Dear Reader It seems we Africans are often the orchestrators of our own misfortune. With the European economy in disarray, it is the BRICS economies that continue to shine globally. It is with dismay then that we look northwards to the instability that continues to afflict (mainly oil-producing) countries that really should be taking advantage of what could be their time in the sun.
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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For Namibia the discovery of massive oil reserves could herald an opportunity for our nation to provide its people with schools, roads, hospitals and infrastructure on a scale unprecedented on the continent. Be warned though; should oil eventually be exploited off our coast, it will surely bring with it a plethora of oil hungry mega-corporations keen to claim their slice of the crude cake. It is therefore vital we learn from the mistakes of others, putting all the correct checks and balances in place. This will ensure our mineral wealth is exploited in a way that maximises benefit to the ultimate custodians, the Namibian people. We hope you enjoy this issue of RISKAFRICA as much as we enjoyed bringing it to 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 Hanna Barry Elvorne Palmer Bianca Wright Angelique Ruzicka Art director Dries van der Westhuizen Copyright THE RISKAFRICA MAGAZINE PUBLISHER CC 2012. 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 10 16 20 22 24 26 35 37
Lucky strike? CEO profile: Franco Feris, Santam Namibia Beneath the numbers: Screening medical insurance Silver lining: The future of life insurance in Africa Third party insurance reform: Will insurers benefit? Overflowing: The Namibian flood response Reinventing the wheel: Will South Africa’s RE test work in Namibia? News Africa profile: Inside Mozambique The next twenty hours
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Lucky strike? Namibia can expect to benefit tremendously from job creation as well as royalties and taxes paid by oil companies.
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Last year, black gold more commonly known as oil was found in Namibia. It was first predicted that the find would equal around 11 billion barrels of oil but Ben Brewerton, spokesperson for Chariot Oil & Gas, said that the estimated number of barrels that could lie off Namibia’s coastline now stands at 20 billion barrels. “We are hoping to drill the initial well in the first half of this year. This estimate is based on seismic activity in the region but we won’t know for sure how much is down there until we start drilling.” No doubt the oil find will mean big business. In July 2011, reports compared Namibia’s oil find on par with neighbouring Angola, whose reserves were estimated at 13 billion barrels and whose production rivalled Nigeria – Africa’s top oil producer. But with 20 billion barrels now a possibility, Namibia could surpass its fellows on the continent in terms of production. It’s good news for those working in petroleum, especially for Enigma Oil & Gas which has identified the prospects along the southern coast. But even though an independent oil and gas company is set to profit handsomely, Paul Welch CEO of Chariot Oil & Gas, which owns Enigma, was quick to point out the benefits for the country. He was quoted in Moneyweb as saying that Namibia can expect to benefit tremendously from job creation as well as royalties and taxes paid by oil companies. He compared Namibia to Brazil’s situation 10 years ago. “Brazil has gone from essentially an importing country to an exporting country with regard to crude oil products. The difference between Namibia and Brazil is that there are only 2.1 million people in Namibia, so every barrel discovered in Namibia is going to make a tremendous difference.”
Open for business But what does it mean for other industries within Namibia? The answer is that if the extraction and export of petroleum is conducted in the right way, a number of other industries, including the financial services industry, could benefit. Many commentators and politicians have made upbeat statements about the potential oil find. During a briefing in July, Minister of Mines and Energy, Isak Katali, announced that this strike could see a return of international majors back to Namibia, which will further improve the image of the country as the new petroleum exploration destination. “We are expecting six to eight wells to be drilled in Namibia over the next 18 months,” Katali added. Insurance commentators have welcomed the news, too, and see it as a major opportunity for the financial services industry. “We at Santam Namibia believe that the oil find will have a very positive effect on the country and the economic development of Namibia; the positive spin-off will be employment and development. Insurance will most definitely benefit – from the contractors and erection policies to marine and personal lines. For Santam and the short-term industry this will boost growth and profit. Santam is well positioned to tap into this growth due to our infrastructure and solutions we can offer in the niche environment – we basically have all the solutions to cater for short-term needs,” said outgoing CEO of Santam, Riaan Louw. Riana Gous, director of the Insurance Institute of Namibia (INN), added: “It’s a huge opportunity. In the development stages it will
create some opportunities in terms of construction and risk policies and employment. It will have an impact on insurance and the financial sector as a whole. There is a lot of homework to be done. We are looking at this anxiously and I am sure we will take the opportunities up as they present themselves.” Japie le Roux, chief operating officer Namibia and acting managing director of Mutual & Federal (M&F), said the industry would definitely benefit; however, he was more cautious with his optimism. “It will generate some work for people and more premiums for the industry. It all depends though on how long this project will take; when it will physically be taken out of the ground; and on what the government is going to do. If they only extract and export, there will be an impact on the financial side but there may not be as much work for people. But there could be lots of spin-offs [opportunities] for the country.” Brokers are also set to benefit from the discovery of oil and a number of deals could certainly be struck between brokers as well as brokers and insurers this year and beyond. Marsh has made no secret about the fact that it is expanding its operations in Africa and keeping up its momentum in Namibia is certainly one of its goals. Providing cover for drilling rigs and equipment is one of its many specialities. In September 2011, Marsh and Arab Anglo Insurance Brokers (AAIB) launched a new facility for oil drilling contractors operating in Iraq. The Iraq Land Rig Facility provides cover for physical loss or damage to drilling rigs and associated equipment, machinery breakdown and third partly liability risks. Jurie Erwee, chief executive officer of Marsh Africa, expects business opportunities for the firm in Namibia, too. “This find in Namibia is relevant and we are excited about it as we do have the expertise to leverage off of in Namibia. There are lots of secondary opportunities to take advantage of because of investment going into Namibia, people relocating and companies acquiring assets,” he said. Dangerous waters While the 20 billion barrel find is indeed exciting and could be hugely beneficial to the country and participating industries alike, there are downsides to having an oil rig so near. Environmental waste and pollution are just one of the many setbacks to mining for petroleum. Many harsh lessons were learned during and after the Deepwater Horizon disaster.
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Market response to Deepwater Horizon loss
As BP owns 65 per cent of the Deepwater Horizon consortium, it self-insures so the insurance industry has not been hit as hard as it could have been. But according to the Insurance Information Institute, companies with exposure to the Deepwater Horizon oil rig are insured for losses totalling $1.4 billion to $3.5 billion according to initial reports. However, litigation, D&O liability and workers comp losses may eventually bring total insured losses to $4 billion or even as high as $6 billion. Fortunately, the insured loss is spread across a broad range of insurers and reinsurers on a global scale.
BP is suing Halliburton as the manufacturer of the cement cap which blew when the blow-out preventer failed. Halliburton isn’t the only company that BP is taking on. It’s also in legal battles with Transocean, the owner and operator of the Deepwater Horizon rig. BP has received some remuneration already, however. Last year, Cameron International, which manufactured the well’s blow-out preventer, paid BP $250 million for costs associated with the spill. According to the BBC, the US commission that investigated the spill found that BP, Halliburton and Transocean all shared blame.
Lawsuits against equipment manufacturers, suppliers and sub-contractors and business interruption claims could also bump up the increased losses according to the Insurance Information Institute. But the Deepwater saga is continuing and losses could still come through this year and in the future. At the time of writing, the BBC reported that oil giant BP is locked in a legal battle with its contractor Halliburton, which it is asking to pay for all costs and damages that arose from the oil spill in the Gulf of Mexico. The spill was the worst in US history and so far BP has spent $14 billion in the clean-up operation. It has set a further $20 billion aside for damages. Besides polluting the environment and killing animals, people have also died due to the disaster. Eleven workers were killed when the cement cap blew.
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While Namibia’s oil find could earn it millions if not billions of Dollars in revenue, the industry should take heed and precautions to prevent such an incident. An oil spill of this magnitude will not only have an impact on the financial services, tourism and petroleum industry, but it could severely impact or potentially reverse any financial and economic benefits that the oil find could provide in the future.
Price impact:
Impact on demand:
• The loss is a major event for the offshore energy insurance and reinsurance market, described by many as a ‘market-changing’ event. • Others note that while energy insurers have been unsettled by the loss, capacity has not constricted and price increases are likely to be modest unless further major losses occur. • As of 26 May 2010, Lloyd’s estimates net claims from the Deepwater Horizon loss at between $300 and $600 million. Richard Ward, Lloyd’s CEO, said: “These figures are our estimate of the market’s total exposure … The event in the Gulf of Mexico is still developing.” • Energy insurance rates for offshore accounts are expected to rise and terms and conditions to tighten. • MarketScout CEO Richard Kerr predicts 15 per cent to 25 per cent rate increases for rigs operating in shallow water and up to 50 per cent rate increases for operations further out to sea. • Given existing capacity levels, analysts do not expect the event to lead to a sustained hard market in offshore energy insurance. Prior to this event, energy insurance pricing was declining 15 per cent.
• Many firms involved in offshore activities are reviewing their current insurance programmes and seeking to top up their cover and looking at terms and conditions. • Business interruption coverage resulting from pollution is not widely purchased by insureds. Analysts predict more businesses will be looking to purchase such cover. Impact on capacity: • Marsh commented in July 2010: “There isn’t a lack of capacity, and as things stand, no-one looks like they are ‘leaving the party’.” • Concerns remain that if the US raises the liability cap under OPA for offshore facilities to $10 billion from $75 million, insurance capacity will be insufficient and more energy companies will have to self-insure. • Potential reduction in reinsurance capacity is another concern. In the wake of the loss, reinsurers’ management may be starting to question necessity of writing offshore business which could impact energy insurers at year-end renewals. Source: Insurance Information Institute. Deepwater Horizon Disaster: Insurance Market Impacts presentation, 11 June 2010.
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• CEO profile
FrancO Feris Santam Namibia
by Hanna Barry
RISKAFRICA caught up with Franco Feris, recently appointed as CEO of Santam Namibia. We heard his views on the FIM Bill, skills development and what his plans are now that he’s in charge of one of the biggest short-term insurers in the country. Franco also shed some light on his private life.
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1. In March 2007, you took on the role of chief operating officer at Santam. How has your time as COO prepared you for this position? The role as COO empowered me with the following: • Short-term insurance skills: product knowledge and underwriting. • The opportunity to build relationships with brokers and understand the value chain. • An understanding of the workings of internal processes (such as what happens with a claim and quotation, or understanding policy wording, for instance) and the total flow of the business, including the importance of the wider Santam group and the placement of Santam Namibia within the group.
because we want the industry to be regulated. The FIM Bill will provide the regulator with the necessary tools to perform this function as watchdog, hence promoting improved compliance and better client service. We score ourselves against various bills and charters and are currently engaged with scoring ourselves against this bill and are comfortable in terms of compliance. We want to comply with legislation; this has always been the view of Santam. We want to help the authority and believe in an open relationship with the regulator.
3. What will you do differently to your predecessor, Riaan Louw? If you don’t think you will do anything differently, could you please say what it is you admired about Louw, what he has done right for the company and how you intend to follow on from what he has done. Riaan was a leader of impact, who allowed staff to grow. I will continue with the vision to provide excellent client service, improved broker relationships and create a working environment that promotes positive and high morale within staff. 4. What is Santam currently doing well and where could it improve, or in which area would you like to see an increased focus? Currently, the business is operating on sound business principles, complying with legislation and yielding returns to stakeholders. Going forward we will embark on claims excellence and continually improved risk management. 5. Name three things that you believe would improve the insurance industry in Namibia. • Skills: a shortage of skills is currently costing the industry. • Regulation: a closer relationship between the regulator and the industry. • Client education: empowering the client to understand short-term insurance. 6. What is your view on new legislation, such as the FIM Bill? Santam welcomes the introduction of the FIM Bill
10. How do you plan to contribute to the goals of the Namibia Insurance Association committee and what do you hope to achieve while serving on this body? To be an active player and collectively, with other insurers, improve skill levels and the understanding of and compliance with legislation. 11. Describe yourself in a few words.
All these acts, such as the FIM Bill, the financial sector strategy and the Namibia Financial Sector Charter (NFSC) complement each other and speak the same language. The idea is that if you comply with the FIM Bill, you will comply with all the others.
2. What will you tackle first as CEO? Ensuring that both brokers and internal staff are comfortable with the transition; the focus will be to build relationships and trust.
that, compelling aggressive retention strategies and continuous improved customer satisfaction.
7. What are the biggest challenges facing Santam and the Namibian insurance industry more generally? The greatest challenge is the shortage of skills within the industry. 8. What is Santam doing to address this challenge?
I am a self-starter and base my life on values of which integrity is the cornerstone. Teamwork is of great importance and success is a continuous journey driven by learning. 12. If you weren’t doing what you are doing now, what career path would you have chosen? Farming and doing motivational talks to youth. My dad is a farmer, I grew up on a farm and currently do part-time farming. My farm is next to my dad’s and I farm Bonsmara cattle and Van Rooyen sheep. I leave for the farm on the weekends and enjoy escaping the stress of the corporate world.
We are actually the only insurer providing product training within the insurance industry, in both personal lines and commercial lines. We also give various bursaries to school-leavers, enabling them to study while doing an internship, and give holiday jobs to students from Grade 10 to Grade 12 to expose them to the environment.
Motivational speaking is a passion of mine that I’m currently doing in our community. Most of my motivational talks are directed at young people, focused on inspiring them to make a success of life.
I don’t think people know what short-term insurance is really about and, through the motivational talks I do at schools, I am able to act as a brand ambassador for Santam, explaining what the yellow umbrella is all about. These talks are given to various ages, some as young as nine or 10. We also provide educational best achievement awards at less privileged schools, giving vouchers for books for the following year. Once again, someone from Santam goes to these schools and chats about the company and the industry.
To honour your word for this is the basis for trust and to continuously walk an extra mile for your client and business partner.
9. In terms of your predictions for the industry in 2012, you told RISKAFRICA in our December/January issue that competition will increase for commercial lines and brokers will be more aggressive on retention.
13. What important business lessons have you learned?
14. How did you get to where you are today? My achievements are attributable to the following: • Hard work: the willingness to turn a dream into a reality and believing in myself. • Teamwork: the people who surrounded me allowed me to grow and supported me. • Faith: God carried me daily and supported me – the ultimate reason for my position.
Brokers are becoming more aggressive on retention and developing a better use of technology to provide better retention for their clients. In commercial lines especially, brokers are providing better client advice and taking better care of their clients. Over the last year, the Namibian economy has grown by around 4.7 per cent and Santam has got a growth target much higher than
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• Medical aid funds in Namibia
beneath the numbers by Hanna Barry
RISKAFRICA takes a closer look at Namibia’s medical aid fund industry and finds that despite regulation, some questionable practices lie under the surface.
W
hile the basis from which medical aid funds in Namibia operate originated from the South African environment and legislation, today the industries differ in important respects. These differences lie chiefly in regulation and risk management. Before unpacking the rocky regulatory environment, we take a look at risk management practices, the who’s who of the industry and their strategies to grow the market. Risk management The ability of Namibian medical aid funds to risk rate and apply underwriting to new members has arguably helped keep member contribution increases down. Senior manager of marketing and consulting for Medscheme Namibia, Ronnie Skolnic, is of this opinion. “Due to the ability of medical aid funds to better risk rate and apply underwriting before accepting new members onto the fund, we have found that the contributions charged by funds are in general slightly
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cheaper than that of comparative South African medical schemes; in addition our benefits are slightly richer, especially with regard to dayto-day benefits or out-of-hospital treatment,” he explained. Applications for membership can even be rejected altogether, as long as this is in compliance with conditions set out in the Medical Aid Funds Act, 23 of 1995, which regulates the industry. South African medical schemes are not allowed, by law, to deny membership to anyone (even elderly people who previously did not belong to a medical scheme) or base premiums on risk. This has arguably lead increasingly to anti-selective behaviour, with members joining a scheme only when they fall ill. However, on the Namibian side, risk rating has allowed insurance companies to enter the space of medical aid funds, which gives rise to challenges of a different sort. Who’s who? Four open funds and four closed funds provide health cover to approximately 152 238 Namibians, in the private sector.* With 64 399 principal members, excluding those on the Public Service Employee Medical Aid Scheme (PSEMAS), the market for medical aid funds is small in Namibia. “In 2009, Namfisa statistics reflected that of the approximately 1.2 million employed Namibians, only 23 per cent were covered by medical aid, including PSEMAS members,” said Hester Spangenberg, executive director of Investmed Ltd. “This implies that the rest of the population is either dependent on state-subsidised facilities or make out-of-pocket provision for healthcare funding.” However, these figures do not include medical insurance companies operating in Namibia, regulated by the short- and long-term insurance acts. One such company is Investmed Ltd. While risk is shared among members of medical aid funds on a cross-subsidisation basis, medical insurance products work on the basis of individual underwriting and risk assessment. “The healthcare market in Namibia is small and remains volatile and the current medical aid environment has become unaffordable for a large number of employed persons,” noted Spangenberg. Annual audited statements of the medical aid funds reflect that the average contribution from members increased by N$ 1 323 over 11 years – from N$ 683 in 1999 to N$ 2 006 in 2010. However, the average claim amount more than doubled in the same period, as did membership. While individual risk rating may seem preferable in such small risk pools, it can also have its downsides. “Insurance companies pose a significant risk to private [medical aid] funds as they target and attract young risk,”
said Tiaan Serfontein, managing director of Medscheme. “As these risks get older, premiums increase and become unaffordable.” He acknowledged that medical insurance companies do have a place when it comes to gap or top-up cover. Managing director of Prosperity Health, Callie Schafer, thinks that the industry is facing major challenges over the next 12 to 18 months, including growing membership. “To this end a number of short-term insurers have entered the local market and other insurers from South Africa considering expansion into Namibia,” said Schafer. He thinks that medical insurers should provide certain niche products rather than compete with traditional medical aid funds. Schafer said that it is to the individual’s benefit to be in a risk pool involving cross-subsidisation as health deteriorates with age, leading to possible premium increases for people that are carrying their own risk. However, he acknowledged that people in medical aid funds cannot be incentivised, in terms of the Medical Aid Funds Act, to reduce claims, while in the insurance industry policyholders are rewarded if they claim less and keep their risk profile low. But the question remains. With such small risk pools, what are medical aid funds doing to grow their membership? Growing the market “Efforts have been made by the industry to stimulate membership growth through the introduction of primary healthcare options with varying degrees of success,” said Skolnic. To promote this end, Namibia Health Plan (NHP) administered by Medscheme and Renaissance Health administered by Prosperity Health have joined forces to form an organisation known as Prime Care Network (PCN). PCN is aimed at contracting health professionals to provide services at reduced rates, which is essential to keep premiums low and promote the accessibility of healthcare. “This is in the best interest of all private healthcare players (funders and health professionals) and holds direct benefit to government as the number of Namibians making use of public health facilities is reduced and subsequently costs are reduced,” noted Schafer.
With about 65 000 principal members, excluding those on the Public Service Employee Medical Aid Scheme (PSEMAS), the market for medical aid funds is small in Namibia.
“It’s commendable that almost 60+ health professionals, such as GPs, specialists, private hospitals and dentists, have joined the Prime Care Network. This contributes to the effort of providing cover to more Namibians,” he continued. This promotes the Namibian Government’s ‘Vision 2030’, which is to provide accessible and equitable healthcare for all. Further, Schafer said that it confirms the willingness of private healthcare players to work together and find solutions for challenges facing the industry. “Another first for the joint venture was to introduce a mobile clinic, operated by a GP and
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providing medical services to members in certain remote areas in an effort to improve accessibility. This directly contributes to a healthier workforce and to the participating company’s productivity, as well as enabling employees to build a future and protect their employment,” said Schafer. “The services provided by the network are not inspired by financial motive and are open to members of all medical aid funds. It’s not considered a competitive tool, but an honest attempt at broadening the base of private healthcare cover in Namibia.”
Reviving public healthcare facilities and offering services at reduced prices would not only reduce the financial burden on private medical aid funds, but would also stimulate growth amongst these funds.
Medical aid funds also employ incentives. “The NHP fund supports a healthy lifestyle among its members through the provision of attractive gym rebates and an annual low-claims incentive through its roll-over benefit,” said Skolnic. This allows low-claiming members to supplement benefits or cover out-of-pocket expenses. In the same way, Investmed rewards members who do not claim (or claim very little) by a no- or low-claim bonus. “Unlike medical aid funds, Investmed Ltd believes that one of the keys to maintaining healthcare costs is to empower the consumers,” said Spangenberg. “Investmed empowers its clients with financial incentives by being able to make specific choices with specific financial outcomes.” The ruling by Namfisa that brokers can approach only previously uninsured individuals, and are not allowed to sell medical aid to members of other medical aid funds, is also aimed at growing the market. Schafer explained that since the market is very
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NHP provides it’s members with the “winning combination” In recognition of the quality service and products offered by Namibia Health Plan relative to the rest of the industry, we have been awarded the Diamond Arrow PMR Award in the business sector: “Medical Aid Funds in Namibia” for both 2010 and 2011, being rated the best medical aid fund in Namibia for two consecutive years. We are very pleased to have been bestowed this honour yet again for our specialist managed healthcare and administration services. The PMR Africa Awards are held annually to benchmark the standards of products and services in Namibia with the Diamond Arrow Award being the highest honour that a company can receive. While NHP continues to be recognised by the PMR Africa Awards each year it is no less of a privilege to be counted once more among Namibia’s leading organisations in 2011. This year we were adjudged first overall and received the PMR Diamond Arrow Award for best medical aid fund in Namibia. We view this as a reflection of the technical efficiency and personal service that lie at the heart of each and every one of our client interactions. NHP were bestowed with the same honour in 2010. At NHP we do not take our pledge to be your partner in health lightly. We are committed to provide every member with exceptional levels of customer care, services and products that are adaptable to their unique and diverse, individual medical aid needs.
NHP, Your Partner in Health. Namibia Health Plan Tel (+264 61) 285 5400 Fax (+264 610 223 904
limited in Namibia, “poaching” or recycling existing members from competing funds is unproductive. “We found that over the last two to three years, the number of members in medical aid funds grew only two to three per cent,” he noted.
It is these special favours, based on who and what you know, which result in fund members not being treated in the same manner.
It does not seem as though all regulation in this industry, however, is aimed at being as productive as this one. The regulatory environment “Unfortunately, although NAMAF (the Namibian Association of Medical Aid Funds) is the representative body of the medical aid funds, decisions taken are not always to the benefit of the consumers and are not always applied across the board,” said Spangenberg. Firstly, not all stakeholders of the industry are represented on the committee of NAMAF, which can be problematic for its independence. Spangenberg explained that in reality it is the administrators that look after the interests of the funds and not the independent board of trustees (who often do not know the legal responsibility associated with such a position), and that these administrators will give discounts to certain employer groups, even though this goes against the Medical Aid Funds Act, to retain or obtain business. Since these employer groups have more power than individual members, if they threaten to leave the fund, they are often granted discounts so that the fund keeps the business. This financially exposes individual members and, while it may be best for business in the short term, is detrimental to the industry in the long run. Spangenberg knows of an ex-trustee of a medical aid fund who boasts of how he exceeded the limit he was subject to by his fund for his chronic medication and other benefits and then used knowledge of inside information to force the fund into processing his claim. “It is these special favours, based on who and what you know, which result in fund members not being treated in the same manner,” she added. Industry tariffs may also face dissolution in the near future. Currently, NAMAF benchmark tariffs and procedure codes are used by medical aid funds for the processing and reimbursement of members’ medical claims. NAMAF engages with various stakeholders to arrive at an acceptable tariff regime against which medical aid funds will benchmark the reimbursement of health services rendered to their members. “The Competition Act and the interpretation allowed for by the Competition Commissioner will determine to what extent NAMAF will be able to continue to apply the industry tariffs across disciplines and whether it will adopt a similar stance to what has happened in South Africa, whereby the BHF tariffs were ruled as anti-competitive and medical schemes were forced to negotiate tariffs individually with
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service providers,” said Skolnic. The scrapping of the National Health Reference Price List (NHRPL) in South Africa in 2010, in the name of competition, has in fact pushed up private healthcare costs and placed pressure on medical schemes – especially smaller schemes that do not have the financial muscle to negotiate with service providers. “It may be argued that external mechanisms and pressure imposed on medical schemes in South Africa may have hastened the demise and long-term sustainability of the industry and thereby hastened the introduction of National Health Insurance,” said Skolnic. “It is felt that the same levels of interference and external pressure may eventually result in a similar situation in Namibia.” Medical care for all The impending introduction of National Health Insurance (NHI) in South Africa has caused much debate and discussion. All those earning above a certain threshold will have to pay for NHI and may be unable to afford private medical aid on top of this. With little confidence in the state of public healthcare in the country, this has given rise to grave concerns. In Namibia, according to Schafer, the social security commissioner has appointed Deloitte as consultants to assist them with the investigation into the formation of a national medical benefit fund for Namibia. He said that Namibia can learn from the South African experience in finding a model that suits the needs of Namibia and the objectives of the Namibian Government. “It is inevitable that NHI will be implemented [in Namibia], thereby reaching out to all the other
persons currently not covered by the private healthcare sector, who have become a huge financial burden for the Namibian Government,” said Spangenberg. “As is the case in South Africa, the government does not necessarily have the capacity to support this; however, it can be sourced from the industry whether in Namibia or from abroad. A concern is the manner in which contributions to belong to the NHI, which will be compulsory, is to be calculated. It will be unlikely that employees will be able to afford to belong to the NHI as well as their current medical aid fund for the mere reason that they will not be able to afford both contributions monthly.” This may make medical insurance companies increasingly popular for top-up cover or hospital plans, posing a definite risk to the sustainability of medical aid funds in Namibia. “The ideal situation would be to see to what extent the existing infrastructure offered and supported by medical aid funds could be used in a complementary manner to what the requirements may be of government,” commented Skolnic. He said that reviving public healthcare facilities and offering services at reduced prices would not only reduce the financial burden on private medical aid funds, but would also stimulate growth among these funds. The level of care, affordability and availability of healthcare professionals remains a problem. Whether the Namibian Government will address these and successfully introduce a national medical benefit fund remains to be seen. *Figure from the 2011 Namfisa Annual Report.
ADVERTORIAL • CEO profile
A MEDICAL AID SCHEME WITH A DIFFERENCE WHO ARE WE Investmed Ltd is a well-established competitor in the medical aid fund industry. The products are affordable and accessible and have been designed to address the specific needs of employer groups, individuals and families. The fact that members are rewarded with a low-or-no claim bonus where claims have been uitilsed effectively has put Investmed Ltd in a leading position in the healthcare industry. We use accredited brokers to market our products throughout Namibia. WHO MAY JOIN AND WHEN Any employer group, individuals or families may join at any time during the year without cover being pro rated. The month that you join determines your policy year. Any person irrespective of age may join.
• Our service exceeds the normal standard as we have weekly pay runs and you can manage your own portfolio daily through our website as our system is live. OUR OBJECTIVES Investmed Ltd is dedicated to remain a competotor to be reckoned with as we help people achieve health and financial security by providing easy access to safe, cost-effective, high quality healthcare and protecting their finances against health-related risk. Our consumers are empowered with financial incentives by being able to make specific choices with specific financial outcomes. HOW TO JOIN You may either contact our office or an accredited broker or visit our website at www.investmednamibia.com
WHAT DO WE OFFER A key distinction between what Investmed Ltd offers in relation to the competitors is that all costs while in hospital are paid at 100 per cent of cost and not an agreed tariff which often leaves additional shortfalls to be paid by members when least expected and often when less affordable. The product design gives the insured freedom of choice and affordability. Policyholders will not feel that they pay exuberant monthly premiums for which they do not receive value for money unless they claim. Policyholders have the benefit of structuring their own cover according to their own specific needs and are in control not to claim for unnecessary services. WHY YOU SHOULD JOIN INVESTMED • We offer you lower monthly premiums for more comprehensive cover. • We do not make a distinction in cover between the principle member and the beneficiaries.
CONTACT US Tel: +264 61 271 260/254/279 Fax: +264 61 271 287 Office: 17 Ausspann Centre, First Floor, Ausspannplatz, Windhoek Postal: PO Box 23148, Windhoek, Namibia
• Life
The future of life insurance in Africa
by Lize van Coeverden
Is there a future for life insurance in Africa, where so many households live on only a couple of Dollars a day and many don’t live to see adulthood, not to mention old age? We look at some recent facts, figures and predictions and analyse the prospects for life insurance in Africa.
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There was a time when Africa was referred to as Dark Africa for good reason. Development, in the Western sense of the word, was non-existent and the customs and living conditions of the continent’s people was so different and incomprehensible to the developed world that it seemed a dark and inhospitable place. Over the centuries, through colonialism and the post-colonial era, this has changed dramatically and Africa became a land brimming with prospects of wealth, mineral riches and an explosion of new markets. Today, Africa has a collective GDP (2008) of US$ 1.6 trillion, roughly equal to that of Brazil or Russia. In 2008, Africa’s combined consumer spending was in the region of US$ 860 billion. There are 52 cities with a population of more than a million people each and 20 African companies with revenues of at least US$ 3 billion (source: McKinsey Global Institute, ‘Lions on the move: The progress and potential of African economies’, 2010). Life in numbers While evidently some economies are flourishing, in many countries, food security, living conditions, access to medical treatment, civil unrest and war have been the main stumbling blocks to development in Africa for decades (and continues to impede economic transition). When it comes to life expectancy at birth, with the exception of a few, African countries have among the lowest life expectancy figures in the world. Only an isolated few (such as Egypt and Morocco) exceed the world average, where numerous countries have life expectancy of up to 40 per cent lower than the world average, according to the UN, with an average person not expecting to see their 50th birthday.
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In Nigeria, life expectancy is a staggering 30 per cent below the world average. Nevertheless, it has a flourishing insurance sector. The Nigerian Insurers Association (NIA) has over 50 members and more than 10 life insurance companies are listed with NIA.
These facts would suggest that life insurance is even more necessary here in Africa than in developed countries with life expectancy of up to 70 or even 80. Families are often left destitute when the breadwinner in a family dies, reducing their chances of surviving to long and fulfilling lives. Whether it is then economically viable to sell life insurance in countries where life expectancy is low or even how to attract business in such markets where poverty levels and distrust of financial services are high are pertinent questions. A case in point In Nigeria, life expectancy is a staggering 30 per cent below the world average. Nevertheless, it has a flourishing insurance sector. The Nigerian Insurers Association (NIA) has over 50 members and more than 10 life insurance companies are listed with NIA. Conversely, in Mozambique, a country with life expectancy 40 per cent below average, the number of insurance companies is few. The size of the population and their productivity is invariably linked to their potential as prospective insurance markets. Nigeria covers an area of just over 900 000 square kilometres, where Mozambique has just over 800 000 square kilometres. However, when we compare the size of their populations, Nigeria’s population is estimated to be in the region of 167 million, with Mozambique coming in with approximately 23 million. Their GDPs are also US$ 415 billion and US$ 9.9 billion, respectively. Clearly, life expectancy isn’t the only factor here. The HIV/Aids factor Of the 33 million people with HIV/Aids in the world, 22.5 million of these live in Africa. In 2009, 1.8 million people died as a result of the disease, 1.3 million of whom lived in Africa. Of the 15 million Aids orphans in the world, 13 million of them are in Africa. These are the
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statistics according to global initiatives and the Joint United Nations programme on HIV/Aids (UNAIDS). New technologies, education and the development and increased access and distribution of antiretroviral (ARV) treatment is increasing the life expectancy and quality of life of HIV-positive people (and so also their ability to contribute to the economy) continually, but according to the UNAIDS 2010 Global Report, at least 10 million of those infected in Africa still do not have access to ARVs. Economic development is directly linked to life expectancy. Economic growth opportunities slow down when there are not enough people of an age to contribute to the economy. However, with greater efforts from international organisations to reduce the rate of HIV infections through awareness campaigns, promoting access to preventative aids, already some promising results have been achieved. In sub-Saharan Africa, 22 countries have managed to reduce HIV infections by more than 25 per cent. Thinking out of the box Even in economies where HIV/Aids is running rampant, opportunities exist for new and innovative products and service providers. South Africa in 2004 saw the establishment of AllLife (Pty) Ltd, a company specialising in providing life insurance for individuals living with HIV and diabetes. Safaricom, a Kenyan telecommunications company, developed the M-PESA money transfer system which has enjoyed a vast uptake and is a system that banks are replicating to serve and attract lower income groups.
The 2010 McKinsey Global Institute’s report on the progress and potential of African economies suggests that “companies already operating in Africa should consider expanding. For others
still on the sidelines, early entry into emerging economies provides opportunities to create markets, establish brands, shape industry structures, influence customer preferences and establish long-term relationships. Business can help build the Africa of the future. And working together, business, governments and civil society can confront the continent’s many challenges and lift the living standards of its people”. According to the McKinsey report, the rate of return on foreign investment in Africa is higher than in any other developing region – a drawcard for any globally successful corporation wanting a slice of the proverbial pie. The good news According to the McKinsey report, “If recent trends continue, Africa will play an increasingly important role in the global economy. By 2040, the continent will be home to one in five of the planet’s young people, and the size of its labour force will top China’s.” The report further anticipates that by 2020, Africa’s collective GDP will be US$ 2.6 trillion and consumer spending will stand at US$ 1.4 trillion, 50 per cent of all Africans will be living in cities by 2030 and 128 million households in Africa will have discretionary income by 2020. If this is true, a burgeoning market and workforce is waiting in the wings for life (and other) insurers to take advantage of. As disposable income becomes more readily available, security becomes a primary concern. While life expectancy in Africa may not increase dramatically for the foreseeable future, the ability of this continent’s people to take part in the insurance process will undoubtedly increase; however, it will depend on insurers’ ability to foster trust and reliability in the eyes of prospective clientele if they are to successfully integrate with these new markets.
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• Third party insurance
Third party insurance reform by Elvorne Palmer
Will the Namibian industry benefit from the proposed harmonising of third party liability insurance in Africa?
A
few years ago, you might have been forgiven for considering the Southern African Development Community (SADC) one of the most unsuccessful organisations of its kind. In fact, until recently, it was hard to take most African trade blocs seriously, especially when you compare them to Europe. But then the unthinkable happened. In 2008, the standing joke among the financial services community was that economists had successfully predicted at least eight of the last three
recessions. But no-one was laughing. America had sneezed, Europe contracted a cold and the world was plummeted into a recession that slowed growth for years to come. The rest is history. Despite our forced optimism this year, we have entered 2012 with prospects of slowed growth and the threat of a double-dip recession still palpable as economic recovery stalwart China now threatens to collapse. The 2008 downturn, however, yielded an unexpected result in Africa: it became a haven for investment and exponential development soon followed. Economic growth became the order of the day in Africa and its collective annual gross domestic product (GDP) rivalled that of Brazil and Russia.
That was four years ago and today the SADC is considered by global commentators as one of the most integrated, if not the most successful trade blocs in Africa. Sure SADC seems light-years behind world economic communities, but the EU is a pretty long stick to measure success by. The citizens of member states don’t always appreciate how far we’ve come in recent years: 10 of the top 20 African economies (in terms of GDP) are in the SADC. Most SADC countries have diversified or transitional economies, meaning they’re not as dependent on minerals and resources (although it doesn’t hurt that SADC countries hold 90 per cent of the world’s platinum and over 50 per cent of gold). Free trade Arguably SADC still has a long way to go towards becoming transparent and making their presence both felt and understood by citizens, but there are some big efforts currently underway that might change the face of Namibia and its neighbours. The historical agreement between SADC, the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC) to create the African Free Trade Zone (AFTZ) possibly gave all these trade blocs a lot more clout, with a collective GDP of around R5 trillion. One such initiative that has the potential to dramatically impact the Namibian insurance industry is the recent move to further develop the AFTZ by standardising compulsory third party (CTP) insurance across African borders from Cape Town in South Africa, through to Cairo in Egypt. Headed by the SADC locally, this initiative by the tripartite coalition (SADC, COMESA and EAC) seems to be underway. Known as the ‘harmonisation of third party motor vehicle insurance scheme for the SADC/COMES/
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EAC region’, this effort will entail syncing the compulsory third party insurance schemes in 26 countries – literally across Africa. The idea to create standardised or at least compatible CTP schemes in the member states likely originated in the successes of the yellow card system used in 13 COMESA countries, including Zimbabwe and even Tanzania which is not a COMESA member. The scheme can broadly be aligned in all member countries, so that a driver can purchase his CTP insurance permit in his own country and then travel through any member countries knowing that he is covered for limited liability. However, in the EAC, four countries are COMESA members and one SADC, complicating integration. The same applies for SADC countries like Namibia and neighbouring South Africa that have completely divergent schemes. No more fuel levy? Namibia’s Motor Vehicle Accident (MVA) Fund has come under fire in recent years. Much like its South African counterpart, the Road
Accident Fund (RAF), the MVA’s inability to curb loss-making while demanding ever-increasing levies on fuel has left many disillusioned and wondering if a different scheme under the management of private insurers will not fare better. 2011 already saw an outcry from the private insurance industry for the South African Government to rethink the CTP scheme there. The move to harmonise CTP insurance schemes in AFTZ could help force the Namibian Government to do just that. Namibian insurers were already asking how they could benefit and possibly take ownership of the new CTP initiative, likely akin to COMESA’s yellow card system, by the end of last year. It makes sense that government and private industry could partner and benefit out of such a system. There should be room for underwriting and administrating the scheme, while government takes a cut for enforcing it and collecting premiums. Much the same sentiment was echoed in South Africa, where critics believe that private insurers will be more adept at administrating a CTP scheme profitably and efficiently, as opposed to the State insurers that have been making losses for years now.
22118_NAMIBIA "Good And Proper" 130x175.indd 1
A preliminary report on the harmonisation of CTP insurance was compiled by COMESA, the EAC and SADC in August last year, which detailed the consultancy project, in broad terms a document outlining how each country should go about researching the possibility of aligning their current CTP insurance scheme with other members. It allocated a budget and gave member states a 161-day window to implement the project. This would then be rolled out by holding workshops in each of the countries – relative authorities and stakeholders would be invited.
careful planning and the involvement of various stakeholders at national level. A project team will be convened in the first quarter of 2012 to look into this matter and put together a project proposal, including a timeline and costing. Anything else would be speculation,” Gous said. Things in Africa have been moving rather quickly lately, and we can’t help but wonder if 2012 will be the year? RISKAFRICA will keep you posted as this story progresses.
Wheels in motion The Namibian workshop was held on 1 and 2 November 2011. Riana Gous, director of the Insurance Institute of Namibia, attended the event and told RISKAFRICA that the entire project is still in its infancy. “All I can tell you at the moment is that we attended a national workshop on the harmonisation of third party motor vehicle insurance for the COMESA/SADC/EAC region under the chairmanship of SADC. Members of the Namibia Insurance Association discussed the opportunity to take ownership of this initiative, but a project of this magnitude will need
A project of this magnitude will need careful planning and the involvement of various stakeholders at national level. A project team will be convened in the first quarter of 2012 to look into this matter and put together a project proposal.
2011/10/07 1:49 PM
• Insurance response to flooding
Overflowing: the Namibian flood response
Thailand made headlines the world over because of its 2011 floods with an impact on insurers and reinsurers running into billions of Dollars. The cost in human lives and the disruption in the production of technological components were also severe. But what about Namibia, where annual floods are as much part of the scenery as the sand dunes? Flood season is around the corner and we ask what is in store for 2012 and what insurers can do to mitigate their risk and exposure. A state of emergency At the end of March 2011, Namibian President Hifikepunye Pohamba declared a state of emergency. It is the second such national flood emergency in three years following extensive flooding in six of the country’s northern regions. The heaviest rainfall in at least a century of recorded weather history had devastating effects on the people and economy in 2011. About 30 000 people (9 000 households) were displaced, 22 clinics and 263 schools had to be closed, affecting 114 000 schoolchildren. The regions affected the worst are the north-central Oshona, Ohangwena and Omusati regions, which are situated in the Cuvelai Basin, a shallow floodplain through which the overflow from southern Angola spills into the Etosha Pans. This flood is known as the Efundja and is considered a time of plenty because of the millions of little fish that hatch in the pans during the flood. In recent years though, this time of plenty has become a time of disaster.
To increase premiums continually or to refuse to insure a high-risk area is not the answer.
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It is not just a question of insured losses, but economical losses as well. The lives, businesses and livelihoods of thousands of residents were disrupted for months as they waited for flood waters to recede. Reports are that 31 villages had to be relocated to higher ground. Some of these towns’ people being moved by relief workers brought to mind darker times when people travelled with their meagre belongings to new encampments to sleep outside with the barest of necessities waiting for better days. With livestock drowned and sorghum fields vanishing under the water, the flood brings food shortages. Roads and bridges washed away hampering the efforts to bring food to the communities cut off from the outside world. Rail links and major roads suffered from the impact of landslides and even the waterpumping infrastructure that supplies Walvis Bay’s fish factories was washed away. More than 60 people (of whom a third were children) drowned and the standing water meant that incidences of malaria increased markedly. Those clinics not flooded were nearly unreachable for most flood victims, causing grave concern for pregnant women and those in need of life-saving drugs and treatment. With President Pohamba promising millions in relief funding, even those not immediately affected by the floods felt the burden of the aftermath.
countries as a result of the worst rainfall recorded in years and the resulting floods. When asked whether they would increase premiums across the board, the answer was no, but Franco Ferris (now CEO of Santam Namibia) urged people to ensure that they were adequately covered. Speaking at a round table discussion on risk and resilience in a changing world, John Melville, executive head of risk services for Santam, said that to increase premiums continually or to refuse to insure a high-risk area is not the answer. “Neither option offers a sustainable model,” Melville said. “You are reducing the size of your available market and not serving the population. Everyone loses.” It’s all about the money A research study conducted by the Council for Scientific and Industrial Research (CSIR), Santam, the University of Cape Town and the WWF has highlighted the role of the insurance industry, with its expertise in risk assessment and risk management, to play a role in building more climate-resilient communities. Human activity is reducing the ability of the ecosystems to absorb a great deal of the impact of natural disasters. How and where we build, and how coastal dunes and invasive trees are managed, are all areas where humans can change their behaviour to better support the ecosystem.
Where to from here? In 2006, floods cost insurers N$126 million in claims by residents, local government, businesses and farmers in the Mariental region. As a result, after the 2006 flood, the Namibia Insurance Association (NIA) took a decision to stop providing flood insurance to the Fish River Basin in an effort to protect insurers against the frequency and magnitude of these claims. Since then, we have seen the problem escalate. Water levels were significantly higher in 2011 than during the 2009 floods when a state of emergency was also declared. There is a pattern here – the indelible fingerprint of climate change. In an effort to reduce damages and flood waters hanging around, the Mariental Flood Taskforce has been tasked with clearing the rivers of sediment and reeds. This will make water flow even faster and the response-time for evacuations in towns in the region will be even less. Other efforts by the government, to reinforce infrastructure for example, means that the nation is better prepared, but what the 2012 flood season holds in store is yet to be seen. Enter the insurer. Santam has one of the largest portfolios of personal, commercial and agricultural insurance clients in Namibia and South Africa and has borne the brunt of significant insured losses in both
Former mayor of Oshakati, Ben Kuutumbeni Kathindi, at the time of the floods in 2011 told the media that except for evacuating flood victims, there is little that can be done unless stakeholders commit themselves to a lasting solution. According to Kathindi, the flooding problems are rooted in the lack of a building code for the country’s infrastructure. To date, Namibia has followed a South African building code. “The only solution,” Kathindi said, “is for the Minister of Works and Transport to commission the building code. He [the Minister] will have to liaise with our neighbour, Botswana, because they have the same delta systems as ours. We will also need a team of hydrologists, environmentalists and planners to restructure everything.”
The solution (as proposed in the study) is for insurers to identify these controllable factors particularly in high-risk areas and rather than refuse to insure the risk or to increase premiums unreasonably, to enter into a dialogue with the community and authorities. It is important, Santam said, for insurers to consider imposing conditions for insurance on new developments to take climate change into consideration and to encourage sustainable development. “Commercial projects represent the most insurance revenue in Africa. It is a prime opportunity to influence them and set requirements for insurance to positively influence the development which will have a ripple effect on the sustainability of the country.” Melville said. “In established markets, we need to engage with local authorities to influence and guide the dialogue,” said Deon Nel of WWF South Africa at the Santam round-table. Developing with sustainability in mind does not have to necessarily be more costly, the point is that there needs to be some rules. The new mayor of Oshakati, Onesmus Shilunga, announced in November that new developments are on the cards for the town – a prime opportunity for insurers to take a stand in the town that has historically been worst affected by the floods.
As climate change continues to impact and increase the volatility of our natural disasters, a collective response is necessary. To ensure that flood losses are minimised in the future, insurers need to buy into the idea that in working together with clients, local authorities and corporate entities, working towards a greater ecological sensitivity will benefit all parties. The growing global awareness of sustainability issues also means that a forward-thinking insurer will secure gaps in the market and especially in new African markets. On a practical level, influencing clients to take precautions against placing assets in supremely vulnerable places and taking cognisance of human factors that impact the buffering capacity of the ecosystems will reduce the risks and exposure of insurers come flood season in the future. Hopefully then, instead of exponentially worse floods (as we’ve seen in Namibia since 2006), the curve will start to bend downwards as humans and habitat begin to combat climate change effectively.
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• Broker education
reinventing
the wheel? by Angelique Ruzicka
In South Africa, it is compulsory for brokers to complete the RE exams in order to keep their licences. However, this has become a contentious issue and the regulators have received a lot of criticism from the industry about the way in which the tests have been rolled out and the costs involved. While the Financial Institutions and Markets Bill (FIM Bill) is being drafted into law, Namibia still has time to consider whether it should follow in South Africa’s footsteps.
I
t’s very easy to become a broker in Namibia. A letter of intent, a police clearance, enrolment and an insurer to back your business is about all you need to become a financial services professional in Namibia. There are currently no tests or minimum requirements that force you to do anything more. No exams and no legislation. One commentator related how this can unfortunately result in a number of untrained and unqualified advisors. The end result is that the consumer loses out and the industry gets a bad name. While the FIM Bill could do much to ensure that there are some standards in place that people wishing to enter the financial services industry need to attain, more regulation is needed to ensure that the consumer gets a fair deal and the industry’s reputation stays intact. This is why Riana Gous, director of the Insurance Institute of Namibia (INN), and Japie le Roux, chief operating officer and acting managing director for Namibia at Mutual & Federal form part of a committee that is looking at the merits of adopting the RE exams or a similar approach
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to raising standards and preventing incompetence. Both believe that this is an important function as most of the Namibian population who seek financial advice do so through a broker. “We think it’s very important that the brokers and all the other financial services professionals in the industry get the right training to ensure fit and proper standards and to be compliant with everything. The broker in particular is the first contact between the consumer and the insurer,” said Le Roux. According to Gous and Le Roux, the market is still very broker orientated. Direct insurers have not yet
made a significant impact in the industry and they calculate that only five per cent of those seeking financial advice go direct, with OUTsurance taking approximately two per cent of the market. Predominantly, it’s the younger generation that is approaching direct players, whereas the older generation still appreciates face-to-face consultations. “In Namibia, the insurance industry has a very good relationship with the brokers and clients usually work through brokers. It’s important for them to know the product band the legal framework in Namibia in which they are operating; that is why we spend a lot of time training not only brokers, but other staff in the financial services industry,” added Gous. Le Roux believes that introducing some kind of exam or test will provide the consumers of Namibia with more confidence and assurance when dealing with a financial services professional. “I can’t emphasise enough that brokers must go through these training courses. Riana and I are part of the committee which is currently looking at the fit and proper standards and training programmes together with the Namibia Training Authority (NTA) to ensure that all brokers in Namibia are trained to protect the consumer.” It’s understandable why Gous and Le Roux are so passionate about a standard for people wishing to become brokers. The December/January issue of RISKAFRICA pointed out that the financial services industry has suffered scandals. The mention of Prowealth Asset Managers probably still leaves former clients with a bitter taste in their mouths. After the founder committed suicide in December 2008, the company came under investigation and was declared insolvent. To date, 98 per cent of the money still remains unaccounted for. Change and regulation is important to clear the industry of inept financial advisors. What about South Africa’s RE? It’s clear the FIM Bill won’t be enough, but the question remains whether Namibia will take on South Africa’s RE exams. At the time of writing this was still up in the air. Gous confirmed that within the INN there is a Professional Standards Committee representative of the various disciplines within the short-term industry. Gous admits the committee is against the idea. “At the last meeting we had in December 2011, we discussed the RE exams and the committee is of the opinion that we should rather structure our continuous professional development programme to
such an extent that it acts as an RE. The reason is we believe that the RE exams are time bound. The individual will write it once and then that is it. The continuous professional development programme will be implemented over a two-year cycle and this is a better way to evaluate an individual’s competency,” she explained. However, not everyone may agree with the committee’s viewpoint. “We want individuals to showcase their competancy on a continuous basis but I am not sure how the regulator feels about it. We will have a meeting towards the end of January and will have an indication of whether the regulator wants the RE,” added Gous. If Namibia does go the RE route, it may not emulate South Africa’s model exactly. “We will structure it a bit differently to South Africa,” said Gous. “The RE 1 will be aimed at executive management and will look at legal framework, the Short-term Insurance Act, the Companies Act and so forth. RE 2 will test product knowledge, while RE 3 will focus on the back office such as internal processes and audits.” Even if Namibia adopts the RE exams, Gous is in still in favour of rolling exams. The only people who will be excluded from taking such exams will be messengers and girl Fridays. “We prefer not to have RE exams as a once off. We want it to be more measurable. A lot of thinking still needs to go into it, but the broad framework is that individuals will have the opportunity to accumulate credits through predetermined activities over a two-year cycle. Should they fail to have sufficient credits by the end of the cycle, they will have a three-month grace period in which they can try to accumulate the necessary credits. Unfortunately, if they fail to do so, steps will be taken, which may even result in them being disbarred. Brokers of any age and experience will be compelled to undertake the exams. We will look at putting a proposal together.”
be compromised. “It is something that we are taking into consideration but I think the industry does carry the label of being incompetent, insufficient and unprofessional. In the past few years we also had our share of problems where customers lost a lot of money. I think that consumers want to deal with someone who is professional, ethical and fit and proper.” She pointed out that the industry is doing much to help the situation. “We understand unemployment, which is why we are embarking on an internship programme; but as an industry we have made it clear we will no longer tolerate incompetent people selling financial products and interacting with clients. They have to do the minimum qualifications.” Le Roux agreed with Gous’s stance and added: “We want to cater for the black market here in Namibia so they are part and parcel of our industry going forward. It is still very much a white market, but there are youngsters coming through.” A stitch in time While the committee and the regulator are keen to improve standards by implementing a structure where brokers and others in the financial services industry will be subject to tests, brokers need not pull out the study books just yet. The downside to these plans is that they are still in the research and discussion phases. Meanwhile, the FIM Bill takes priority. Gous pointed out that nothing can be set in stone until the Bill is written into law. “If we look at the FIM Bill, which still needs to be presented and passed by Parliament, we won’t be able to put anything into practice. But in the meantime, we are preparing the industry for this. I reckon we’d be able to implement something from 2014 onwards.”
Tackling the unemployment problem The World Bank claims unemployment in Namibia currently stands at 51.2 per cent. However, this has been met with much criticism and a recent online report quoted economist Martin Mwinga at First Capital saying that the figure should be 28.4 per cent. Both figures are still high so surely if Namibia and in particular its financial services industry want to tackle the high unemployment rate it should try to make jobs more accessible. But Gous maintains that standards shouldn’t
It’s very important that the brokers and all the other financial services professionals in the industry get the right training to ensure fit and proper standards and to be compliant with everything. The broker in particular is the first contact between the consumer and the insurer.
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NEWS Namibia: GIPF increases disability benefits The GIPF (Government Institutions Pension Fund) has been under fire for some years and various allegations of irregular transactions and mismanagement have set a forensic investigation in motion. Despite a great deal of secrecy on this sensitive matter, the GIPF continues to soldier on and has recently announced that it has approved a 10 per cent increase
in disability income benefits. The increase would furthermore be backdated to 1 April 2011. Elvis Nashilongo, the GIPF’s manager of corporate communications, told the media that in terms of the GIPF’s rules, disability income earners remain contributing members to the fund and are entitled to receive annual increases. The increase was
awarded to correspond with the average salary increase given to civil servants (as agreed by the Namibia Public Workers’ Union (NAPWU) and the government. Nashilongo added that the total disability income liability amounts to less than one per cent of the total liabilities of the fund and so the increases are viewed as affordable.
Kenya: NHIF wins, private insurers lose out In 2011, Kenya’s Public Service Minister Dalmas Otieno and Finance Minister Uhuru Kenyatta tabled a joint paper proposing for a medical scheme to provide outpatient services to civil servants. Cabinet approved the proposal and from July, under the scheme, the government was to reroute the medical allowances given to civil servants as part of their salaries and pool these funds to offer them medical cover. Although a public dispute over the involvement of the NHIF (National Hospital Insurance Fund) ensued, the cabinet recommended that the medical scheme be placed with a consortium of at least five underwriters. When the tender opened, there were only two bids – a consortium of underwriters put together by Aon Insurance Brokers and another put together by Faulu Kenya and Sunland Insurance Brokers. The differences in the quotes numbered billions of Shillings (KES) and the more technically compliant consortium’s quotation was vastly over budget. The bid was subsequently cancelled by the government and companies were given the chance to retender. The second time around, the two consortiums joined forces and presented a single quotation. However, it emerged that it was a challenge for private companies to provide medical cover in all the 47 counties without assistance from NHIF which has a ready network of service providers in all parts of the country. Faced with the task of handling high administrative costs, the private insurance company ’s high quotes for premiums discouraged the government which has now opted for established and State-owned NHIF. After the lengthy process to bring the scheme to fruition, it is now a reality.
Nigeria: Motorists take unnecessary risks In a recent interview with Nigeria’s The Nation newspaper, the president of the Lagos Area Committee of the Nigerian Council of Registered Insurance Brokers (NCRIB), Tunde Oguntade, said that although the industry has fared well in the past year, an estimated 90 per cent of motorists still carry fake insurance documents. To combat this practice, Nigeria’s Federal Road Safety Commission (FRSC) is bringing in a new system to reduce the incidences of false insurance documents. Henceforth, vehicle licenses won’t be renewed without proof of valid insurance cover. This plan is expected to lead to nearly 80 per cent of motorists buying legitimate insurance even if it is only third party cover. Motorists will not wish to be caught with an unlicensed vehicle and the initiative is expected to benefit the insurance industry substantially.
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Kenyans could see an increase in premium charges early this year as the insurance industry strives to combat the rising cost of doing business, inflation and the weakening of the local currency that set them back in 2011. All insurers and reinsurers were required to apply for renewal of their registration for 2012 by the end of September last year and industry players have indicated that they might use this as an opportunity to raise premiums. In addition to the high rate of inflation and its impact on their costs, the Public Service Vehicle (PSV) sector continues to take a toll on insurance companies. PSV operators caused the Insurance Regulatory Authority (IRA) to place Blueshield Insurance under statutory management for failure to meet its financial obligations. According to the industry regulator, Blueshield, previously one of the country ’s top insurers of public service vehicles with nearly half the industry in its register, had unpaid claims of KES 1 billion by the time of its collapse in September. It became the eighth PSV underwriter to collapse in the past 20 years, after Standard Assurance, the Kenya National Assurance, United, Lakestar and Liberty Insurance, Access and Stallion Assurance companies.
E-Insurance Centre Limited has launched TurnQuest BIMA 360 into the market. The product enables insurance agents and policyholders to carry out insurance business on mobile phones or tablets.
customer relationship. The software is said to be easy to adopt due to the wide use of mobile phones and is very reliable in ensuring security, integration and real-time data support.
The product aims to extend and integrate backend solution to mobile phone devices and was developed by Turnkey Africa. Insurance agents will now have on-demand access to information on their mobile devices, significantly improving the agent-
The solution mobilises work and task management, prospecting, scheduling and territory management, thereby enabling agents to compete more effectively than before.
South Africa: Vodacom licensed to sell insurance South Africa’s cellular services provider Vodacom has been granted a licence by the Financial Services Board to sell insurance, a move that will allow the telecommunications group to sell to its customer base and diversify its income. Previously, the company sold insurance (for handsets, laptops and tablets) via a third party, now however, they can sell directly. The license grants Vodacom opportunity to sell both short-term and long-term insurance, including funeral cover.
let your assets grow old gracefully Momentum’s FundsAtWork umbrella fund is the best investment for your future. Innovative and flexible, it can be tailor-made to your needs so that you can retire gracefully. For more information, contact your financial adviser or Momentum financial planner today.
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It has been reported that Vodacom’s insurance unit already had more than 100 000 customers and short-term insurance products are expected to be launched within the next few months, with longterm insurance following later. The company is still exploring different insurance models as it sets its insurance business in motion to sell to its large distribution footprint and established customer network.
DRAFTFCB CAPE TOWN MOME000951/E
Kenya: Inflation bites the insurance industry
Nigeria: E-Insurance solution unveiled
Kenya: Insurance watchdog to vet health covers The Kenyan Insurance Regulatory Authority has said that, going forward, health insurers in Kenya will be required to use actuaries to help in viable pricing of new products before being licensed to launch them in the market.
authority has made a move to mitigate these risks. The ratio is calculated as a percentage of the income from premiums over total claims. The loss ratio for medical insurance in particular has been increasing every year.
Previously only long-term insurance was subject to mandatory actuarial services. However, with medical insurance showing the highest loss ratio (81.5 per cent) according to the 2010 industry report by the Association of Kenya Insurance, the regulatory
As a result, the regulator has begun introducing risk-based supervision gradually while waiting on parliament for enactment of the proposed insurance law which seeks to make actuaries mandatory for all insurance companies.
Angola: Floods leave returnees stranded
South Africa: Marsh completes AF acquisition
In January, several thousand Angolan returnees from the Democratic Republic of Congo (DRC) were stranded by floods in north-eastern Angola. This is one of the first adverse effects of the rainy season in these parts and the annual Zambezi flooding which also affects Namibia.
Marsh, a wholly owned subsidiary of Marsh & McLennan Companies, has announced that it has completed its previously agreed acquisition of the brokerage business of South Africa’s Alexander Forbes.
The DRC is home to approximately 80 000 Angolans refugees, according to UN Refugee Agency (UNHCR). The organisation started formal repatriation of Angolans in November 2011 but thousands were stranded as a result of the ongoing rains, hailstorms and flooding in north-eastern Angola. Meteorologists for the Southern African Development Community (SADC) have predicted normal to above normal rains for most of the region from January to March 2012. Thousands of people in the region were displaced and large numbers died in the early parts of 2011 as a result of heavy rains and flooding associated with La NiĂąa.
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Marsh said the transaction comprised its South African insurance broking operations, Alexander Forbes Risk Services (AFRS) and related ancillary operations, and its insurance broking operations
in Botswana and Namibia. Marsh also announced that it has agreed to acquire other Alexander Forbes local operations across subSaharan Africa in Malawi, Mozambique, Nigeria, Uganda and Zambia subject to regulatory and other approvals during the first quarter of 2012. The combined enterprise will be rebranded as Marsh Africa and Jurie Erwee has been appointed as CEO.
• •CEO NASRIA profile
Better safe than sorry
T
he National Special Risks Insurance Association (NASRIA) is a Section 21 company, formed in 1987, with the aim of being your first line of defence against loss as a result of riots, strike action, acts of terrorism and politically motivated acts. The loss of profits, assets and other damages for companies and individuals as a result of such acts are excluded by other insurance companies, leaving a gap in your cover – a gap NASRIA is there to fill. Although it may seem that Namibia has very little exposure to these types of acts, incidents have occurred resulting in losses and from time to time tensions run high. The biggest claim NASRIA has had to settle was as a result of damages from strike action in the region of N$ 25 million. Despite the lower exposure Namibia’s people and businesses face, it is also important to understand that in terms of the reciprocal agreement between NASRIA and its South African counterpart, SASRIA, damage and loss on South African soil in respect of NASRIA’s clients will be covered. This is an important thing to remember as many Namibian businesses and
individuals have ties in South Africa. Because of its more diverse population and international profile, South Africa has greater risk and exposure and you need only watch the news to know that riots, strikes and other politically motivated action is wide-spread there. Why take the risk of damage to your property when you can place that risk with NASRIA for a nominal fee?
remains N$ 30 (with a monthly minimum of N$ 2.50), excluding VAT. Is that really too much to pay for peace of mind? Don’t be caught unaware, make sure that you and your clients are covered for every eventuality.
Last year, NASRIA announced notable reductions in rates on domestic, commercial cover and other classes. Moreover, the limits NASRIA has done away with top-up cover and has instead increased its capacity from N$ 25 million to N$ 140 million limit. In short, clients now pay less for better cover. Further developments include a new commission structure for members and brokers. Brokers are also now allowed to place all types of business with NASRIA directly. NASRIA cover is automatically included for Group Schemes and members and brokers are encouraged to include NASRIA cover as a standard component of all personal lines. The annual minimum premium
Prem as lo iums wa s
N$3
per
0
yea r!
‘CAUSE IT ONLY TAKES ONE. When emotions boil over during a strike or a rally, how safe is your property against a rioting crowd? What about your car? Or your business? Only NASRIA (and no other insurer) provides insurance cover against damage or censequential loss caused by events like these. Make sure your your property and your business is covered against being struck down by a strike, riot or political violence. Contact your broker or NASRIA directly @ (+264) 61 229 207 before it is too late.
www.nasria.com.na
• Keeping a cool head
Ride the rollercoaster
Recent falls in world stock markets have left many people feeling anxious and concerned. When it comes to financial decisions and investments, the temptation is strong to stand on the sidelines and wait for the dust to settle rather than to climb onboard and ride the global economic rollercoaster. Some have savings and investments and are worried about their current value. Others are thinking of starting a new savings or investment plan, but don’t know where to begin. If you keep a cool head and use a sound investment strategy, you can still achieve your lifetime financial goals.
P
lanning is everything and there are some basic investment principles that can be followed in order to conquer the challenges of slower economic growth and volatile markets. Johannes !Gawaxab, managing director of Old Mutual African Operations, provided some tips on how you and your clients should invest during market turbulence. 1. Keep investing at regular intervals over the long term. Most people want to invest when markets are doing well and tend to sell when markets fall. It is better to keep investing through market lows, when share prices are undervalued and a lot cheaper, creating the opportunity to gain more wealth during the highs. 2. Understand your time horizon and your reason for investing. These two factors affect how you invest. The younger you are and the longer you have to invest, the more risk you can afford to take. If you have longer than 10 years to invest, you could invest in markets that ensure the best return on investment. These markets could, however, have some short-term ups and downs. On the other hand, if you have only five years to invest, you should consider a more
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cautious investment strategy, because you won’t have time to make up for possible market losses. 3. Diversify your investments so that when one market does not perform well, you will still have other investments to count on, thus managing your risks. Don’t focus on returns from individual investments; view your investment portfolio as a whole. 4. Balance your portfolio. Don’t put all your eggs in one basket by investing only in property or only in cash, for example. Maintain a sensible balance between different types of investments. There will always be times when one asset class outperforms another. Remember that cash and bonds provide stability, whereas shares and property provide growth. Historically, equities have provided the strongest returns over the long term, despite economic downturns. It is important, however, that they form part of a diversified investment portfolio, structured according to your risk profile and end goals.
5. It is time in the market that counts, not timing. The longer investors are in the market, the better the likelihood of making up for losses. Furthermore, the sooner you start saving, the more time you will have to earn compound interest. Compound interest is basically interest earned on interest, resulting in a dramatic snowball effect. 6. Remember that each person is unique. A good investment for one person is not necessarily a good investment choice for you. 7. Invest with a company that has a proven track record and is well known within the industry. Don’t invest with a company that promises astronomical returns when such returns are simply not viable in current market conditions. The world is currently experiencing an economic and financial crisis. So far, Africa in general, and Namibia in particular, has weathered the storm in the wake of the 2008/2009 global economic downturn fairly well and the general consensus is that the outlook going forward is for positive economic growth while Europe lies in shambles. Although the local economy suggests positive growth for the future, the recovery is slow and, as a result, investors will need to save more than before to secure the financial future they are aiming for. !Gawaxab advised that investors should avoid the panic and sell-off attitude characteristic of many international investors as a result of the European debt crisis and the global slow down: “Focus on your end goal. Stick to your long-term investment plan and the solutions that you have to get you there.”
• Clem Chambers
Protecting what’s ours C Clem Chambers, CEO of ADVFN
ould insurance companies adjust to a possible ‘two Europe’ scenario? Readjusting operations is never cheap and it’s something that most companies would not like to do. Will Solvency II put the final nail in the coffin for some companies already struggling under the financial weight of the European crisis?
It is hard to know whether the Euro crisis has actually started or ended. Europe is still is an uncertain position. 2011 ended with a European Union summit seeking to reach new agreements about a redefined Europe but the UK vetoed proposals in a bid to protect the City of London, Europe’s economic hub. As a backdrop to the political crisis, the Organisation for Economic Co-operation and Development (OECD) predicted that Europe is heading into a double-dip recession; something that has already occurred. We have been in the double dip for months. Problems in the Eurozone create significant challenges for the UK’s largest insurance firms. If, as is possible, a greater federal and fiscal European Union beckons then London-based insurers are in a potentially precarious position.
Companies such as Aviva, with close to half its business dependant on the Euro, risk being caught in the middle of what French President Nicolas Sarkozy has called “two Europes”. Two Europes would mean an extra burden on companies having to readjust their operations, something they would happily do without. Restructuring a business is never cheap, but it is even more difficult as income falls.
The markets have started to notice the upcoming problems. As the year closed, the FTSE350 Life insurance index was falling nearly one per cent further than the FTSE100. While the Non-life insurance index was also falling, it was a more stable 0.5 per cent, but this must be viewed against the index being nearly 400 points down from its year high. A further challenge facing insurers across Europe is the EU moving the Solvency II vote back to April 2012. The delayed vote, about the capital adequacy regime for the European insurance industry, means that insurers remain in the dark about the capital requirements and risk management standards they will have to meet. Planning for a full year with a key vote delayed to Q2 is another burden they could do well without. For insurers both large and small, heading into 2012 with uncertainty
about the future of the EU, the potential for greater fiscal union and Solvency II unresolved, the new year is certainly fraught with choppy waters. Long-term sustainable economic plans would have been on many insurers’ Christmas lists. Short-term announcements have the power to create temporary positive impact on long-term market trends. Following a raft of new government spending plans in November by UK Chancellor George Osborne, the FTSE 350 Life insurance index jumped by 5.1 per cent, with the, until recently sluggish, 350 Non-life increasing by a respectable 3.8 per cent. But as we have seen, as the long-term impact of the EU summit became clearer, these short-term gains melted away.
While November’s results are still 2 000 higher than the crash of 2009, the big picture demonstrates how the sector is far from a recovery and could sink much lower. At the start of 2012, Western economies are facing the prospect of a decade, perhaps a generation, of realignment. Hooked on spending, the west’s governments are not cutting back until forced. When the cuts hit the public, they find themselves with less money for the basics – when looking at their budgets for the month, they may find that insurance comes under the
category of spending they hope they can do without. The UK is leading the way in cutting government spending. Even after riots, strikes and live-in protests outside of the London Stock Exchange, the full impact of the cuts has yet to happen. The question for the insurance sector is how it can cope with reduced individual spending and if it can convince the public its products are necessary: not an easy prospect. The key indicator for 2012 is inflation. If that starts to rise, the investor can be sure that the real recovery is on its way. Otherwise Europe will be in for a Japanese-style lost economic generation, with a strong Euro and a moribund economy so far out, it’ll be anyone’s guess. Ultimately, the market will decide on the lead up to the spring agreement. The sovereign bond yields of Europe will ebb and flow and if the market flatly refuses to fund Euro governments, whatever the politicians agree, then the Euro will break up and Europe will go back to the way it was in 1990s. If the markets will lend to Spain, Italy and Portugal at around five per cent, a new era of the United States of Europe beckons.
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United Kingdom BDO: Fraud increases by 50 per cent Accountancy firm BDO has warned companies to be more proactive when it comes to fraud prevention. This comes after the firm produced its 2011 FraudTrack report, which showed that fraud has increased by 50 per cent to £2 billion (R25 billion) from 2010 which saw a figure of £1.4 billion (R17.6 billion). The survey was launched in 2003 when fraud totalled just £331 million (R4.1 billion). The FraudTrack report collates data from all reported fraud cases over £50 000 (R630 000). In 2011, there were 413 reported cases with an average value of £5 million (R63 million) compared with 372 cases in 2010, at an average of £3.7 million (R46.6 million). “The fact that reported fraud is up is worrying, but not at all surprising. When the economic climate is difficult there is even more focus on the bottom line and driving out unnecessary costs, so fraud is more likely to be uncovered. But organisations need to be much more proactive when it comes to preventing fraud. Too often risk teams are either too externally focused or fail to look at fraud from a financial point of view. Organisations need to be taking a P&L (profit and loss) approach to fraud risk. That is to say you
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look at your P&L and the areas in which you receive or pay the most monies will be where the greatest fraud risk lies,” said Simon Bevan, head of fraud at BDO LLP. Britain’s motorists fear car thefts and break-ins Britain’s motorists are very concerned about their car being stolen or broken into according to a new poll, even though car crime numbers have fallen over the years. Car insurance specialist Admiral commissioned YouGov to survey 2 500 drivers as part of the annual Admiral Survey of British Motorists, and found almost three quarters (74 per cent) worry about their car being stolen or broken into. Drivers in the East Midlands and Yorkshire are most concerned with 80 per cent in those regions worrying about their car being stolen or broken into, while motorists in Scotland have the most relaxed stance at 63 per cent. However, it appears this anxiety about car crime is misplaced. Admiral’s claims statistics show that the number of cars being stolen or broken into has dropped dramatically over the past decade. Last year 0.16 per cent of motorists insured by Admiral had their car stolen compared to 0.54 per cent in 2001. Car break-ins show a similar pattern, as 10 years ago 0.6 per cent of drivers insured by Admiral had their car broken into compared to 0.16 per cent
in 2011. “Our statistics show that car crime has been falling for several years now. This undue anxiety could be linked to a general sense of unease about the state of the country and the economy in particular, our cars are after all, one of the most valuable things we own,” said Dave Halliday, Admiral’s managing director. Churchill gets FSCS job Former Zurich life insurance chief executive Lawrence Churchill CBE has been appointed as the new chairman of the Financial Services Compensation Scheme (FSCS). Churchill, who is currently chairman of the National Employers Savings Trust, will take up this position from 1 April 2012. Before he joined Zurich, he held several senior positions at Unum, NatWest life and investments and Hambro Life/Allied Dunbar Assurance. He was appointed a CBE in the New Year’s Honours list two years ago in recognition of his public service.
Europe CEA welcomes EC gender guidelines Thanks to a ruling by the European Court of Justice, the use of gender in insurance pricing will be banned from 21 December 2012. A statement issued by the CEA, the European insurance and reinsurance
federation, said Europe’s insurers welcome the publication of the guidelines and will analyse them thoroughly. However, it warned that adaptation will be challenging for the industry given the short transition period that will follow the change to national laws. It also iterated the potential negative effects of the ruling on consumers, insurance markets and society in general which was outlined in an independent study by consultancy Oxera. The study found likely increases in premiums in lines such as motor and term life and in the income from pension annuities. Natural disasters make 2011 costliest year Devastating earthquakes and many weather-related catastrophes made 2011 the costliest year ever in terms of natural catastrophe losses. At about US$ 380 billion (R3,1 trillion), global economic losses were nearly two-thirds higher than in 2005, the previous record year with losses of US$ 220 billion (R1.7 trillion). The earthquakes in Japan in March and New Zealand in February constituted almost two-thirds of these losses. Insured losses of US$ 105 billion also exceeded the 2005 record (US$ 101 billion). “Thankfully, a sequence of severe natural catastrophes like last year’s is a very rare occurrence. We had to contend with events with return periods of once
every 1 000 years or even higher at the locations concerned. But we are prepared for such extreme situations. It is the insurance industry ’s task to cover extreme losses, to help society cope with such events and to learn from them in order to protect mankind better from these natural perils,” said Torsten Jeworrek, Munich Re Board member responsible for global reinsurance business.
around £1 billion (R12.6 billion). The portfolio encompasses only those who are drawing a pension. “With this transaction we are cementing our leading position in the attractive longevity risks market,” said chief executive officer Ulrich Wallin. “Going forward, too, we anticipate good business opportunities since it is likely that companies will increasingly seek to limit their direct pension obligations.”
The insurer’s lawyer claims that Google, along with several websites, are violating state law by “intentionally disparaging the goods, services or business of the plaintiff by false and misleading representations of fact”.
QBE France hires Pagès as general manager Jean-Philippe Pagès has been appointed as general manager in France and has filled the position since 9 January. He was previously Marsh France managing director and will replace Jean Basset who will retire this year in February. “Jean has been instrumental in QBE’s development in France. I would like to thank him for his commitment and all that he has achieved and I wish him the best for the future,” said QBE European operations chief executive Steven Burns. Hannover Re takes on longevity risk portfolio Hannover Re has concluded a block transaction for longevity risks in the United Kingdom. The reinsured portfolio consists of pension obligations assumed by the insurer Legal & General for around 11 500 employees of the UK industrial enterprise Pilkington with a volume of
United States Insurer attempts to sue Google American Income Life Insurance Co. is hoping to take advantage of Alabama state law governing deceptive trade practices to stop Google from prominently displaying websites that negatively portray the company. According to InsuranceJournal. com the suit has been filed at the Jefferson County Alabama Circuit Court. The insurer ’s lawyer claims that Google, along with several websites, are violating state law by “intentionally disparaging the goods, services or business of the plaintiff by false and misleading representations of fact”. American Income is a wholly owned subsidiary of the McKinney, Texas-based Torchmark Corp. and specialises in selling life insurance to labour unions, credit unions and associations.
When the insurer is searched for on Google, it claims that a number of results contain contents criticising the insurer ’s business practices. One site describes the insurer as ‘scam’ while another site has former employees grumbling about the company ’s alleged shady hiring practices. American Income said these website have cost the company millions in damages. However, its lawyer has attempted to engage in a compromise before filing the suit asking Google to ensure that the websites concerned would be found further down, below the second page. Google has rejected the proposal and, at the time of writing, is trying to claim immunity from the lawsuit under section 230(c) of the 1996 Federal Communications Decency Act, which holds that “no provider or user of an interactive computer service shall be treated as the publisher
or speaker of any information provided by another content provider ”. InsuranceJournal hints that the insurer will not be successful, referring to the fact that courts have previously sided with Google in similar lawsuits.
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• Mozambique
Inside Mozambique
by Bianca Wright
M
ozambique is quickly gaining recognition as an attractive potential investment destination for insurers from neighbouring countries. The stable political and economic conditions in the former Portuguese colony have made it a possible idyll for insurers looking to expand. South African companies already have a foothold in the region and are starting to compete with an already-established local and Portuguese industry. The interest in the region was perhaps best highlighted by Absa’s recent acquisition of
Mozambique’s Global Alliance Seguras which, in 2010, generated income of over $25 million, according to the Absa Group. It already has a presence in the country through its majority stake in Barclays Bank Mozambique. Absa is majority owned by Barclays PLC (BCS). Willie Lategan, Absa CEO, told Dow Jones Newswires, “Absa wants to recreate the insurance and financial services offers it has in South Africa in other markets in Africa, and the Mozambique purchase is in line with that goal.” The bank is not alone – there are other South African insurers already active in the market and others are eyeing the possibilities. According to George Mathonsi, managing director of Alexander Forbes Moçambique, Mozambique’s non-life market continues to grow at a good rate with an annual growth in US Dollars of more than 12.5 per cent from 2007. The non-life sector, he says, is dominated by the motor insurance class, accounting for about 46.5 per cent gross premium written. “The growth of the insurance industry remains inextricably linked with economic performance. All indications are that if political and macroeconomic stability is maintained, the non-life market will continue to grow,” Mathonsi said. In terms of loss ratio performance, Mozambique’s non-life sector has had a ratio of not more than 38.7 per cent for a number of years, incurred claims to net premiums earned. “The return on capital
for the industry as a whole is around 13.6 per cent with the three top companies reporting rates of return in excess of 25 per cent in 2008 and 2009,” he said. The only reinsurer registered in the country is Moz Re, a subsidiary of the ZimRe. “Local insurers cede a substantial amount of facultative business to the South African market, principally Munich Re and Swiss Re. Business is also placed with regional reinsurers; for example, Africa Re, Kenya Re and PTA Re,” Mathonsi said. “Specialist markets are used for particular classes or risks; in, the aviation sector, tourist lodges and liabilities, and the London market is often used for the specialist facilities it can provide.” “There is no single insurer writing life business or life insurance companies in the market. Life and non-life business is written by composite insurers and the life business is very insignificant accounting for approximately 2.5 per cent of GPI,” Mathonsi added. South African-owned Absa bought the Global Alliance insurance company and it and Alexander Forbes Insurance Brokers both have majority direct foreign investments and are very successful. Mathonsi added: “There is no Namibian investment in the insurance industry but countries like Kenya, Malawi and Zimbabwe have successful insurance investment in Mozambique.”
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In another interview with the website, How We Made It In Africa, Lategan said, “If you look at the Mozambican market, it is still very lightly penetrated with insurance, although it has been growing in significant double-digits over the last three to five years. We think this growth is going to continue, and we want to participate in that growth.” He added that Global Alliance is the number three player in the Mozambican landscape. “The top four are all significant in the Mozambican context, and then there are a number of smaller players. Competition is heating up, but the overall insurance penetration is still less than one per cent of GDP.” Absa does not intend to rebrand Global Alliance as the company already enjoys a foothold in the market and has very good relationships with the brokers.
If you look at the Mozambican market, it is still very lightly penetrated with insurance, although it has been growing in significant double-digits over the last three to five years.
As a percentage of GDP and expenditure on a per capita basis expressed in USD in the year 2008, life represents 0.11 per cent and non-life 0.69 per cent. “Most of Mozambique’s population works in the informal sector, a substantial amount of which comprises of subsistence farming. These people have no involvement at all with the insurance sector and an improvement in insurance penetration hinges on the growth of formal sector employment and the economy in general,” Mathonsi said. Distribution model Although no official statistics are available, brokers are now believed to be the most important distribution channel in the Mozambican market, certainly in terms of the business-related insurances with more than 50 per cent market share. Mozambique’s insurance industry reflects its colonial history. In 1987, insurance was monopolised by the State through the establishment of (EMOSE) Empresa Moçambicana de Seguros; but in 1991, this monopoly was broken and the market was liberalised. IMPAR and Global Alliance were founded
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in 1992. IMPAR is now Seguradora Internaçional de Moçambique and Global Alliance is the new name of Companhia Geral de Seguros de Moçambique, which was recently bought out by Absa. The regulatory environment has evolved over time. Decree No. 42/99 of July 1999 established the (IGS) Inspecção Geral de Seguros [the Inspector General of Insurance] or the Commissioner of Insurance which controls insurance activities on behalf of the Ministry of Finance in Mozambique. Mathonsi said that, following this decree, in 2003 Law No. 3/2003 set new parameters for the conduct of insurance business in Mozambique. Decree 41/2003 went on to provide the regulations in support of Law No. 3/2003, and the Decree No. 42/2003 established the new requirements in respect of technical reserves and solvency margins. Mathonsi said that it is fairly easy to enter the insurance industry in Mozambique provided the investor complies with the specific requirements of the Insurance Decree, Law No. 1 /2010 of 31 December. The decree is essentially the main legislation regulating the operation of the insurance sector. This law sets the parameters for the conduct of insurance business in Mozambique. Issues dealt with include licensing of insurance sector organisations, restrictions on non-admitted insurance, operating requirements, supervision levy, operating criteria for intermediaries and the penalties for non-compliance with the act. Similar to the South African environment, insurancerelated laws are drafted by the IGS. The draft law is submitted to the Ministry of Finance for approval and, on approval, is forwarded to the cabinet. If the draft law meets with the consent of the cabinet, it is placed before parliament. If it is found to be acceptable, it is then signed off by the president and published in the Government Gazette. Mozambique remains a relatively untapped market for insurers and South African and Namibian insurers are set to take advantage of the possibilities.
Mozambique’s market size is valued at approximately US$ 95 million, ranked as follows: Composite insurers 1. 28.4 per cent Impar 2. 26.1 per cent Emose – State insurer 3. 21.9 per cent Hollard 4. 19.40 per cent Global Alliance Non-life 5. 02.5 per cent MCS 6. 01.7 per cent Austral Seguros 7. 00.0 per cent Real Seguros – started 1 August 2010
Mozambique’s broker landscape: There are currently 33 insurance brokers licensed in Mozambique, a number of these with Portuguese or South African shareholders. The largest insurance brokers according to IGS statistics released in 2008 are: • 26.5 per cent Aon • 21.3 per cent Alexander Forbes • 15.7 per cent National Brokers • 12.1 per cent PoliSeguros • 11.3 per cent MSeguros • 13.1 per cent all other brokers
• Put Foot
The next twenty hours
by Elvorne Palmer
W
hile you are reading this, it is likely that a rhinoceros somewhere in South Africa will be darted from a helicopter. The rhino won’t stand a chance: striking with military precision, a group of armed men will hack deep into the sedated creature’s face to remove the horn. It’ll be a rushed job and likely quite messy. They will make a quick getaway, leaving the violated animal to slowly regain consciousness. It will take hours to die – even days – by which time another rhino will have already been attacked. Near 450 rhinoceros were slaughtered during 2011 – 30 per cent up from 2010. This is also well over the estimated figure of 380 published ahead of Christmas last year, a record high number of killings for at least the last 100 years.
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If you go by the averages, 1.2 rhinos are poached every day. That’s one every 20 hours, not a very long time. If you were flying back from business in the US or Japan, you’d be hard-pressed to find a flight that can get you home in that time. And by the time you land in South Africa, another rhinoceros will have been slaughtered. Recent extinctions Perhaps we’re numbed by the constant media attention this topic enjoys; there are a plethora of grotesque pictures of suffering rhinos in the media and horror stories all over the net. But at the onset of 2012 and with the recent record number of rhino killings, the issue surrounding our rhinos seems to suddenly have become a lot less about how saddened we are at each individual case of poaching reported, and a lot more about the figures. The threat just became real: the species is staring extinction in the face. Extinction isn’t a word we have to deal with every day; we humans are notoriously unaware of what is really happening in the natural world around us. It’s easy to forget as we enjoy our air-conditioned offices that we are currently in the midst of the biggest extinction in our planet’s history. The Holocene epoch (the present time in Earth’s history) has seen more species go extinct than during any of the single event mass extinctions in our planet’s history – including whatever wiped out the dinosaurs. Extinction today is more the rule than the exception. Not convinced? Three months ago, in November 2011, the International Union for Conservation of Nature (IUCN) that draws up the endangered species list, declared the western black rhino extinct in the wild. A few individuals remain in captivity, but we will never see this subspecies of black rhino in Western Africa again. This followed years of desperately searching for proof of at least one living individual in the wild. The northern white rhino (the cousin of our southern white rhino, a subspecies with a much longer horn) hasn’t been seen in the wild since what was believed to have been the last remaining four were found butchered by poachers in 2008. The IUCN hasn’t declared this subspecies extinct yet because some individuals which were born in captivity have been released into the wild in Kenya in hopes that they might survive. Most people consider this rhino extinct in the wild though. The Asian paradigm Why have these rhinoceros species gone extinct? The same reason our species of black and white rhino are threatened: illegal poaching. And it’s clear where the market is too. The last living wild specimens of most subspecies of Asia’s Javan rhino (the rarest mammal in the world and only living relative of the woolly rhinoceros) have all but disappeared and the Indian rhinoceros that once dominated the Asian landscape from the Himalayas to China now live in small pockets in India and Nepal. The last remaining populations are heavily protected, but they have another advantage over the African species: they have only one horn and it is
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quite small, making them less attractive to poachers. One almost doesn’t need to understand how entrenched the use of rhino horn is in Asian medicinal culture, to know that this is where the market is. It doesn’t help that Asian economies have boomed in recent years either, giving the now moneyed populations from China to Vietnam the necessary spending power to indulge in their hereditary practices.
Extinction isn’t a word we have to deal with every day; we humans are notoriously unaware of what is really happening in the natural world around us.
The cure for cancer One of the biggest misunderstandings about the use of rhino horn is that it is used as an aphrodisiac. If this were true we would have only half the fight ahead of us. Rhino horn can be used as an aphrodisiac, yes, but its main purpose in Asian culture is to cure cancer. The allure is evident: what would you do to save yourself and a loved one’s life? This is not a viewpoint that our media or science is likely to change either. The Internet is bombarded with the testimonials of Asians of all ages around the world, explaining how medicines containing rhino horn had cured cancers in their own families. Rhino horn is the veritable cure-all in Asian culture and it has been for likely thousands of years – remember that Rhinocerotidae were among Earth’s most successful species until recently. It is so entrenched in Asian medicinal culture and beliefs that it is hardly surprising that it fetches well over R500 000 a kilogram on the black market here. It is illegal to trade in rhino horn worldwide of course, but this has just made it more valuable. To put the R500 000 a kilogram street-value of rhino horn into perspective: it is by far more valuable than both gold and platinum – and worth more than cocaine these days. Mathematics of extinction In 2008, the recession impacted world economies and despite Africa’s huge growth in recent years, there is still a lot of poverty here. It was only a matter of time before underground trade erupted and the numbers of poached wild rhino grew exponentially. Incidents of poaching increased by 540 per cent from 13 in 2007 to the 84 in 2008; then by another 50 per cent to 122 in 2009; then by 172 per cent to 333 in 2010; and 33 per cent to 448 in 2011. This equates to an average percentage growth of around 190 per cent annually over the last five years. There are only 18 000 white rhinoceros left in the wild and they reproduce at a rate of
nine per cent during a good year (the reality is more like 4.5 per cent). Even if the rate of poaching decreases to near 10 per cent annual growth, it’s mathematically unlikely at current levels that we’ll have any more rhinos left by say 2030. Reviewing South African National Parks (SANParks) data on rhino poaching, activist-site stoprhinopoaching.com claims that in-breeding due to dwindling numbers could mean that the southern white rhino is unlikely to survive past the next 10 years. One every 20 hours The irony is that little over a 100 years ago, there were only 500 southern white rhino left on Earth. The concept of conservation was practically invented right here in Africa and the white rhino was saved from extinction, to become one of the most prolific species of rhino on the planet. This is the same species that today is under great threat. Impoverished Africans trying to eke out a living and feed their families in a changing world are responding to international market demands. It is believed that locals are doing the poaching, though their share of the profits for poaching rhino is significantly less than what the dealers fetch in the Asian markets. Where rhino horn fetches R500 000 there, poachers here reportedly earn only around R750 per kilogram. It could be that the best chance at curbing the trend of poaching rhinos is by educating the local communities. Poaching is a matter of subsistence for these individuals and education and job creation could be the key to saving the few rhino left from extinction. The global economics of rhino horn trade and the cultural driving forces behind them continue on a daily basis. For the southern white rhinoceros and those who want future generations to know what these majestic creatures look like, it’s becoming impossible to overlook the importance of what happens in the next 20 hours.
Put foot RISKAFRICA is proud to announce that we will be joining the fight to curb rhino poaching in South Africa in 2012. The Put Foot Rally in June and July this year will see the RISKAFRICA team using the opportunity of travelling 17 000 kilometres, through seven Southern African countries to not only raise funds for the prevention of rhino poaching, but also to meet with locals along the way and create awareness about the necessity to stop the poaching of our rhinos. Keep an eye out for updates in the run up to Put Foot Rally 2012 and RISKAFRICA’s save the rhino campaign.
Spagetti33
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