BusinessDay 24 May 2017

Wednesday 24 May 2017
BUSINESS DAY
21
InsuranceToday
E-mail: insurancetoday@businessdayonline.com
C002D5556
L-R: Adewale Kadri, head, Non-Life Business; Babatunde Fajemirokun , executive director;
Edwin Igbiti, managing director/CEO and Ayodele Bamidele, chief financial officer all of
AIICO Insurance Plc at the Company’s Pre AGM Press briefing in Lagos.
L-R: Bode Akinboye, group managing director, Standard Alliance Insurance Plc; Alex Brown,
Duncan Thomson; Ahmed Salawudeen; Nick Brown; Zainab Bakare and Biodun Jegede at a
meeting with SA Insurance foreign reinsurance consultants in Lagos
‘African insurance to remain
on growth trajectory despite
economic headwinds’
Modestus Anaesoronye
The potential for growth of
insurance in the African
continent remains huge on
back of young, growing and
more affluent population as well as
investments in infrastructure and
exploitation of the continent’s raw
materials, experts have said.
According to the 2nd Africa Insurance
Barometer, launched Monday
at the 44th AIO Conference & General
Assembly in Kampala, Uganda,
Africa’s insurers remain upbeat
about the prospects of their markets.
The 29 senior executives from
regional and international insurers,
reinsurers and brokers polled for
this year’s survey contend that the
young, growing and more affluent
population as well as investments in
infrastructure and exploitation of the
continent’s raw materials will drive
demand for insurance protection.
However, the executives posit that
inadequately harmonised regulatory
frameworks across the continent,
which frequently are poorly
enforced, as well as the persistent
lack in skills and local talents remain
the industry’s soft spots. Furthermore
– unless the regulators take
action – many African insurers are
insufficiently capitalized and lack
financial stability, which could
dampen consumer confidence.
“The Africa Insurance Barometer
provides a comprehensive overview
of the current state and future
prospects of the $ 64 billion African
insurance market,” says Prisca
Soares, the secretary general of the
African Insurance Organisation.
“The executives interviewed for this
year’s edition expect the underlying
market fundamentals to prevail over
the economic decline that many
markets witnessed in 2016. A majority
of our interviewees assume that
premiums will outgrow GDP. Africa’s
insurance penetration, which currently
stands at 2.9 percent or less
than half of the global average, will
translate into accelerated premium
growth – provided global demand
and commodity prices continue to
bounce back in 2017 and 2018.”
Due to new technology, in particular
mobile telephones and the
internet, a broader array of products
and distribution channels is available
to access the continent’s corporate
and partly untapped consumer
base, including its growing middle
class. However, adequate regulation
is needed to control and facilitate
the market’s expansion. Some requirements
tightened in the past
year. But interviewees are also concerned
about overregulation with
a tendency to burdening insurers
with additional cost, complexity and
incoherent regulatory enactment.
Pressure on insurance rates is
most pronounced among Africa’s
commoditized commercial lines of
business, where barriers to entry are
low and customers are insurancesavvy,
opportunistic and fight for
the best price. Obviously, noncommoditized
lines, which require
a high specialization, are able to
escape from some of the pricing
pressure. As a result, interviewees
predict that rates will remain subdued
over the next twelve months.
Profitability still benefits from the
adequate original pricing of the risks,
but declining rates, inflation and
claims costs reduce margins.
In personal lines rates are more
favourable. While access to the
market is more complex and policyholders
act less opportunistically,
insurers try to control more of the
value chain themselves. Profitability
also fares better than in commercial
lines, although claims inflation and
a depressed economy negatively affect
the bottom line. Going forward
almost 80 percent of interviewees
predict stable or even rising profits,
as personal lines are viewed as less
volatile and exposed to cutthroat
competition.
According to 70 percent of executives,
access to local skills and talent
is a challenge for African insurers.
While expertise is generally hard to
come by in small markets, specialists,
such as actuaries, are scarce
even in the more populous markets.
As know-how is missing to develop
and introduce new products, capital
is invested in mainstream solutions,
further aggravating the fierce
competition in those segments.
Interviewees expect a further concentration
of Africa’s insurance
industry, driven by heightened competition,
regulatory pressure and the
economic downturn. While regional
or international insurers increase
their footprint through acquisitions,
smaller insurers might choose to exit
the market. As regulators force them
to strengthen their capital base, they
struggle to survive in an environment
of anaemic top line growth,
high claims, currency devaluation
and inflationary pressure.
PFA list steps to include informal
sector into pension scheme
Stanbic IBTC Pension Managers
Limited has outlined
four vital measures
needed to bring the country’s
huge informal sector into
the formal pension system. These
are awareness and collaboration
with key associations and unions;
tax incentives and guarantee;
seamless registration and service
delivery.
Eric Fajemisin, chief executive,
Stanbic IBTC Pension Managers
Limited, said these steps
would attract a sizeable chunk
of the estimated 38 million
workers in the informal sector
and significantly boost the
reported eight million people
currently registered under the
Contributory Pension System
(CPS). Accounting for about 60
percent of Nigeria’s Gross Domestic
Product and employing
over 90 percent of its workforce,
the informal sector is largely insignificant
in the CPS.
Fajemisin made the remark in
Port Harcourt, Rivers State, at an
employers’ forum organized by the
PFA to encourage participation in
the pension scheme.
Fajemisin, who was represented
by Oladele Sotubo, executive
director, Investments said it is imperative
to raise the level of awareness
through major informal sector
associations and unions due
to the prominent role they play in
the sector. In addition, endorsements
from these unions will help
to motivate members and build
the requisite trust in the pension
scheme.
The on-boarding process for
the informal sector customers’
needs to be flexible and devoid of
any form of complexity, Fajemisin
said, adding that this objective can
be achieved through the adoption
of a unique identifier like BVN and
the use of mobile technology for
registration, collection and benefit
payment.
‘Kwara not owing pensions, salaries’
Kwara State is fully up to
date with payment of
pension and salaries to its
pensioners and workers
despite the economic situation in
the country.
Muyideen Akorede, senior special
Assistant on Media and Communication
to Kwara State Governor,
who made this known in an
interview with journalists, said the
governor was able to achieve this
through intense reform of Internally
Generated Revenue (IGR) of the
state and cutting down the cost of
governance by 40 per cent.
He stressed that contrary to reports
in a newspaper that the state
is owing 11 months salaries and
pensions, the State does not have
any pension or salary arrears.
He disclosed that the only arrears
are with workers and pensioners
at the local government
level which have a separate allocation
from the federal government.
He said the local governments
are also not owing 11 months as
speculated but only have various
degrees of arrears of one and half
month, 3 months or 6 months depending
on the IGR capacity and
the allocation.
Akorede further explained that
the local government is a different
tier of government and, with special
regards to the case of Kwara
state, is autonomous.
“The state government is not
owing pensions or salaries except
for local governments which are a
different tier of government and,
with special regards to the case of
Kwara state, are autonomous. Their
funds by law come through the
state and are allocated publicly by
a body comprising the chairmen of
the local governments, their treasurers
and the state commissioner
for finance as well as labor leaders.