© dr. schanz, alms & company ag the african insurance regulation directory executive summary...

© Dr. Schanz, Alms & Company AG

The African Insurance

Regulation Directory

Executive Summary

May 26, 2015

© Dr. Schanz, Alms & Company AG2

Contents

Introduction

Africa’s Insurance Markets

African Insurance Regulation and Supervision

Key Findings and Recommendations

Country Sheets

The African Insurance Regulation Directory


Contents

Introduction




Country Sheets



The inaugural African Insurance Regulation Directory

First comprehensive study on insurance regulation and supervision

in Africa

Research reflects the status quo of up to the middle of 2014

Analysis based on the responses to a standardized questionnaire sent to 52 African regulators


Improve the transparency of African insurance regulation

and supervision

Contribute to the further development and

strengthening of African insurance markets


Methodology

Africa Re Data collection and collation in close

cooperation with 52 African regulatory bodiesProvision of additional information and insights


Dr. Schanz, Alms & CompanyQuestionnaire design

Data analysis

Report write-up

Report layout, design and artwork


ChallengesData availability, collection and consistency

The availability of consistent and high quality data is critical to the survival and prosperity of insurance companies, the industry and to meet obligations to policyholders.

IAIS Insurance Core Principles 2 (Supervisor):

“The supervisor publishes information on the insurance sector, about its own role and how it performs its duties.

Unless reliably published by other parties in a timely fashion, the supervisor publishes information and analysis about the financial condition of the insurance sector.”



The inaugural African Insurance Regulation Directory

Key recommendations

Strengthen Financing of Regulatory Bodies

Introduce RBC (Risk Based Capital) Concepts

Establish Policyholder Protection Funds



Contents

Introduction




Country Sheets



Africa’s largest insurance markets (excl. South Africa),

premiums by type, 20131/20122, US$ bn

Moroc

co

Niger

ia

Egyp

t

Kenya

Alger

ia

Angol

a

Namib

ia

Tuni

sia

Maurit

ius

Botsw

ana

Ghana

Cote

d'iv

oire

Camer

oon

Libya

Suda

n

Ethi

opia

Gabon

Sene

gal

0

1000

2000

3000

3'180

1'863

1'851

1'520

1'440

1'136 943

830 688

473 446 415 294 288 285

219 198 183

Life Non-life


1 Morocco, Nigeria, Egypt, Kenya, Algeria, Angola, Namibia, Tunisia and Mauritius. Source: Swiss Re sigma2 Botswana, Ghana, Cote d’Ivoire, Cameroon, Libya, Sudan, Ethiopia, Gabon and Senegal. Source: African Regulatory Authorities, data compiled by Africa Re. Split between life and non-life premiums for these nine countries based on own estimates.


Contents

Introduction




Country Sheets



African IAIS Member Countries, 20131


Egypt

Nigeria

Morocco

Ghana

Guinea

KenyaUganda

Tanzania

RwandaBurundi

ZambiaMalawi

BotswanaNamibia

South Africa

Lesotho

Swaziland

Mauritius

Cabo Verde

Tunisia

Mali

Chad

CentralAfrican Republic

Gabon

Cameroon

Equatorial Guinea

SenegalBurkina Faso

Republicof the Congo

Cote d‘Ivoire

Togo

Mauritania

LibyaAlgeria

Sudan

SouthSudan

Ethiopia

Somalia

Democratic Republic of the Congo

Angola

Zimbabwe Madagascar

Eritrea

Djibouti

IAIS Member Countries CIMA Countries

Sierra LeoneLiberia

Niger

Mozambique

Benin

The IAIS (International Association of Insurance Supervisors) has 20 African members, representing 33 countries. 19 of the members represent individual countries; CIMA (Conférence Interafricaine des Marchés) is an institutional member, representing 14 countries from francophone West and Central Africa.


Regulated re/insurance companies in Africa, 20141


1. Source: Regulatory authorities, data compiled by Africa Re2. Also included in the domestic life and non-life companies category3. Also included in the domestic reinsurance category4. Also included in the respective categories

Type of licensed entity Number of licensed entities

Domestic life insurance companies 233

Domestic non-life insurance companies 397

Domestic composite insurance companies 166

Foreign life insurance companies 48

Foreign non-life insurance companies 84

Foreign composite insurance companies 43

Domestic reinsurance companies 40

Foreign reinsurance companies 36

Total 1047

Majority government-owned insurance companies2 36

Majority government-owned reinsurance companies3 7

Re/insurance companies with a minority government ownership4 9


Analysis of African Regulatory and Supervisory Regimes: Topics


Regulatory and Supervisory Authorities

Scope of Regulation and Supervision: General, cross-boarder regulations

Licensing: Financial, other requirements

Ongoing Supervision: Solvency, Reserves, Investments

Suspension and Termination of Business Operations

Insurance Companies in Difficulties

Others:

Supervision of Intermediaries Financial Reporting and Disclosure Compulsory Insurance Compulsory Reinsurance Cessions

Microinsurance Regulation in Africa


Minimum capital requirements1 and average premiums per

insurance company, selected African countries, 20132

0 5 10 15 20 25 30 350

50

100

150

200

250

300

350

South Africa

Morocco

Algeria

Minimum Capital Requirement,(US$mn)

Average Premium / Insurer (US$mn)

CIMA

Angola

Egypt

TunisiaKenya

Ghana

NigeriaMauritiusNamibia


1. Composite insurer’s minimum capital requirements (if available)2. Size of the bubble represents market size. Source: African regulatory authorities, data compiled by Africa Re. 2013 market sizes partly based on own estimates.


Contents

Introduction




Country Sheets



1. Strengthen Financing of Regulatory Bodies


Findings

In about 50% of all African countries, regulatory bodies are solely financed by the state. In most OECD countries, the authorities are financed by the insurance industry, sometimes supported by the government (minority funding).

Recommendation

Increasing the financial resources of regulatory bodies will also attract more insurance professionals to Africa and limit the ‘brain-drain’. African insurance market players should play a stronger role in financing.

Expected Benefits

Only with adequate human and financial resources African authorities will be able to fulfil their missions. Strong regulatory regimes as well as strong and stable markets will ultimately benefit all market actors.


2. Introduce RBC (Risk Based Capital) Concepts


Findings

In many African countries, solvency capital is not yet referred to as the difference between assets and liabilities. In most of these countries, minimum capital requirements are used instead.

Recommendation

Globally, in more and more countries, regulatory capital requirements are becoming risk-based to reflect the economic impact of balance sheet risks. More African countries should consider introducing RBC concepts.

Expected Benefits

Benefits are not limited to an im-proved risk mea-surement process or a better determi-nation of appropri-ate levels of capitali-zation. The intro-duction of RBC concepts will ulti-mately strengthen the African insurance industry.


Potential widespread benefits of introducing RBC principles


Source: Dr. Schanz, Alms & Company AG

Refer to solvency as the difference between assets and liabilities

Introduce and apply a risk based capital concept

Increased need for Africa based insurance actuaries

Strengthening of technical capabilities

Improved ability to retain more risk

Improved ability to make money on risk

Higher profits materialising in Africa

More funds available for reinvestment

Strengthened African insurance industry


3. Establish Policyholder Protection Funds


Findings

One of the primary objectives of insurance regulation is the protection of policyholders against insolvency of insurance compa-nies. So far, only a minority (about one third) of African countries has esta-blished policyholder protection funds.

Problem

Policyholders are the creditors of insurance compa-nies. Information asymmetry between policyholders and insurers and a lack of financial literacy hinder the assess-ment of financial soundness of insu-rance companies by policyholders.

Recommendation

These funds can help to maintain the public’s confidence in insurance busi-ness. They need to be carefully de-signed to minimize potential drawbacks such as moral hazard or a high financial burden on soundly managed companies.


Contents

Introduction




Country Sheets



Country Sheets: Examples



Contact

Dr. Schanz, Alms & Company AGDufourstrasse 24CH-8008 ZurichSwitzerland

Andreas BollmannPartner

Fon +41 44 256 1085

Mob +49 172 896 [email protected]


African Reinsurance Corporation

Africa Re Building

Plot 1679 Karimu Kotun Street,

Victoria Island

PMB 12765

Lagos, Nigeria

www.africa-re.com

mailto:[email protected]

© dr. schanz, alms & company ag the african insurance regulation directory executive summary...

Documents

african insurance markets

insurance sector

iais insurance core

african regulatory authorities

alms company ag34

alms company ag67

alms company ag2 objectives

supervisionkey findings