2009.

Five years on from the 2007 crash, a paradigm shift in the insurance sector has started to appear. Before the crash, the FTSE Insurance indexes, 350 Life and 350 Non-life, rose and fell with relative parity; but in 2008, while the Non-life index grew in value, the Life index fell (see graph). Since then Non-life has grown above its pre-crash value, while the Life index has yet to return to its 2007 position.

While the Eurozone summit was a positive step forward, good times will not return overnight.

Inflation will grind against the rock of austerity and will rebalance the European economy over a period of three to five years. This will put insurers in a difficult position as cash-strapped consumers may potentially cut insurance spending to meet rising household costs.

This difficulty is reflected in the

share value of FTSE100 insurer Admiral Group. The market rally sparked by the Eurozone summit was not reflected in Admiral’s value, which closed at a year’s low compared to the FTSEs near three-month high.

Five years of an arduous inflation plan will right the economy of Britain, although the pain of the ordeal will be significant. Inflation is unfair and ugly yet it is brutally effective in bailing out countries whose state has run out of control and bankrupted the country ’s treasury.

The question is: how will insurers adapt to this new economic era?

The saying goes that the market is always right, and it will be looking to see whether the insurance sector can meet the new demands of inflation.

• Advertorial

natural disasters

Global reinsurance industry counts the cost of this year’s natural disasters The reinsurance industry has been heavily impacted by a series of natural disasters since the beginning of 2011. Following hard on the heels of the Australian floods and the New Zealand earthquake in February, the world watched in horror as Japan experienced its worst disaster since Hiroshima. In May, a volcano erupted in Iceland, clouding skies as far as Europe, while fierce storms tore through several Midwestern states in the US, killing dozens of people. More recently, a tornado caused extensive damage in Duduza near Nigel, east of Johannesburg and in Ficksburg in the Free State, resulting in deaths, serious injuries and loss of property.

As insurers, after the shock at the loss of life and devastation has subsided, our thoughts turn to how our industry and our reinsurers, and by extension our clients, will be affected by these unexpected catastrophes. The world has shrunk to a global village and countries can no longer see themselves in isolation. Thus an earthquake in Japan can affect the way a reinsurer in Botswana does business, just as floods in New Zealand can influence the insurance premiums paid by Namibian policyholders.

In Southern Africa, there were no major weatherrelated catastrophes that impacted earnings last year. “2010 was a good year for Mutual & Federal and this helped us to secure favourable capacity and prices for 2011. The local reinsurance sector tends to follow trends in the Southern African insurance market, which is currently strong after a relatively benign claims year in 2010,” managing director Peter Todd explained.

Southern African modelling for catastrophic events has proved to be more than adequate. This needs to be emphasised to global reinsurers who tend to lump South Africa and Namibia together with emerging markets when they look at diversifying risk.

“Given the favourable claims environment over the past two years, we would expect to be able to differentiate our risks and escape

any adverse impact from global losses,” Todd explained.

These disasters have also had an impact on the legislation that governs the insurance and reinsurance industries. Insurance regulations worldwide have been radically altered in the past few years, prompted by the need to provide an international standard for how we do business. The necessity of assessing risk accurately has become paramount in the current uncertain climate.

At Mutual & Federal, we strongly support new regulations like Solvency Assessment and Management (SAM), South Africa’s variation of Solvency II, which puts us on a par with international supervisory standards.

Adequate risk management is vital if we as insurers are mandated to protect what is important to our customers. Having our businesses monitored more stringently by outside regulators will ensure that we can restore solvency control levels timeously.

Conversely, it will also ensure that companies that are not meeting the requirements of risk management and transparency will no longer be allowed to practice. These harsh penalties will also aid in enhancing the reputation of our industry as one with its customers’ best interests at heart.

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• Botswana

Botswana: A land of opportunity?

Following on from our country profile of Namibia in the first issue of RISKAFRICA, we now turn our attention to our neighbour, Botswana.

South African insurers and insurers from other countries in Africa have started to look to Botswana as a place of opportunity. With established players of both local and broader African pedigree, the robust and vibrant sector in one of Africa’s success stories has been holding up well despite recession pressure and has attracted the attention of companies in the industry outside its borders.

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Botswana’s insurance industry has become one of the country’s fastest-growing sectors with an average annual growth rate in gross premiums of 18 per cent annually since 2005. According to the Making Finance Work for Africa website, the assets of pension and insurance companies combined account for 49.5 per cent of the gross domestic product (GDP) of Botswana.

It is little wonder, then, that the Botswana insurance sector has proved an attractive investment and growth opportunity for South African insurers and banks. This South African interest was reflected in the inaugural conference for the Insurance Council of Botswana (ICB), which was held in Gaborone in September 2010 and attracted some of the biggest players in the South African insurance industry.

Manie Booysen, former CEO of the Financial Intermediaries Association of Southern Africa

(FIA), said in a statement that “it was clear from the presentations that Botswana and South Africa have the same views regarding the regulatory environment for the insurance industry”.

financial entities registered in Botswana including pension funds, asset management, consumer/ micro lending, insurance and collective investment undertakings.

In February 2011, Absa announced that it was launching a new subsidiary, Absa Life Botswana, in Gaborone. Willie Lategan, chief executive of Absa Financial Services, said in a statement, “We saw an opportunity in Botswana for Absa Life to enter the market and provide a distinct service offering.

Absa believes that our business has a market in the country. Moreover, Botswana has a sound monetary policy which safeguards and ensures economic stability. We have been particularly impressed by the regulatory environment of financial services under the supervision of the Non-bank Financial Institutions Regulatory Authority (NBFIRA) and the Bank of Botswana.”

Botswana’s largest insurance company, Botswana Life, boasts an 80 per cent market share in the country and is a member of the Sanlam group of companies, headquartered in South Africa.

Another South African insurer, Hollard, is also active in Botswana. Hollard Insurance Botswana was established in May 2005 with an initial capital of 10 million Pula, with shareholdings earmarked for local management. It offers a full range of business and personal lines of insurance.

Metropolitan Life Botswana started operating in 1997. It has a dual shareholding comprising Botswana Development Corporation (25 per cent) and Metropolitan South Africa (75 per cent). Global reinsurers Zurich Re operates in Botswana through subsidiary operations.

NBFIRA is the regulator of all non-banking

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Local Botswana competitors include General Insurance Botswana. Other insurers in the region are also claiming a stake in the insurance industry with Zimbabwean FMRE Property and Casualty Insurance Company entering the market in July 2010. At the time of the launch, chief executive officer of NBFIRA, Oaitse Ramasedi, said that FMRE “will transform Botswana‘s re-insurance industry”. He added, “We welcome the coming of investors in Botswana from fellow African nations as this shows confidence in the ability of our nation to partake of the growth and expansion of businesses and economies in our region.”

But the sector in Botswana is not without its challenges. As competition increases, existing players are feeling the heat. Botswana Insurance Holdings Limited (BIHL) chairperson, Batsho Dambe-Groth, said at the announcement of the company’s results in March 2011 that its asset management and life insurance subsidiaries were expected to lose some business in 2011 as new competitors entered the industry, while new regulatory measures will put pressure on the group's income.

Dambe-Groth said, “The asset management business will lose some business due to a change in strategy by a key client, while the entrance of Absa Life will provide some competition to

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our life assurance business. The freeze in civil servants’ salaries has also affected our Botswana Life business as the bulk of our clients are government employees.” Botswana Life lost its Barclays account to Absa Life earlier in 2011.

Despite this, BIHL’s operating profit increased by 12 per cent to P281 million as a result of operational performance from both the life insurance and asset management divisions.

Though NBFIRA was initially praised, it is the source of much concern within the current context. In October, the Sunday Standard reported that the Botswana Government was “worried that thousands of insurance policyholders may lose millions of Pula and scores of insurance companies may find themselves facing closure as the NBFIRA proposed changes to reinsurance oversight seem set to steer the industry into ruin”.

According to the report, NBFIRA issued a circular indicating that reinsurance should be placed with Botswana-registered reinsurance companies.

Currently, only two reinsurance companies – FM Reinsurance Property and Casualty (FM Re) and First Reinsurance Company (First Re) – are registered with NBFIRA and the Sunday Standard has reported that the parent companies of these two reinsurers are experiencing financial difficulties. Under the NBFIRA circular, all local insurers would be obliged to cede to the two recently registered local reinsurers.

Moves have been made to tighten professional and ethical practice in the industry with the Insurance Council of Botswana (ICB) introducing

the Insurance Industry Charter, an instrument through which members bind themselves to the highest ethical and professional standards, in September this year.

Insurers wishing to expand into Botswana need to look carefully at the current landscape and regulatory environment, which, while similar in philosophy to that of South Africa, poses certain challenges. Despite this, Botswana remains a country brimming with potential and offering an attractive package to the shrewd insurer looking to expand.

events IIN short term conference a hit

A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well.

The Insurance Institute of Namibia (IIN) enjoyed great support from the industry when it successfully hosted its first Short-term Insurance Conference on 26 September 2011. Some 107 delegates attended; representatives from the legal, banking and motor trades, but mainly short-term insurers, brokers, reinsurance brokers and loss adjusters.

The aim of the conference was to get professionals with a stake in the development of the short-term insurance industry talking to each other and sharing information. Share they did; the conference was a hit according to IIN director Riana Gous.

“The support of the short-term insurance industry is a vote of confidence in the IIN’s objectives. Our aim is to represent and protect the professional status and shared interest of our members who are active in the Namibian insurance industry,” Gous said. “We’ve already started planning our 2012 conference.”

A new look for the IIN Keeping up with the times is becoming more and more important.

Amazon.com CEO Jeff Bezos famously said, “A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well.” It’s not only businesses that need to stay in touch with the latest trends though, which is why the IIN recently launched its newlook logo. Here’s to the future.

The aim of the conference was to get professionals with a stake in the development of the short-term insurance industry talking to each other and sharing information.

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