Tuesday, January 18, 2022

Insurance collaborations face legal, regulatory hurdles in Africa

As the African continent mulls intra continental trade, the insurance industry has been seen as an instrument that should be at the forefront of this transformation.

Speaking at the a three day Organisation of Eastern and Southern Africa Insurers’ 37th Annual Conference (OESAI) in Gaborone, Dr Talent Maziwisa said the East and Southern Africa region’s size provides obvious advantage of increased market size.

“There is a huge compelling force justifying expediting removal of obstacles for regional insurance collaboration,” Maziwisa said at the conference held in Botswana for the first time.
The Southern African Development Community (SADC) region comprises roughly 289 million people while the East Africa has nearly 270 million.

Equally, the Gross Domestic Product (GDP) of SADC is in excess of US$767 billion as in 2014 and the International Monetary Fund (IMF) projects that the SADC economy will reach US$868 billion in 2018.

According to Maziwisa, there is already a foundation in place as already regulatory bodies in some parts of the continent are talking to each other and there are number of insurers that could build a case for collaborations. However, he warned that regulators in Africa are not fully exchanging information relating to various aspects of their markets, but efforts are now being made.

For example, the East African Community agreed to harmonise their regulations around the 26 insurance principles issued by the International Association of Insurance Supervisors.
“There are SADC regional legal frameworks which provide basis to initiate regional collaborations,” he said.

Just like other barriers to trade in Africa, Maziwisa observed that there is no harmonised legislation on insurance in the continent as there is no common insurance regulatory framework like Solvency II to codify and harmonise insurance regulation.

Also he said legislations relating to compulsory treaty sessions are not so common in most of other African countries.

“When the company is negotiating Re-Insurance treaties, they have to take into account various laws relating to compulsory sessions in all the countries they operate,” he noted.
“Legislation relating to Third Party Liability Limits vary with some countries having unlimited third party liabilities on their motor vehicle policies.”

The other problem in Africa could be that different countries carry out business in different business environments, languages and culture and that there are many different insurance systems operating in the region.

For example, a policy holder with a full comprehensive motor policy travelling between countries is required to buy additional cover as he drives through three or four countries.
However, insurance collaboration allows diversification of risk as it also allows offshore investment which further matches and diversifies investments.

“There is need to re-model our insurance packages to ensure we encapsulate wide regional consumer expectations and demand,” argued Maziwisa.

“Our products must not alienate the markets we intend to serve. The spread and mix of our people cannot be ignored. Models that speak regionally provide answers to our ever demanding market.”

Insurance penetration is low in Africa and with the exception of South Africa and Kenya were financial markets within the region remain under-developed and shallow.

Statistics showed that penetration rate hovers between 0.2 and 4.0 percent in each country and in South Africa is at 16 percent.

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