- There is a strong correlation between economic growth and insurance penetration
- The country’s insurance penetration ratio declined from around 6% to below 2% over the past decade
- The advancement of mining, energy and agriculture are critical to the country’s economy
- The insurance industry needs to provide robust and sustained solutions to protect the expansion of these sectors
Allianz Global Corporate & Specialty (AGCS) Africa CEO Delphine Maïdou urged all stakeholders at the Insurance Institute of Zimbabwe (IIZ) Conference at Victoria Falls to find innovative and creative solutions to revive the insurance sector in the country.
“The economic meltdown has severely dented the insurance sector. Zimbabwe’s insurance penetration ratio declined from around 6% to below 2% over the past decade. The industry remains under significant pressure, with many companies seen to be financially unsound. The capital requirement for insurance companies is USD1.5 million. The regulator is currently looking at increasing it to USD2.5million and this could put more companies under strain. With a penetration rate of more than 14%, South Africa needs insurance companies to have USD1million to operate,” says Maïdou.
“The lack of capitalization could restrict companies from taking a bigger share of risks, so they can keep more premiums in the country. Some insurers may resort to undercutting premium, which results in them failing to meet their claims obligations. In the end this could result in a loss of confidence in the local market. Some clients may place their business with regional and international insurers ,” she adds.
The total premiums placed offshore across both life and non-life insurance in Africa is estimated at $4.29billion. Regulators in most African countries have indicated their awareness of the risk of unnecessary transfer of premiums offshore and have adopted premium retention frameworks that aim to ensure that only necessary offshore premium transfer occurs.
Maidou explained that there is a strong correlation between economic progress and insurance penetration. A lot of the challenges facing the sector in Zimbabwe can be attributed to the struggling economy. “With a depressed economy, risk management and enterprise risk management tend to weaken. So, it is important to revitalize these essentials to support the sustainability of insurance sector. The advancement of mining, energy and agriculture are critical to the country’s economy. At the same time, the insurance industry needs to provide robust and sustained solutions for both traditional and alternative risk transfer solutions to protect the expansion,” she says.
But there are other factors limiting the growth of the industry. These include: low level of trust, low income levels; little awareness of insurance; legal and judicial systems as well as lack of human capital and expertise.
“The consumer trust level on the insurance sector needs to be enhanced for it to grow. Trust within the business space where AGCS Africa operates is slightly better as businesses understand the value of insurance a lot more than individual consumers. I encourage the industry to be more open and transparent with clients and more importantly to pay legitimate claims,” says Maïdou, who is originally from Burkina Faso.
The fact that close to 70% of the population in Zimbabwe is not insured presents a good opportunity for insurers. “The provision of micro insurance solutions needs to be broadened through trusted stakeholder models to insure more individuals and businesses are insured. For this to work, the sector needs to use alternative distribution channels such as mobile technology, retailers and banks,” she states.
The skills shortage especially within the corporate and industrial sector continues to be a challenge. “We need to encourage the highly skilled and experienced diaspora to return to Zimbabwe while up-skilling the youth through organizations such as IIZ to meet market demands. There are no quick fixes. We are working closely with the sector in Zimbabwe and the continent to create awareness about the value and purpose of insurance,” expounds Maïdou, who is also president of the Insurance Institute of South Africa (IISA).
The legal and regulatory systems may sometimes be a hindrance to the growth of the sector. For example, some countries still allow non-admitted insurance in their jurisdiction for large corporate clients doing business in Africa. This means that an insurance company that is “non-admitted” is not regulated in that country and does not contribute to the country fund, which protects policyholders from the bankruptcy risk of its insurance carrier. If the insurance company becomes insolvent, there is no guarantee that the client will be able to get their claims settled as they would have no recourse through the regulator.
Delphine Maïdou
“At AGCS our International Insurance Program (IIP) is a global insurance set up which covers risks located in more than one country where local primary policies are issued by an insurer licensed in local countries. This then gets pooled via facultative reinsurance when the local market is not able to or doesn’t wish to take on the risk. This way we ensure that we support the local insurance industry through a compliant insurance program, which abides by the rules and regulations of the countries our clients operate in. This approach contributes to the growth of the sector in Africa,” explains Maïdou.
Themed Today’s Vision: Tomorrow’s reality – managing risk exposure through innovative solutions, the conference ends on November 16 2016.
Themed Today’s Vision: Tomorrow’s reality – managing risk exposure through innovative solutions, the conference ends on November 16 2016.
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About Allianz Global Corporate & Specialty
Allianz Global Corporate & Specialty (AGCS) is the Allianz Group's dedicated carrier for corporate and specialty insurance business. AGCS provides insurance and risk consultancy across the whole spectrum of specialty, alternative risk transfer and corporate business: Marine, Aviation (incl. Space), Energy, Engineering, Entertainment, Financial Lines (incl. D&O), Liability, Mid-Corporate and Property insurance (incl. International Insurance Programs).
Worldwide, AGCS operates with its own teams in 34 countries and through the Allianz Group network and partners in over 210 countries and territories, employing almost 4,700 people of 70 nationalities. AGCS provides insurance solutions to more than three quarters of the Fortune Global 500 companies, writing a total of €7.4 billion gross premium worldwide in 2017.
AGCS SE is rated AA by Standard & Poor’s and A+ by A.M. Best.
Worldwide, AGCS operates with its own teams in 34 countries and through the Allianz Group network and partners in over 210 countries and territories, employing almost 4,700 people of 70 nationalities. AGCS provides insurance solutions to more than three quarters of the Fortune Global 500 companies, writing a total of €7.4 billion gross premium worldwide in 2017.
AGCS SE is rated AA by Standard & Poor’s and A+ by A.M. Best.
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