RISKAFRICA Magazine

Issue 08 | 2013 ISSN 1812-5964

Underwriting

industry in

Africa

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CONTENTS 4 10 14 18 21 22 28

Underwriting industry in Africa The real cost of oil High risks, high returns: investing in Africa News Thoughts on Africa in Davos Covering The Coldest Journey Country profile: Zambia

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• UMAs in Africa

Underwriting industry in

Africa Hanna Barry

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Unlocking Africa’s undisputed economic potential requires infrastructure.

Inadequate infrastructure is consistently raised as a major constraint to doing business on the continent and a key factor in shaping its future. As different types of industry develop throughout the continent, niche insurers will play an increasingly important role in providing the risk management strategies and solutions to nurture this growth.

“A

lthough the funding gap has begun to close in recent years, unlocking the continent’s vast economic potential requires new projects and programmes, with the need particularly acute in transport, power and communications.

Doing this requires strong political leadership, a greater role for the private sector and diverse sources of funding. Policy makers and the private sector need to do more work together, with political leaders creating a regulatory environment that will encourage private sector investment,” it was noted at the recent Ernst & Young Strategic Growth Forum Africa. The event saw government and business leaders from across the globe converge on Cape Town, South Africa to discuss Africa’s investment potential and hear from businesses that have achieved considerable success on the continent.

RISKAFRICA caught up with some of South Africa’s major underwriting management agencies (UMA) that have launched operations in the rest of Africa. They told us about their operating models on the continent and the unique challenges and risks they are exposed to.

HOLLARD “Globalisation and the resultant competition from foreign conglomerates make entry into new African markets anything but a slamdunk,” says Stef Theofanidis, managing director of Hollard Corporate Markets. “Market dynamics and specifics need to be carefully considered before entering into insurance ventures in Africa.”

Several specialist UMAs of South African short-term insurer Hollard have been providing products and solutions to key African markets since 2005. In particular, Scintilla (engineering and construction); Astra (marine); FASA (personal accident); and Oojah (travel) have established track records in these countries.

More recently, specialist liability products (D&O, PI and PL) and construction guarantees have been introduced in these territories.

“Hollard has a strong footprint in the SADC region, having crafted its vision of pursuing local licences and business opportunities in Africa more than 10 years ago,” says Theofanidis. As a result, it has developed significant capability in Namibia, Botswana, Mozambique and Zambia by partnering with and growing local experts and developing key relationships in these markets. Beyond SADC, Hollard has established strategic partnerships and alliances in the rest of Africa.

“The African market provides an interesting opportunity for South African insurers because of the large potential and because South African companies are relatively familiar with African culture and economies, thus arguably making expansion within the continent less daunting than for US or UK businesses,” continues Theofanidis. “Despite serious competition from global players and local incumbents, South African insurers have achieved reasonable success on the continent, including holding leading positions in several markets.”

Hollard’s approach Theofanidis describes Hollard’s UMA partners as centres of excellence in respect of specialist

lines. “Outside South Africa, they provide support and the capability to underwrite the relevant class of business. This involves training local staff, providing underwriting guidelines, policy wordings, capacity and administrative support. When the risks in the country are large and/or complex, these specialists can assist with upfront risk management, as well as post-loss assessment,” he explains.

While the partners provide the technical insurance expertise, staff members based at Hollard country offices provide insights and local knowledge and access to the broker market. This is the essence of the Hollard partnership model. “Our model allows us to offer a one-stop shop and seamless solution for various businesses. Whether it is a South African client that is operating in the SADC region or only within a particular SADC country, we can provide tailored insurance solutions, both for large commercial entities and specialist businesses. Where Hollard does not have a licence to operate in a particular country, we can facilitate a business transaction through our network of partners and joint ventures/facilities across the continent.”

No walk in the park Since insurance legislation and regulation varies from country to country, Theofanidis stresses that a one-size-fits-all approach cannot be adopted. Challenges vary from country to country, too, but Hollard has observed a number of common factors. For example, among individual consumers, limited disposable income and lack of awareness about the importance of insurance contribute to low penetration. “This is changing slowly but remains a challenge,” says Theofanidis.

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A lack of capacity and underwriting expertise to underwrite some classes of business, such as oil and gas, aviation and other specialised lines of business, remain a challenge.

He adds that technology will play a key role in overcoming the difficulties associated with traditional distribution channels. “In order to succeed in retail markets, it is likely that insurers will need to embrace alternative models in trying to connect products and customers in a reliable, cost-effective manner.”

From an insurance perspective, the risks are not necessarily higher; they are different. “For example, the additional costs of post-loss management in some foreign territories, especially when specialist loss adjusters’ expertise must be sourced externally from South Africa or Europe.”

A lack of capacity and underwriting expertise to underwrite some classes of business – such as oil and gas, aviation and other specialised lines of business – remain a challenge. In contrast, “Some markets appear to be over-traded in terms of the number of industry players. This has the effect of fragmenting premiums and making markets appear unattractive to new entrants,” says Theofanidis.

Hollard’s approach to managing risks when entering new markets entails building a strong brand and culture, and partnering with local insurance professionals.

“Language remains an underestimated barrier.

While communicating can be a challenge, the more significant test lies in the fact that Portuguese and French-speaking countries often have different systems of governance to English-speaking countries on the continent.”

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The future is bright Despite great market and economic diversity from country to country, Africa holds huge potential for the insurance industry. “The continent’s outlook is largely positive, given independent forecasts of growth rates that exceed those of developed markets and a concomitant increase in foreign direct investment, increasing consumer populations enjoying increased levels of disposable income,

and proven large-scale reserves of mineral wealth,” concludes Theofanidis.

NATSURE NASRA Despite Namibia being a very small market, Bertus Visser, head of distribution and business development at Natsure, says that Namibia Special Risk Acceptances (NASRA) has achieved success. It has been running for about two years and, as the registered agent of an Alexander Forbes cell captive wholly owned by the Natsure Group, is able to underwrite all classes of short-term insurance business.

Airspace Africa Underwriters In Botswana, Natsure acts as a reinsurer to Botswana Insurance Company for its aviation book of business. Where risks are too big, Natsure provides reinsurance through Airspace Africa Underwriters. This year, Airspace Africa became an approved Lloyd’s

coverholder. So while reinsurance is currently placed via Guardrisk in Botswana, once the book has run off, this business will be placed into the Lloyd’s market.

“Most African countries like to keep local revenue inside the country, especially Namibia.

In Botswana again, all business has to stay within the country and only when there is a lack of capacity, will it be sourced from outside the country,” explains Visser.

C&G Underwriting Managers Specialist engineering underwriter C&G Underwriting Managers selectively looks at risks all over Southern Africa. “C&G will look at any Southern African country when it comes to engineering, construction and renewable energy, but will be selective. It is not countryspecific, but risk-specific,” notes Visser. Since many of the markets it operates in are small, the only physical office that the UMA has outside of South Africa is in Windhoek, but its major strength is its long-standing relationships with brokers.

Knowing the risks “The biggest challenge I’ve experienced in Africa is the push to keep money local.

Secondly, we are unfamiliar with these markets and so fully understanding the risks is a

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challenge.” Visser says that from a regulatory perspective, many African countries lag behind South Africa in the same way that we lag behind the United Kingdom and Australia.

While this presents opportunities for South Africa, as less regulation brings down the cost of doing business, a solid regulatory environment can also improve the flow of investment and skills into a country.

PAN AFRICA UNDERWRITING MANAGERS Low-frequency, high-severity risks characterise the engineering class of business in Africa, says Cas Hansa, managing director of Pan African Underwriting Managers (PAU), a one-year old UMA operating in the speciality engineering insurance sector.

PAU underwrites on behalf of Regent Insurance Company Limited, which has interests in South Africa, Botswana and Lesotho.

With this in mind, insurers need to more astutely diversify to manage these risks. This includes product diversification, geographic diversification and time diversification.

“When one construction project is starting, another project will be in its final stages of

completion with substantial capital exposure,” explains Hansa.

“Continuously participating in as many risks throughout as large a regional development catchment area as possible, as well as risk sharing among local insurers and reinsurers, helps to simulate the ‘law of large numbers’ and spread-of-risk scenarios critically needed for insurers to succeed in their endeavours to match actual loss experience with expected loss experience,” adds Hansa.

An integrated regional approach therefore improves the ability to secure profit margins in this sophisticated and potentially volatile insurance sector.

The law of the land Key considerations for a South African-based UMA operating in the rest of Africa largely relates to ensuring full compliance with local insurance legislation, says Hansa. “In most cases, this legislation rightfully seeks to secure local insurer development. The continued prospect of a large African infrastructural or industrial project being front-insured by a local insurer and then substantially reinsured offcontinent has to be tempered to nurture and benefit many more locally based engineering insurers,” he explains.

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While this does not mean that overseas capacity and expertise should be excluded altogether, supporting the profitable development of Africa’s own specialist insurance capacity is vital for our own human capital development.

“Engineering underwriting on the continent should be strongly supported and facilitated so that a network of engineering specialists (brokers, loss adjusters and underwriters) can ensure that Africa too is at the forefront of this risk/insurance frontier,” continues Hansa.

“The engineering insurance sector is critically important, since prior to any developmental project being given the green light to proceed, the project managers must ensure an engineering/works insurance policy has been secured from an authorised insurer.

Engineering-insurance prospects therefore directly correlate with any local and foreign direct investment potential on the continent.”

PAU’s point of focus PAU provides facultative reinsurance capacity support to local insurers. Through technical support and a focus on local skills development, it seeks to facilitate greater self-reliant development on the continent. The critical purpose of insurance is to resolve and pay claims quickly, which requires local presence and easy access to the requisite skills sets. “It is important to consider the speed at which claims can be professionally assessed and adjusted, especially in fairly remote locations, as well as how quickly repairs can be concluded on sophisticated, imported machinery, for example,” says Hansa “In this context, also consider the exposures with consequential loss type covers, such as loss of profits or delay in start-up. Even when the damages are insurable, consider road accessibility, border-post/customs processing and actual shipment (road, air and marine) resources.” Once again, this points to an urgent need for an integrated Pan-African strategic approach in all spheres of influence.

Hansa emphasises, however, “The folly of a Pan-African approach would be to regard the region as a homogenised market or standardised business opportunity. Each country has its own unique business features and local legislation dynamics, which must be understood and respected.”

Apart from physical exposure considerations, each country has its own prevailing skill sets and insurance capacity, highlighting the need for a concerted effort in ensuring the nurturing and development of skilled local footprints, preferably entrepreneurially operated by locals.

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“As engineering-insurance specialists, PAU is mindful of the need to ensure we respectfully enter regional markets through the sharing of experiences and skills, and the support of local business development through projectprogrammes paid for, in the final analyses, by Africans,” concludes Hansa.

SANTAM Emerald Risk Transfer A division of Santam Limited, Emerald Risk Transfer has been underwriting risks in Africa for the past six years. It is the largest corporate property and affiliated engineering insurance underwriter in South Africa and currently has policies in approximately 15 sub-Saharan countries, among them, Mozambique, Namibia, Zimbabwe, Ghana, Guinea, DRC, Nigeria and Zambia.

“Emerald specialises in large corporate property risks such as mining, infrastructure, rail and manufacturing. In addition to providing reinsurance capacity, we offer technical assistance, both from an insurance perspective as well as risk engineering and management,” says CEO, Bernie Ray. Ray notes that Africa, as an emerging economy, offers challenges that are not present in developed economies. “Transport, communication and language are common issues. Then there is the threat of real or perceived political instability and difficulties with foreign exchange,” he says. “Competition is keen, and markets are slow to embrace change. There is no quick fix to establishing an African footprint and it requires determination and perseverance. There are, however, great rewards. Business in our market sphere is usually profitable and the risks are well managed.”

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Santam Aviation A sizable Santam office and adequate infrastructure make Namibia the easiest country for Santam Aviation to operate in outside of South Africa. In addition to Namibia, the division has quite extensive dealings in Botswana, Zimbabwe, Zambia and Mozambique. “Botswana has come a long way on the aviation front to make it safer, especially in the swamp areas. The country’s civil aviation authority has tightened up regulation around when and where you can fly, as well as improving airstrips around the Delta region, which is the area that carries the most air traffic in Botswana. The registrar has also stepped up its game in terms of doing business there and companies must go through local subsidiaries,” comments James Godden, head of Santam Aviation.

Profitable growth exists

Botswana is more accessible than Mozambique. Aircraft wrecks can be brought into South Africa relatively easily via a flatbed truck; while in Mozambique, retrieving aircraft can prove more challenging. “Language is another issue and it’s important to have someone on the ground who can speak Portuguese,” notes Godden.

He says that Zimbabwe has been wide open for business as overseas companies have stayed away from the country. “It’s important to go through a local insurance company when operating in Zimbabwe. There is a very small aviation market there, so we don’t have too many problems.” Santam Aviation operates through Tristar Insurance Company in Zimbabwe.

Zambia, though much the same as Zimbabwe, is slightly more efficient due to political reasons.

Generally, a lack of infrastructure, as well as the lack of maintenance and repair skills is a challenge. Currency issues, such as exchange rate fluctuations, makes doing business tougher.

From a risk exposure point of view, dealings in West Africa, including Ghana and Nigeria, are more concerning, but this region is opening up and offers major opportunity.

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Some of the risks posed by this region include fuel contamination, which occurs when water seeps into fuel that is being stored in barrels at remote airstrips; the quality of the landing strips; as well as herds of cattle and goats, and sometimes people, walking across the strips.

“The cost of recovery from most countries is quite expensive and repairs must usually be done in South Africa. Inevitably you have to look at higher excesses, which is not ideal for the client,” says Godden. “We are very selective of the risks we write. A country like the Democratic Republic of Congo is a massive concern for us and has the highest fatality rate in the world. It is also located on the equator and is exposed to incredibly harsh storms, has virtually no infrastructure and is in political turmoil.”

Santam Aviation operates through local brokers in Kenya and Tanzania. The South African operation offers underwriting and claims control, taking a bigger portion of the risk as the local players are generally quite small. “I think that will change. The Zambian state Insurance Company, for example, is now prepared to write 100 per cent of aviation risks,” says Godden.

“There continues to be a lot of activity in this space. Aviation will grow faster in a country like Nigeria, for instance, than in certain other African countries. Santam Aviation will keep expanding but will be very selective about the risks we accept.”

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The cost of recovery from most countries is quite expensive and repairs must usually be done in South Africa. Inevitably you have to look at higher excesses, which is not ideal for the client.

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• Oil and marine

The real

cost of

oil Nick Krige

The highly publicised Deepwater Horizon oil spill in the Gulf of Mexico in 2010 brought home the need for shipping owners and operators to have sufficient environmental liability insurance in place. But it seems as though shipments of oil being carried on African waters are inadequately insured.

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African costal economies, local business and the tourism industries in those countries would take a severe knock if a portion of the coastline was to suffer a major oil disaster. The risk of an environmental disaster has increased in recent times due to the rest of the world realising Africa’s economic growth potential and the increased trade that has resulted from it. “Africa’s growing economies and the explosion in the export of raw materials from the continent have resulted in more shipping activity around the coast of Africa.

Concerns have been expressed at the increased risk created by this growth in marine traffic on the environment of coastal states and the extent to which that risk is insured by ship owners and the coastal states themselves,” says Malcolm Hartwell, a director at Norton Rose.

coastal states also tend to attract the ships that are not as well maintained, operated or insured as those that call at South Africa. Furthermore, those coastal states are also less able to respond to environmental emergencies,” says Hartwell.

It is not just oil tankers that pose a major environmental threat. “Any ship has very large volumes of oil and fuel on board.

The Eihatsu Maru, although only a small long-line fishing vessel, could have caused serious damage had the ship broken up after it ran aground off Clifton Beach in Cape Town South Africa, in May last year. Not only are fuel and oil carried in significant volumes on ships, we know that ships are illegally flushing their bilge tanks at sea, leaving large slicks of oil in their wake,” explains Andrew Aubin, Aon South Africa’s regional manager for the Eastern Cape.

According to the South African Maritime Safety Authority (SAMSA), of the nine most recent shipping incidents, seven ran into serious insurance challenges. In the salvage of the Eihatsu Maru, authorities face costs of R7.5 million, with more legal costs to come. The ship was not insured and SAMSA’s hopes of selling it and its contents to foot the bill will not even cover a third of the costs.

There are a series of international and local systems that determine a ship’s seaworthiness, which would mitigate many risks, as a compliant ship is far less likely to breakdown or leak oil. “The ship owner is obliged to comply with construction and operational standards established by the country where the ship is registered. In addition, the ship owner has to comply with the regulatory regime applicable in the ports of all of the states at which the ship calls,” explains Hartwell.

The problem facing African countries with insufficient resources is that they cannot afford to effectively enforce any local or international legislation. “Other countries in Africa with fewer resources do not have South Africa’s regulatory and enforcement mechanisms. Their exposure to environmental pollution from ships also varies according to the state of their domestic legislation and according to whether they have acceded to the various international pollution funds.

Unfortunately the under-resourced

No insurance company in the world can fund a R23-billion oil spill clean-up, which is why the International Insurance Fund was set up, under the auspices of the United Nations. This is a fund to which the world’s major oil companies contribute, in order to cover clean-up costs from tankers over and above ship owners’ limits on their liability. “Any country that is a signatory to the enabling legislation and has paid its contributions can claim all the costs of pollution clean-up from the fund,” notes Aubin. But enforcing premium payment has proved a challenge and as with all insurance, if premiums are not paid, claims cannot be made.

Any country that is a signatory to the enabling legislation and has paid its contributions can claim all the costs of pollution cleanup from the fund.

and getting a handle on these risks is massively challenging, as they often arise out of complex interdependencies which may not be immediately visible,” adds Aubin.

“All coastal states should be ensuring compliance by shipowners with the relevant international standards and, more importantly, should be ensuring that they have the right to claim from the large international insurance funds designed to respond to environmental pollution from tankers. Can Africa’s coastal states adequately survive a serious oil spill or other pollution threat?

“Probably not,” concludes Hartwell.

Environmental damage When oil is spilt into the ocean, it has both immediate and long-term environmental consequences. The oil has an adverse effect on the surroundings, the birdlife, the ecosystems and the marine animals, sometimes for decades after the initial spill, if it was significant.

South Africa, for instance, has not acceded to the updated fund and has not passed the local legislation that would enable it to claim from the existing fund.

“Countries are lagging dismally in their approach to the range of risks that their coastlines are exposed to and putting proper, bespoke risk mitigation strategies in place to counter the impact of worst case scenarios. Granted, understanding

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Damage to marine ecosystems Oil spilled from damaged ships and oil rigs or burst pipelines coats everything it touches and is not particularly easy to get rid of. Anyone who has eaten a greasy hamburger and tried to wash their hands without soap afterwards will have a slight inkling of what oil can do to the environment.

Oil hitting a beach is bad enough, as the oil clings to rocks and every single grain of sand, but if it washes into coastal marshes or wetlands it can be even more harmful, as plants and grasses will absorb the oil, potentially destroying the area as a wildlife habitat.

Damage to birdlife Whenever there is an oil spill it has almost become a clichĂŠ for the media to beam images of oil-soaked penguins around the world, but the fact of the matter is an oil spill is a death sentence for seabirds.

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When a bird is covered in oil, it makes it impossible for them to fly and destroys their natural waterproofing and insulation, which leaves them vulnerable to the elements, hypothermia and overheating. In addition, the birds will try to groom their feathers to restore the natural protection and are at risk of swallowing the oil in the process.

Damage to marine mammals Water mammals are put at risk by oil entering their environment. The oil can clog the blow holes of whales and dolphins, making it difficult for them to breathe and hampering their ability to communicate. Oil coating the fur of seals and otters disrupts their natural protection, similar to birds, leaving them vulnerable to hypothermia.

Mammals that are able to avoid getting coated in oil are still in danger, as the oil can contaminate their food supply. Mammals that ingest fish that have been covered in oil will be poisoned.

Damage to habitat and breeding grounds The long-term damage caused by oil spills, however, is in what it does to the habitats and breeding grounds of all of these animals. They rely on these areas for the continuation of their species, and the damage done by oil is without a doubt one of the most significant environmental effects of an oil spill.

In the end, the overall cost and severity of environmental damages caused by a spill are difficult to calculate and depend on many factors. Often the full impact is not seen or felt until many years after the event, but one thing is certain; oil spills are bad news for the environment.

World’s worst oil disasters

Castillo de Bellver Deepwater Horizon Date August 1983 Location: Saldanha Bay, South Africa

Date April 2010 Location: Gulf of Mexico, USA

On a global scale, the Saldanha Bay oil spill ranks only eighth or ninth in terms of gallons of oil spilled, but it is easily the worst marine environmental disaster on South African shores. It started when the Castillo de Bellver oil tanker caught fire about 100 kilometres northwest of Cape Town. The ship began to drift before eventually breaking apart and sinking 40 kilometres from the coast. The rear portion of the ship sank with around 31 million gallons of oil still aboard, but the front portion was towed away and sunk further off the coast to minimise pollution. In total, just short of 80 million gallons of oil polluted the west coast of South Africa.

ABT Summer

Katina P

Date May 1991 Location: Off the coast of Angola

Date April 1992 Location: Maputo, Mozambique

The oil tanker ABT Summer, headed for Holland, was full to the brim when an explosion on board caused the ship to catch fire about 1 450 kilometres off the coast of Angola. Due to the explosion, the ship began leaking its oil into the ocean. The leak created a 128 square kilometre oil slick as the tanker burned for three days before sinking. The whole cargo of 80 million gallons of oil was lost to the sea, but thankfully the majority of the spill is believed to have been broken up by rough seas and caused little environmental damage, thanks to the offshore location of the event.

In terms of total oil spilled the Katina P incident was not a massive one, but the negative effect on the Mozambican coast was significant. The captain of the Greek-owned ship intentionally ran the ship aground and abandoned ship just North of Maputo after the vessel had been damaged in a storm. Two of the boat’s tanks had been cracked and leaked a substantial amount of oil into the Mozambique Channel.

The Agulhas current spread the oil all over Maputo Bay, causing disastrous environmental damage to local estuaries, and plant and animal life in the area.

The Deepwater Horizon disaster is without a doubt the most high-profile spill of recent times.

It did not involve a tanker, but an explosion on an oil rig after high-pressure methane gas expanded into the drilling unit and ignited. Most of the workers on the rig escaped, but 11 bodies were never found and the effect on the environment around the site was tremendous. There were multiple efforts to douse the flames burning on the rig, all of which failed and the Deepwater Horizon eventually sank after burning for 36 straight hours. At first it was believed that there was no oil leak, but two days after the explosion, a large oil slick began to spread at the rig site. In the end, an estimated 210 million gallons of oil spilled into the ocean and affected the coastlines of Louisiana, Mississippi, Alabama and Florida.

Gulf War Date January 1991 Location: Persian Gulf, Kuwait Interestingly the worst oil spill in history was not caused by a tanker accident or oil rig drilling accident; it was a calculated act of war. During the first Gulf War, in an attempt to prevent American troops from being able to land on the coast, Iraqi forces opened the valves of the Sea Island oil terminal in Kuwait and dumped more than 380 million gallons of oil into the Persian Gulf. The oil slick that was created was 10 centimetres thick and covered 6 500 square kilometres of ocean.

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• Investments

High risks, high returns investing in Africa Anton Pretorius

The climate in sub-Saharan Africa is looking positive for investors in 2013, but the continent continues to battle civil conflict, a recent rise in terrorism groups and resource nationalism.

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he 30th annual RiskMap report, published by independent global risk consultancy Control Risks, reveals that sub-Saharan Africa remains, to some extent, insulated from the developing world’s dominant austerity agendas.

However, 2013 will see increased scrutiny of the continent’s internal geopolitics.

The RiskMap report is compiled from the company’s primary services, which includes anticorruption audits, consultancy and training, political risk analysis and its broad range of security and crisis management support. Operating from 34 offices, Control Risks has helped some of the most influential organisations in the world to understand and manage the risk of operating in complex or hostile environments.

“This year, growth rates range from 3.2 per cent for the more diversified, bigger economies to 7.9 per cent for the countries that we call ‘resource lions’, such as Mozambique, Liberia, Tanzania and Ghana,” says Turner.

These markets are offering much higher rewards for investors than in Europe and North America, and Africa continues to see a diversification across different sectors such as retail, infrastructure, transport and telecommunications.

While the growth story remains positive, several complex political, operational and security challenges face investors across the continent.

“While we have seen a downturn in political violence since 2002 when civil war was raging across the continent, there has been an increase in regional insurgencies and militancy,” notes Turner.

Risk and opportunity Joanna Turner, associate director, Control Risks subSaharan Africa global risk analysis, says that thanks to high growth rates across the continent, Africa’s investment climate is looking very positive for 2013.

In 2012, the coup in Mali took investors by surprise.

After 21 years of democracy, Islamic rebels created a situation of political instability. “While we are confident that the international intervention will return stability to the country over the short term, concerns about the broader regional stability for investors in countries surrounding Mali remains, and we will be watching it very closely in 2013.”

A rise in terrorist groups, such as Boko Haram in northern Nigeria and Al-Shabaab in Somalia, means Control Risks expects some isolated incidents in 2013. “A new rebel group, M23 in the DRC, is adding difficulties in an already complex environment where some of our mining clients are struggling to operate,” comments Turner.

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What to watch There are several key issues which Control Risks will monitor closely in 2013. “The elections in Kenya and Zimbabwe later this year are expected to be a close-run race. Tensions are likely to run high and we are expecting some small-scale violence, which may affect investors operating in the country,” Turner commented earlier this year.

In March, violence flared up in Kenya just days before the polling stations opened for their national elections. In Mombasa, at least four police officers were butchered with machetes in an overnight attack that authorities believe was carried out by a coastal separatist group, forcing some western election observers to retreat to their hotels due to security reasons. Nearly 100 000 police officers were deployed during a tense presidential election in which a record-breaking 12 million people voted.

In terms of regulatory changes, the muchawaited Petroleum Industry Bill (PIB) in Nigeria is due for 2013 and will hopefully provide clarity for investors. “We do have concerns over the implementation of the bill and whether it will actually be passed in 2013,” says Turner. The PIB will not only eliminate corruption, but it will put an end to gas flaring and take care of the problem of environmental degradation in the Niger Delta region of Nigeria. Finally, it will create a balanced financial environment for would-be investors in the hydrocarbon sector of the Nigerian economy.

The PIB has been 12 years in the making. It was first introduced in 2000 as the National Oil and Gas Policy (NOGP) and has survived three regimes led by presidents from the same party.

The price of oil in that period averaged $67 a barrel, with wide fluctuations in the same period.

RiskMap analysis of sub-Saharan African countries for 2013 Namibia The country has one of the continent’s most liberal constitutions and most attractive investment regimes. Although its corruption levels remain among the lowest in subSaharan Africa, corruption allegations have increased in tandem with foreign investor interest in offshore oil and gas exploration.

Despite rich mineral resources, prospects for rapid economic growth are limited, and the redistribution of white-owned land remains a source of tension.

Angola External political threats to Angola’s regime are limited. Control Risks considers that the current political order is largely sustainable while oil revenues continue to grow. Thereafter, the regime will be subjected to an increasing range of political

Another trend that Control Risks is keeping a close watch on is Africa’s growth in resource nationalism.

Several mining codes and contracts in Guinea, DRC and Mozambique came under review last year. Turner says that as more of these countries look into contracts that have already been issued, concerns over growth in resource nationalism continues to grow.

Turner describes Mozambique as the “rising star” of Africa. Having recently returned from an international investors’ conference in the country, she is confident that while Mozambique’s oil, gas and mining spark primary interest, investors can certainly look to diversify across the country’s economy. “Investors from across the globe attended the conference and were looking at various sectors like tourism, infrastructure and agriculture. The main challenge for Mozambique will be making sure that it does not focus only on resource growth, but sustained growth across the country and poverty reduction. Mozambique is my investor’s pick for 2013.”

130 million, especially smallholder farmers, better access to markets. The exchange will initially focus on establishing an auction facility and spot trading for agriculture and non-agriculture commodities, but will also develop futures trading across East Africa.

In Mombasa, at least four police officers were butchered with machetes in an overnight attack that authorities believe was carried out by a coastal separatist group, forcing some western election observers to retreat to their hotels due to security reasons.

As more and more companies, including several insurers, are planning to expand their businesses throughout West and East Africa, the political and security risks will be monitored very closely. Old Mutual is the latest insurer that announced that it wants to scale up its life business in Kenya and use it as a hub for expansion in East Africa. Guardrisk, a unit of Alexander Forbes, says that many of its South African clients are looking for expansion opportunities across the continent.

Another positive for Africa’s investment climate is the establishment of the East Africa Stock Exchange (EASE) later this year. Based in Rwanda, the EASE aims to increase regional market efficiency and liquidity as well as give the region’s population of

risks. In the meantime, a combination of Angola’s reliance on externally sourced oil revenues and pressing demands for social development will continue to generate tensions and could affect the operating environment for foreign investors.

Tanzania Tanzania is one of sub-Saharan Africa’s most politically stable countries. Since abandoning socialism in the ‘80s, it has instituted significant reforms and improvements to the business environment. The status of the semiautonomous archipelago of Zanzibar remains the main source of political friction.

Zambia Zambia is one of Africa’s most liberalised economies, although persistent corruption, a culture of business secrecy and an inadequate infrastructure have previously hampered opportunities for foreign business. President Sata succeeded Banda on the back of a strong

anti-corruption campaign, putting pressure on him to pursue all allegations of corruption and establish systems and structures to support anti-graft initiatives.

Congo The persistent civil war that marred the county’s transition has come to an end, and the Ninja rebel group finally disarmed in 2008.

The business and political elite is small and political patronage is a common problem.

Bureaucracy is interminable and corruption rife.

Uganda The country’s negative aspects are magnified with corruption indicators worsening and President Museveni’s increasingly autocratic manner underlining the weakness of government institutions. 2013 is likely to be decisive for the oil sector, where progress has stalled and political risks are rapidly increasing as the sector becomes a staging ground for factional disputes.

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Liberty Life Namibia Funeral Plan Honour your loved ones with the dignity they deserve.

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2012/09/03 3:51 PM

NEWS SA firm to take controlling stake in Pan Africa Insurance The Competition Authority has approved Sanlam Limited’s bid to acquire additional shares in Pan Africa Insurance. This will increase Sanlam’s stake from 50 per cent to 60 per cent, the controlling share in the Kenyan insurer.

Sanlam said the increased stake would enable the company to make material changes; a restructuring of the Pan Africa Insurance board and a review of its business operations.

Sanlam’s continued expansion into Kenya’s insurance market is rivaled by Liberty Holdings, which is seeking a larger piece of the market through CFC Life.

Namibian insurance industry growth

Long-term insurance, says NAMFISA, had a total premium income of N$2.8 million ($317 582).

Investment income and capital gains amounted to N$1.4 million ($158 820), other income and fees amounted to N$107 625 ($12 209), bringing the total income to N$4.4 ($500 000). Total benefits paid amounted to N$1 947 979 ($215 539).

The Namibian insurance industry grew 13.1 per cent last year, according to a report by PR newswire, Small Business News.

The report provides historical values for the Namibian insurance market and forecasts figures for the years 2012 to 2016. The Namibian insurance industry is highly concentrated, with 17 insurers and one reinsurer, with the top five companies in 2010 accounting for about 87 per cent of overall net written premiums. The industry is dominated by the life segment, says the report.

The Namibia Financial Institutions Supervisory Authority’s (NAMFISA) short-term insurance figures show that net premiums written for the first two quarters of 2012 amounted to N$869 951 ($98 624). Premiums earned stood at N$876 290 ($99 365) and claims incurred amounted to N$526 477 ($59 706). Reinsurance deposits amounted to N$86 589 ($9 816).

Industry awards Africa Re tops for contribution to market development Africa Re, the largest reinsurance company in Africa and the Middle East, received multiple awards in 2012 for contributions to insurance growth and development in Africa. The corporation is headquartered in Lagos, Nigeria, with regional offices and subsidiaries spread across major markets on the continent.

The awards included the Special Recognition Award by the African Insurance Organisation (AIO) in recognition for contributions to insurance and reinsurance development on the continent over the past 40 years; Best Regional Retakaful Company by the International Retakaful Summit; and Best Reinsurance Company 2012 for African Governance and Corporate Leadership by the Institute for Government Research and Leadership Technology.

The 36-year-old institution has maintained top ratings (A-) with Standard & Poor’s (S&P) and AM Best.

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Extreme or erratic rains and drought trap many Rwandan farmers in poverty. Repeated bad weather can rob them of the means to recover in the following growing seasons.

Insurer revokes Mariental flood cover The flood-prone, 10 000-resident town of Mariental has again had its flood cover revoked.

Kilimo Salama now available in Rwanda A low-cost insurance solution, which operates using data from automated weather stations, will offer 20 000 Rwandan farmers cover for the risks posed by increasingly erratic rainfall in the country. The micro-policies will protect agri-loans for high-yielding seeds, fertilisers and other farm inputs.

Called Kilimo Salama, ‘safe farming,’ the project is the collaboration between the Syngenta Foundation for Sustainable Agriculture, the Ministry of Agriculture and Animal Resources, One Acre Fund, SORAS Insurance in Rwanda, and Swiss Re Corporate Solutions. It was launched in Kenya in 2010 and has insured 73 000 farmers to date. Ten thousand payouts have been made to farmers in Kenya. The programme will offer farmers in the southern and western provinces insurance linked with loans provided by One Acre Fund for fertiliser and other inputs. Insurance premiums will be paid as part of loan repayments.

The project covers farmers who plant maize and beans, on as little as a 10th of a hectare. “Extreme or erratic rains and drought trap many Rwandan farmers in poverty. Repeated bad weather can rob them of the means to recover in the following growing seasons,” adds Marco Ferroni, executive director of the Syngenta Foundation.

In 2006, insurers paid out more than N$100 million (US$ 11.1 million) in flood-associated damages when properties in Mariental were flooded following heavy rains.

Subsequently, the entire town’s flood insurance cover was suspended. In September last year, however, Mutual and Federal announced the reinstatement of flood cover for the area. The move was widely celebrated and many residents cancelled short-term policies to join Mutual and Federal at a higher premium in order to acquire the flood cover.

Mutual and Federal announced in February that flood cover in Mariental will again be revoked, with effect from 1 March 2013. “[We were] informed at a stakeholders’ meeting that in the absence of participation by other short-term insurers through risk sharing and adequate reinsurance coverage, Mutual and Federal cannot continue with the insurance,” the chairman of the Mariental Flood Task Force, Chris Nel, said at the time.

“We would like the company to continue with the flood coverage. However, if a person did not claim for the past five months, Mutual and Federal should consider refunding them for the premiums they have paid,” comments Shaanika.

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Afro-Asia health insurance forum NamibRe financial reports too incomplete to audit The only reinsurance company in Namibia, Namibia National Reinsurance Corporation’s (NamibRe) audit report for the 2012/13 financial year remains outstanding. Managerial incompetence is suggested as the reason for the parastatal’s inability to meet requirements.

Auditing firm Ernst and Young has qualified the reinsurer’s financials, meaning insufficient documentation made it impossible to complete the audit. Ernst and Young started the process in April last year and should have finalised the report for approval by the NamibRe board by September 2012.

According to correspondence between NamibRe board chairperson, Maria Dax, and managing director Anna Nakale-Kawana, the auditor believed there was a “significant breakdown” of controls at the company due to a lack of “diligence or lack of skills by management”.

“The disclaimer could, and probably will, influence the excellent credit rating of NamibRe which is AA nationally and A regionally. The rating is aligned to Namibia’s sovereign credit rating,” comments Dax.

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Delegates from countries across Africa and Asia met in South Africa between 11 and 14 March to discuss the role of health insurance in achieving universal coverage and social protection on the two continents.

The African Development Bank (AfDB) organised the meeting in collaboration with the German International Co-operation, the International Labour Organisation (ILO) and the World Health Organisation (WHO) in consultation with the South African Government.

Representatives from the ministries of finance and health, national health insurance authorities and development partners, as well as experts and practitioners from Asia and Africa attended the forum, entitled Achieving Universal Coverage through Health Financing Reform. “Focusing on the Southern African region, the forum will explore in particular the role of extending coverage of pooled financing mechanisms (often under the label of ‘health insurance’), for moving closer to universal health coverage,” commented AfDB, before the time.

The forum also discussed the challenges and limitations of different approaches to revenue contribution in closing healthcare coverage gaps.

Focusing on the Southern African region, the forum will explore in particular the role of extending coverage of pooled financing mechanisms.

• World Economic Forum

Thoughts on

Africa in Davos Johannes !Gawaxab

for us in Namibia is that we are constantly at a crossroads where our actions or inactions can shape the future of life of many Namibians.

Key issues affecting the world Global economy, Eurozone fragility, financial system stability, widening inequality, persistent structural unemployment and climate change appear to be key issues affecting the world. To thrive, never mind survive, global competitiveness is increasingly driven by talent and innovation.

Major geographical risks in 2013

Johannes !Gawaxab, managing director of Old Mutual Africa, was the only Namibian to attend the 43rd World Economic Forum Annual Meeting in Davos, Switzerland. The forum’s AGM brings together business, political, academic and other society leaders from all over the world. It is regarded as the foremost creative force for engaging leaders in collaborative activities focused on shaping global, regional and industry agendas. He shared his thoughts on the experience with RISKAFRICA. Attending the annual meeting was a great opportunity to be part of the shaping of the greater environment in which we operate; and with finance being such a critical part of how an economy runs and functions, to discuss issues affecting the financial services industry with some very key influential stakeholders.

I had the privilege over the four days in Davos to meet and talk to Raila Ondinga, Prime Minister of Kenya; Dr Henry Kissinger, former US Secretary of State; Joseph Stiglitz, the American economist, and recipient of the Nobel Prize in Economics; Marissa Mayer, the CEO of Yahoo; governors of three central banks; and Clay Christensen, the Harvard Business School Professor best known for disruptive innovation.

The Arab Spring/Winter; the Eurozone crises and the rise of China seem to be among the significant risks facing the globe. China’s behaviour is important as its actions impact the entire world.

In Africa, we need to review our relationship with China and change it to one that is mutually beneficial. China has a clear long-term Africa strategy which, understandably, is premised on its own interests. It is time for Africa to review this relationship and approach it in a way that is a winwin for both parties.

Europe will struggle with growth Europe is experiencing structural problems and is set to struggle for a long time. The continent is one of Namibia’s main trading partners and if economic growth continues at current levels, there are obvious challenges to growth in Namibia.

Diversifying our exports to new markets should be a consideration if not already embarked upon.

Risk of unconventional monetary policy We are entering a risk period in terms of how much central banks can do. Currency wars have become a real possibility. Central bankers are keeping interest rates low and asset prices high, and every country wants to keep its currency down in order to make exports more competitive. To respond to global economic challenges, monetary policy globally increasingly finds itself in unconventional territory.

Currency wars

It is evident from the many discussions that we are confronted worldwide by major adaptive challenges as well as profound transformational opportunities. To steer this towards successful outcomes, we need to master strategic agility and to build risk resilience. A primary insight

Although we live in a world of flat money and mostly floating rates, questions are being asked about the current level and value of the Chinese currency as well as the Japanese Yen, including the latest move by Japan to increase its inflation target

from one to two per cent – and the decision

by Bank of Japan to buy $140 billion of mostly short-term government debt each month. The depreciation of the US Dollar during 2012 also raised questions as to whether countries should keep their currencies deliberately low to improve their competitiveness.

Internet will get closer and personal The ‘interest graph’ – the set of things I am interested in and that my friends like – will overtake the ‘social graph’ or the social networks.

In the evolution of technology we had the Internet-boom era, the second wave revolved around social networks, while smartphones are currently experiencing an explosion. The future of technology is personalisation, guided by daily habits. The ultimate source of growth will be technological progress.

Inequality biggest risk facing the world Poverty, unemployment, and inequality are not unique in Namibia. The reality is that across the world – for different reasons and histories – inequality and unemployment are aggravating challenges we all face.

The secrets of success and competitiveness The overarching theme experienced at Davos clearly indicates that success really is about the journey, not the destination. To be competitive, Namibia needs to focus on structural features of competiveness, on its macro-economic policy – fiscal and monetary policy – innovation, attracting FDI and on its export sector. To ensure internal stability, labour-absorbing growth is almost a no-brainer.

But to really focus on ensuring Namibia’s success, we need to get our education system on a track that is supportive of our national aspirations. To do this, we need good leaders.

Good leaders lead, great leaders transform. Our generation has everything to lift Namibia out of poverty and transform it into a winning nation.

While many of these observations are known and shared in various forms across Namibia in boardrooms and in huts, I share them with you now with the assurance that we are in good company globally and our growth is their growth and their success is ours, too.

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Covering

The Coldest Journey Hanna Barry

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“The ship has finally sailed and left the six of us with nowhere to run other than south.” So begins a blog entry by Ian Prickett on Monday, 4 February, the day after the SA Agulhas bid farewell to the six-man Ice Team in Crown Bay, Antarctica. “Next on the list, ski more than 2 000 miles in winter.”

P

rickett is one of a group of explorers who will attempt to conquer what has been called the last great polar challenge: the first ever winter crossing of Antarctica. Known as The Coldest Journey, the expedition will commence on 21 March 2013, the centenary year of Captain Robert Falcon Scott’s death in the Antarctic. A naval officer and explorer, Captain Scott died attempting to be the first to reach the South Pole. Up until late February, the expedition was to be led by Sir Ranulph Fiennes, who has been described by the Guinness Book of World Records as “the world’s greatest living explorer”. Sir Ranulph, Ran to those who know him, was born in 1944 in the UK, brought up in South Africa and then returned to the UK. At 21, he was the youngest captain in the British Army.

Unfortunately, he had to pull out of the expedition after contracting frostbite in his left hand. It was decided that his continued participation in the expedition would make him more of a liability than an asset. Although a blow to the team and bitterly disappointing for Sir Ranulph, the remaining expedition members, under the experienced leadership of traverse manager, Brian Newham, have unanimously elected to continue with the crossing.

Alone on the ice. The Ice Team bid farewell to friends on board the Agulhas.

Insurance aspects Jardine Lloyd Thompson is the broker on The Coldest Journey and has created and placed in the co-insurance markets of Lloyd’s and major insurance companies a bespoke policy to provide crucial cover for the expedition.

“This insurance turns on a requirement for the expedition to have adequate assets to clean up and remove all items used to support the traverse, so as to ensure Antarctica remains a pristine, virgin environment when the crossing is concluded,” explains Tony Medniuk, chairman of the board of trustees for The Coldest Journey. “It must also provide necessary funds for any search and rescue mission for the ice team, to the extent such an operation may be feasible in the hostile polar conditions.”

The precise policy limits and premium remain confidential to the expedition, but Medniuk confirms that the cover is counted in several millions of US Dollars. Medniuk, who has served on the market board of Lloyd’s of London, first worked with Sir Ranulph and Anton Bowring, The Coldest Journey expedition co-leader, to create the wholly sponsored insurance programme for the Transglobe Expedition in 1979.

This was the first circumnavigation of the world along its polar axis. He was joined by British explorer Charles Burton. The three-year, 56 000-kilometre odyssey took intricate planning, 1 900 sponsors and a 52-person team to

the expedition was to be led by Sir Ranulph Fiennes, who has been described by the Guinness Book of World Records as “the world’s greatest living explorer.”

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The Cat with Stonehage House and the science caboose in tow.

Finning engineer Spencer Smirl and Ice Team member Ian Prickett during the whiteout on 10 February, involving blowing snow verging on a mild blizzard and poor visibility.

This is the ultimate engineering challenge, as no machine of this type has ever been exposed to these temperatures and the harsh environment.

handle. One of the sponsors, Mobil, donated $6 million worth of fuel to the expedition. The circumnavigation has never been successfully repeated. Marine insurance was organised

by Marsh and McLennan, together with CT Bowring and Company, through Lloyd’s.

“After seven years of planning, Lloyd’s was approached to sponsor the insurance for it, which it did. Due to the extensive planning and preparation, Lloyd’s decided it was a low risk project,” Sir Ranulph told RISKAFRICA. He was eating lunch on board the SA Agulhas at the time, the day before it set sail for the frozen continent, with Ice Team, crew and equipment, from Cape Town’s V&A Waterfront on 7 January.

Extreme risk management

“The Coldest Journey would not have been possible without insurance,” says Bowring, adding that planning for the expedition has taken five years. While this has minimised the risks significantly, it remains an incredibly highrisk undertaking, not least because there can be no search and rescue in the winter. Search and rescue operations are possible only at the beginning and end of the journey, as aircraft cannot fly in the cold conditions due to the threat of their fuel freezing. Should something happen to a member of the Ice Team in the middle of the crossing, they will have to wait until summer before a rescue attempt can be made.

Frostbite is the most likely hazard, as was evidenced by Sir Ranulph’s incident. This can be contracted at temperatures of -20 degrees Celsius, which seems mild in comparison to what the Ice Team will face. Simply inhaling air below -60 degrees Celsius can cause irreparable damage to the lungs and frostbite in a matter of seconds, if skin is exposed.

When walking on the ice, the team will wear specially developed heated clothing and use breathing apparatus to protect them from the ever-present threats posed by such extreme temperatures.

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The 2 000-mile (3 219-kilometre) journey across the continent of Antarctica has for many years been considered too perilous to try and the expedition team will have to overcome one of the Earth’s most hostile environments, exposing themselves to temperatures dropping close to -90 degrees Celsius and operating in near permanent darkness. The Foreign and Commonwealth Office has, up until this expedition, refused to grant permission to take on the challenge because it has been deemed too risky and the chances of disaster too high.

This decision was overturned only after it was shown that technological innovations could mitigate some of the risks of the crossing.

A mobile vehicle landtrain, known as the ice

train, will lead the traverse. It is made up of two Caterpillar D6N track-type tractors, which will pull two specially developed cabooses for scientific work, accommodation and storage, including fuel designed not to freeze. Supplied

by Finning UK and Ireland, the 20-tonne D6Ns have been modified by mechanics to help cope in the extreme weather conditions.

For instance, a heating mechanism keeps the engines warm when they are not running, and tented garages, which unroll from the roof of each vehicle, will cover them each night, allowing for any maintenance and refuelling.

“This is the ultimate engineering challenge, as no machine of this type has ever been exposed to these temperatures and the harsh environment. You have to consider how every single component is going to operate,” says Andy Thomas, Finning design engineer.

The tractors will follow behind a two-man ski unit, which will be assessing the terrain for crevasses – one of the biggest threats to the success of the expedition. These cracks on the ice can be as little as a few millimetres to many metres across and they can be bridged by snow at the surface, making them very difficult to see. Since long distance vision will not be possible in the dark winter months and what is passable by the skiers may not be passable by the heavy Cat machines, in addition to careful route choice, the team will be using a ground penetrating radar. This piece of equipment transmits a signal down into the snow and then reflects the data onto a screen on board the Cats. It exposes a change of density within the snow pack and is often used for ground survey work to detect subsurface structures such as pipes or cables.

Despite taking significant measures to reduce risk, advanced first aid and emergency rescue training was vital. The team received expert training on the use of their emergency packs, for use in case of a crevasse fall or similar major incident. “The purpose of the training was to learn how to use the equipment to rescue not just other members of the team should they fall into a crack, but also ourselves if we fall in and there is no one around to help us out,” says Prickett.

base. This grew the size and scope of the expedition, to include a scientific research aspect.

The White Mars project

Environmental impact The expedition route has been chosen based on routes used by other operators, to promote safety and prevent the spread of impacts to more pristine parts of the continent. It is expected that environmental impacts will have less than a minor or transitory impact upon Antarctica. All waste, including sewage, will be removed from the continent at the end of the traverse, and whatever can be recycled will be.

The most significant negative impacts of the planned activities are atmospheric emissions, which can contribute to the greenhouse effect and climate change, as well as impacts on the ice environment (release of grey water, sewage and possible fuel spills), including noise and physical disturbance. In response to this, all activities will be planned to minimise fuel use and vehicles will be maintained to give the maximum possible fuel efficiency and minimise emissions of carbon oxides, black smoke and unburned hydrocarbons. Clean, filtered fuels will be used.

The expedition will also make educational content available to schools. Over 143 000 schools worldwide will be able to access engaging, real-time content and students can follow the Ice Team’s progress across the Antarctic.

The cause The Coldest Journey aims to raise $10 million for Seeing is Believing, a global initiative that exists to help tackle avoidable blindness in the developing world. A collaboration between the International Agency for Prevention of Blindness and Standard Chartered, the lead sponsor of the expedition, Seeing is Believing aims to raise $100 million by 2020. According to the initiative, 80 per cent of the world’s blindness is avoidable in that it can be prevented or treated, sometimes for as little as $30. Standard Chartered has committed to matching all donations made to this cause.

Following The Coldest Journey Mobile igloos Two customised cabooses will house the crew and science equipment for six months. These 8.5-metre containers will sit on sledges and be pulled across the snow by the two Caterpillar D6N tractors. The team will eat and sleep in one of the heated cabooses, known as the Stonehage House, after its sponsor. The second caboose will house the science and mechanical workshops, as well as being a back-up living unit. Power for the cabooses will come from the vehicle engines when these are running, to supply heat, light, energy for snow melting, cooking and battery charging.

Eddy Oblowitz, CEO of Stonehage Financial Services, explains that there are a number of linkages between the expedition and Stonehage’s philosophies. “The Coldest Journey team will be going ahead despite all odds and this speaks to our clients, many of whom are

Thanks to satellite technology, The Coldest Journey expedition team can be tracked and stay in touch. A live map on the website (www. thecoldestjourney.org) reflects the current location of the Ice Team. The team’s progress can also be followed via Facebook (The Coldest Journey) and Twitter (@coldestjourney).

The expedition members will travel through the dark months of winter across the polar plateau, via the South Pole, at a height above sea level of 3 400 metres, where the temperature can be -70 degrees Celsius, or lower. In total, the team will spend an estimated 273 days on the ice, with the selected crossing from Crown Bay to McMurdo Sound taking six months. If all goes well, in February 2014, the SA Agulhas will collect the expedition members from McMurdo Sound, Antarctica at the completion of this epic journey.

Photographs: The Coldest Journey

“Part of the British Commonwealth office’s permitting requirements to undertake the expedition was that we have a contract with an agency that can provide search and rescue extraction of the expedition come the summer time, should they not make it to the far side of the continent. There is no getting out during the winter,” explains Adrian McCallum, marine science co-ordinator for The Coldest Journey.

Another requirement of the foreign office was to have a mobile base with the facilities that would be standard at a static British Antarctic

Scientists on The Coldest Journey will be conducting a number of experiments, including measuring the effects of global climate change on the polar ice caps. The White Mars project will assess the physical and psychological effects of the expedition’s extreme nature on the team.

Twenty institutions from across Commonwealth countries designed compact experiments, which, through a range of tests before, during and after the expedition, hope to make unique discoveries about how humans adapt to such extreme conditions. For example, an altered day-night cycle enables research in relation to measurable changes in circadian rhythm.

entrepreneurs who venture into the unknown.

This imbued sense of self-determination, selfdiscovery and the ability to inspire and motivate yourself and others is at the epicentre of the expedition members and of our business.”

Stonehage is a leading independent multifamily office based in South Africa, offering comprehensive wealth management and advisory services to an international clientele of ultra-high net worth families.

From left: Brian Newham, traverse manager; Sir Ranulph Fiennes; and Ian Prickett.

RISKAFRICA’s Hanna Barry with Sir Ranulph on board the SA Agulhas in Cape Town, the day before his departure for Antarctica.

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United States US to open trade talks on global insurance, financial services The United States Trade Representative’s office is expected to enter into talks this year with the European Union and more than a dozen other countries on an agreement to eliminate barriers to trade in finance and other service industry sectors.

The aim will be to remove barriers to trade and investment in sectors such as finance, insurance, telecommunication, computer services and express delivery, all areas in which the United States is a leading provider. The United States, the 27-nation European Union and 18 other developed and developing countries have been exploring the idea of such an International Services Agreement for nearly a year. Emerging markets such as China, India, Brazil and Russia have so far avoided the talks.

The Peterson Institute for International Economics conservatively estimates the proposed agreement could increase annual services exports among 16 core members by $78 billion. “In absolute terms, the United States and the European Union would see the largest export gains, around $14 billion and $21 billion, respectively,” the Peterson report shows. If Brazil, China and India were to join the talks, the trade gains would expand by around 30 per cent.

The Geneva-based negotiations

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could include Australia, Canada, Chile, Colombia, Costa Rica, the EU, Hong Kong, Israel, Japan, Mexico, New Zealand, Norway, Pakistan, Panama, Peru, South Korea, Switzerland, Taiwan, Turkey and the United States.

China Chinese insurance industry’s assets reached $1.18 trillion in 2012 The total assets of the Chinese insurance industry increased 22.3 per cent in 2012 to a value of $1.18 trillion, crossing the $1.12 trillion mark for the first time, says the China Insurance Regulatory Commission.

Total insurance premium income of the industry increased eight per cent to $248.78 billion, with property insurance premiums up 15.4 per cent to $85.56 billion.

The top three Chinese non-life insurers all witnessed double digit growth rates in premium collected.

World Bank, will place $1.7 million in funding, plus technical assistance, to support the local Microinsurance Catastrophe Risk Organisation, (MiCRO) programme.

MiCRO, the first natural catastrophe insurance scheme of its kind in Haiti, was founded by Fonkoze, the international relief organisation Mercy Corps, and a number of other partners after a devastating earthquake in Haiti in January 2010.

One of the most weather disasterprone countries in the world, Haiti’s most vulnerable residents rely on small-scale farming and are at constant risk of losing their livelihoods. MiCRO’s activities are supported locally by Haitian insurer Alternative Insurance Company SA (AIC), along with global reinsurer Swiss Re.

Haiti

While similar disaster microinsurance schemes exist elsewhere in the world, they don’t operate under the same model as MiCRO. The funding is viewed as an experiment, which, if successful, will be replicated elsewhere.

Haiti launches micro-finance catastrophe insurance programme

Europe

When Hurricane Sandy struck Haiti late last year, the majority of Haitians had no insurance cover with which to rebuild their lives.

In an effort to show the feasibility of protecting the poor through insurance International Finance Corporation (IFC), a division of the

European Union insurance watchdog will review proposed Solvency II regulations The European Union’s insurance watchdog has launched a study of proposed capital and risk management rules.

Insurers expect the study to

show that a major rewriting of life insurance rules will be needed, adding to repeated delays in the introduction of the new regime.

The European Insurance and Occupational Pensions Authority (EIOPA) does not expect that Solvency II will come into force earlier than 1 January 2016.

Germany’s insurance watchdog suggests that a 2017 start may be more realistic. “If these seemingly technical details of the new regime are not correct, the impact on the European insurance industry, its clients and the economy would be severe,” says Olav Jones, deputy director general of Insurance Europe.

Some life insurance companies predict that Solvency II will make their products unviable because of requirements forcing greater capitalisation and products with guaranteed returns to customers.

European insurers diversify risks to boost returns European insurers and asset managers are lending to big-ticket infrastructure projects, companies and property developers where banks might no longer be able to, in order to diversify their risk and boost returns.

Europe’s second-largest insurer, AXA, is teaming up with Société Générale to lend to small- to mid-sized companies. “We are reopening some boxes that have been closed since 2008 in the crisis,” says Laurent Clamagirand,

AXA’s chief investment officer.

and flood damage.

Over time, AXA is likely to boost investments in corporate, infrastructure and other types of debt to between 10 and 20 per cent of its €40 billion ($53.4 billion) of yearly investments from all but zero as recently as five years ago.

The average claim payout for flooddamaged homes and businesses was £18 200 ($28 193). Home damage claims accounted for 411 000 claims, while 47 000 business property claims were recorded. And 27 000 claims were filed for flood and storm-damaged vehicles. Another £40 million ($61 900) was handed out to help businesses continue trading while their premises were being repaired.

Despite the enormous numbers, the total payout is still dwarfed by the £3 billion ($4.64 billion) paid out by insurers in 2007, the worst year in recorded history for United Kingdom flooding.

In France, BNP Paribas Investment Partners recently launched its third corporate debt fund for insurers in a year, and in Northern Europe, Swiss Re is to invest $500 million in senior debt issued by northern European infrastructure projects. In the UK, Legal and General’s asset management arm completed a $190 million loan deal last year with student housing specialist Unite Group, while in France.

Europe’s largest insurer Allianz is taking a tentative approach to corporate loans. It has, however increased its presence in areas like commercial real estate where some recent loans are yielding 1.5 to two percentage points more than the equivalent sovereign bonds.

Australia IAG to pay out $180 million for Cyclone Oswald damage Insurance Australia Group Ltd says it expects claims of up to AU$175 million ($180 million) from the floods and fires that have swept through the country this year.

The insurer reported that it had received 13 700 claims, expected to cost between AU$120 million ($123.4 million) and AU$140 million ($144 million) from customers affected by ex-Tropical Cyclone Oswald, the deadly storm which ravaged the country’s east coast last month. IAG has also received about 600 claims for around AU$35 million ($36 million) from bushfires in the southern states.

Deutsche Bank insurance analyst, Kieren Chidgey, says that IAG’s catastrophe costs for the second half of fiscal 2013 had reached about $155 million to $175 million, which was roughly half of the group’s second-half allowance of $320 million. UBS insurance analyst James Coghill believes IAG’s $640 million full-year allowance for the 2013 financial year “remains adequate”.

Rival insurer Suncorp received around 23 000 claims from Oswald. Suncorp says its 30 per cent quota share arrangement on the Queensland home insurance portfolio would help limit the net claims costs to between AU$200 million ($205.7 million) and AU$220 million ($226 million).

United Kingdom Insurers pay out £1.19 billion in UK flood claims The second wettest British summer on record has cost insurers £1.19 billion ($1.84 billion), according to new figures released mid-February.

This is the highest annual figure in five years. Around 486 000 claims were made by homeowners, businesses and motorists for storm

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•Zambia

Opportunities and challenges exist

in Zambian insurance market

Bianca Wright

Zambia, driven by its mining, agricultural and tourism industries, represents an intriguing opportunity for insurers, reinsurers and brokers looking to expand their Southern African operations. What does Zambia have to offer in terms of its insurance sector and what potential pitfalls should insurers look out for when considering expansion into Zambia?

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F

He added, “Our entry into Zambia demonstrates our approach to international expansion, which is to establish a skilled and experienced local presence backed by a powerful global network of licenses, professionals and capabilities. This allows us to truly understand the markets in which we invest.”

Increasing competition

Later in 2012, Metropolitan Zambia introduced its new insurance package dubbed Metropolitan Life Zambia, which includes group life, permanent and total disability, permanent health insurance and health insurance cover.

ollowing the reforms of the early 1990s, the state-owned Zambia State Insurance Corporation (ZSIC) no longer holds a monopoly on the industry. Despite this, it is still the largest player in the sector. Other than ZSIC, nine general insurance companies are licensed to operate, as well as five life insurance companies. Also licensed are two reinsurance companies and numerous brokers and agencies.

International links are strong, with some of the larger companies operating in Zambia obtaining insurance cover from insurers outside Zambia, especially in South Africa, according to the Commonwealth Network. International insurers, reinsurers and brokers, including Aon, Marsh Africa, Hollard and Norwich, also have significant presence in Zambia.

Zambia’s position and stable political situation has made it an attractive market for insurers like Hollard. In May last year, Hollard announced that it would be opening a life insurance office in Lusaka. At the time, Hollard CEO Nic Kohler said, “Ever since we embarked on our Southern Africa expansion drive, we’ve known that Zambia would be an important market for Hollard. We have worked hard to develop relationships there in anticipation of our Zambian market entry.”

More to do While these new products and investments signalled increasing interest in the industry, many believe that more needs to be done to truly reach the potential of Zambia’s insurance sector.

At the Metropolitan Zambia launch, Pensions and Insurance Authority (PIA) Deputy Registrar Muyoya Chibiya bemoaned the low penetration of insurance companies into the Zambian market compared to other markets, reported i-Zambia.

“We hope that you will bring your expertise in providing quality life insurance services from other countries in which Metropolitan operates and localise to meet the insurance demands of local Zambians,” Chibiya said. He stressed the need for insurance, both life and non-life, and highlighted the need to create greater

awareness among Zambians about the value of insurance. The findings of the 2009 Finscope Zambia survey (the most recent survey carried out in this sector), noted that awareness of financial terms such as ‘insurance’ and ‘premium’ is generally very low across the market, with the exception of the salaried urban market.

The PIA noted in June 2012 that only three per cent of the insurable population is currently insured. In fact, insurance figures fell between 2005 and 2009 according to the Finscope Zambia survey. In a speech by PIA registrar Martin Libinga, he urged brokers to grow life assurance in Zambia, noting that brokers contributed about 30 per cent of the overall gross premium written in the life assurance industry in 2011.

The importance of brokers in the Zambian insurance sector was echoed by Madison Life Insurance Company Zambia (MLife) managing director Agnes Chakonta. At an awards ceremony honouring the top brokers in the country, she said that the insurance sector cannot operate effectively without the support of intermediaries who are mainly brokers, and that 90 per cent of insurance in Zambia is mostly handled by brokers. “We recognise the important role that the intermediaries play not only as a key distribution channel of insurance products, but its interface between the insurer and the client,” Chakonta says.

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According to the Microinsurance Network, ALAZ has partnered with MTN Zambia (MTN) to enable MTN customers to buy affordable and convenient life cover.

Product diversification Recognising the need to create products tailored for the market, many insurers have diversified their product offerings, especially in the area of microinsurance. The Microinsurance Network reported on two new product offerings during 2012. Professional Life Assurance Limited introduced its Bantubonse Life Plan, a simple and affordable life plan with a minimum one-off annual premium of ZMK30 000 (US$ 6) for a sum assured of ZMK1 000 000 (US$ 205). This has put insurance cover in the hands of Zambians who previously would not have been able to afford it.

Similarly, African Life Assurance Zambia’s (ALAZ) Life after Life product caters to the lower end of the market and is the first insurance product ever to be offered in Zambia using a mobile phone platform. According to the Microinsurance Network, ALAZ has partnered with MTN Zambia (MTN) to enable MTN customers to buy affordable and convenient life cover for as low as ZMK1 500 (US$ 0.3) per month for a pay-out of ZMK1 000 000 (US$ 205).

Regulatory hurdles Opportunities seem ripe for the taking and the insurance sector is well-developed. Regulatory and industry representation is solid with the Pensions and Insurance Authority as the regulatory body, the Insurers Association of Zambia as the industry body and the Insurance Institute of Zambia as the professional body for insurance practitioners.

Insurers have sometimes found themselves in opposition to government plans for the sector. In 2011, for example, the Zambian Government announced the introduction

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of VAT on insurance premiums as a way of increasing government’s revenue collection.

The outcry was vehement, with many industry experts describing the tax as an affront to the growth of the insurance sector in the country.

Acting chief executive officer Christabel Banda of Diamond General Insurance noted, after the announcement of its 2011 results, “The insurance industry growth slowed down in 2011, though the growth was still above inflation. The slowdown was generally attributed to the introduction of VAT as the industry struggled with its implementation due to the unique nature of the services provided and the different players in the supply chain”.

Other innovative product offerings included Old Mutual’s single premium, pre-paid insurance product launched in November 2007 and distributed through Shoprite Checkers.

The 2009 Finscope Zambia survey found that affordability dominated reasons for not having insurance among those surveyed who said they know what insurance is. Awareness was also highlighted as a key barrier to insurance uptake.

The survey noted, though, the scope for growth among the urban salaried market.

It seems that the need for innovative, forwardthinking insurance products tailored to the Zambian market, combined with increasing awareness drives, make Zambia a solid potential growth area for insurers.

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