the chairman’s welcome -...

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OESAI NEWSLETTER 9th ISSUE 2016

Dear readers, I am delighted to write to you this

welcome note for our September edition of the

OESAI Newsletter. This newsletter comes hot on the

heals of the 39th OESAI Annual conference held in

Swakopmund Namibia this past September. On

behalf of the OESAI Management Board, may I take

this opportunity to thank all the delegates who

attended this conference and the stakeholders who

were involved in the planning and execution. It was a

highly informative and interactive conference and I

hope that many of the executives that attended had

the opportunity to network and create new and

exciting partnerships. I also want to thank all the

sponsors for their generosity , the Local Organizing

Committee for a splendid job well done and

for bringing the conference to life.

The OESAI conference brings together

insurance executives from across the region

and beyond and provides insurance companies

with an opportunity to network, discuss and

find ways to collaborate. Collaboration is an

integral part of the insurance business. And

today, the need to rapidly assemble teams and

capitalize on human expertise to provide

faster, better decisions makes collaborating all

the more important. There are many situations

today where two or more employees and/or business

partners are working together remotely on behalf of a

customer or on important internal projects. As

OESAI we are delighted that we have been able to

make this happen by bringing people together at these

conferences.

Technologies such as chat, real-time

videoconferencing, SMS text messages, are examples

of a range of new technologies that are being

employed for collaboration. These technologies are

individually important, but will provide the most

value for insurers when combined with foundational

capabilities for process management,

communications, and content management. Applying

collaboration technologies and foundational

The Organisation of Eastern and Southern Africa Insurers Newsletter

Issue 9 2016

The Chairman’s Welcome

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capabilities to specific insurance business problems

is enabling insurers to supercharge collaboration and

realize the true promise of collaborating for

competitive advantage. In many of the conferences

across the region this past year, we had heard again

and again, the importance of using emerging

technologies for competitive advantage.

Most segments of the insurance business are facing

high levels of competitive intensity. Any new

capability that allows companies to differentiate

from competitors is worth pursuing. Today insurers

are seeking differentiation by improving the customer

experience, spurring innovation, and increasing the

productivity of employees . Collaboration

technologies and approaches play an important and

enabling role in each of these areas.

Many elements contribute to great customer

experience, including product, price, relationship,

and personal interaction. All of these elements are

optimized for the customer when the right

combinations of individuals are able to collaborate to

deliver with excellence. For example, a broker, an

underwriter, interact to determine the best

combination of coverages and services to address the

customer’s insurance and risk management needs.

Collaboration across industries is a sure way for

insurers to expand their reach and to improve

insurance penetration.

It is my hope therefore that as delegates interacted

and networked, companies did find new business

opportunities for working together.

Thank you

Charles Nakhoze

OESAI Chairman

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Our distinguished readers, I am delighted that you are

taking the time to read our newsletter and trust that

you have had a fantastic month.

OESAI has just hosted its 39th Annual conference in

Swakopmund in Namibia and we are delighted that

the conference was a great success. I wish to thank

the various stakeholders who were involved in the

planning and hosting of this conference. On behalf of

the OESAI management Board and OESAI

Secretariat, I would like to thank all the delegates

who attended the OESAI conference. Many of you

travelled from outside Africa and it was a privilege to

meet you and host you and we are hopeful that we

will see you at future OESAI events. I trust that you

had a truly great experience in Namibia and we

certainly hope that you will join us again in Cape

Town, South Africa coming August 2017. I hope you

have already marked the dates for next year’s

conference so that you may make your travel

arrangements early.

My gratitude also goes out to the Presenters and the

Chairpersons of the various topics who so graciously

gave of their time to both prepare and attend the

conference, sharing their expertise with us.

The conference would not have been a success

without the sponsors who generously sponsored the

various activities and events and my appreciation

goes to all the companies that supported the 39th

OESAI Annual conference. As you prepare your

budget for 2017, we implore you to consider having

OESAI 40th annual conference taking place in Cape

Town, South Africa next August among the list of the

events you will sponsor. We are planning an even

bigger event and this will be a great opportunity to

showcase your brand to the world in 2017.

This year OESAI partnered with the Namibia

insurance community to host the annual conference.

We are eternally grateful to the Local Organizing

Committee led by Mrs. Patty Karuaihe-Martin and

Managing Director of Namibre and her deputy Mr.

Tjozongoro Managing Director of Nasria Insurance

company. The LOC team did a great job in

organizing the logistics for the conference, including

the various events and creating a wonderful

experience for both local and foreign visitors to

Namibia.

Have a blessed month.

Eunice Ndathi,

OESAI Secretary General

Notes From The Secretary General

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39th OESAI Annual Conference Sponsors

OESAI would like to THANK the Sponsors

of the 39th OESAI Annual Conference

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OESAI Chairman Mr Charles Nakhoze talks to the

Namibian Minister of Finance, Mr Calle Schlebrecht Delegates enjoy the networking dinner at the

Tiger Reef

Delegates listen to proceedings at the OESAI 39th

Annual Conference Opening Ceremony Delegates were welcomed by a troupe of dancing

girls at the Walvis Bay Airport

Mrs Patty Karuaihe –Martin, Chairperson of the LOC

and Managing director of Namibre gives her address Mrs Eunice Ndathi, OESAI Secretary General

gives her opening address

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Oesai Members News ZEP-RE launches training

Academy for insurance

executives

ZEP-Reinsurance (ZEP-RE) in collaboration with the

College of Insurance, Kenya has launched a training

Academy to train local and regional insurance

executives on the technical aspects of reinsurance

management.

According to ZEP-RE CEO Rajni Varia, the

Academy has been mainly set up to address an

existing skills gap for reinsurance practitioners. The

training program, Mr Varia said, has been designed

to provide contemporary skills and technical know

how for insurance executives pursuing a career in

reinsurance services.

The CEO also hopes the Academy will also play a

key role in facilitating efforts to raise the local

insurance penetration rates under the new Risk Based

Supervision (RBS) regulatory regime. “Though the

fundamentals of the insurance and reinsurance

industry remain the same, the landscape is ever

changing, with new risks that hitherto were not

prevalent. Terrorism risk for instance has become an

ever-present risk and therefore, we as an industry

have to find ways of mitigating this risk for our

clients,” said Mr Varia.

Officiating at the launch, the Commissioner of

Insurance Sammy Makove said there is a need to

enhance insurance training as part of the insurance

penetration enhancing roadmap.

“Insurance penetration in Comesa and

indeed the rest of Africa is far less than

satisfactory with the exception of a few

countries.

We need to change this if the industry is to find

traction,” said Mr Makove.

Kenya’s insurance penetration stands at 2.8 percent

while Rwanda, Uganda and Tanzania stands 1.6

percent, 1 percent and 0.7 percent respectively. He

added that mobile telephony had changed the way we

do business, including how insurance is delivered to

the customer.

“In the modern era where the population is more

educated, and technology penetration is deepening

because of the consistent increase in the number of

mobile phones and the reach of cell phone networks,

it behooves insurance personnel to increase their

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knowledge of their products and indeed, share that

knowledge with the public.”

The Academy will conduct some classes at ZEP-RE

offices in Upper Hill, others at the College of

Insurance and in the regional markets that the

reinsurance company operates in.

Kenyan Insurance Industry posts slowest growth in Five Years

Kenya’s Insurance Regulatory Authority (IRA) has

released half year 2016 insurance statistics with

industry gross premiums growing by 9.2% compared

to 15.3% growth recorded in half year 2015.

However, on quarter on quarter basis, growth in gross

premiums dropped by a massive 25.4%, the slowest

growth in five years.

The sector’s Profit Before Tax for the period grew by

12.4% with long-term business profits which include

investment income recording a growth of 32.3%.

Short-term insurance business grew 8.98% compared

to a growth of 14.1% in half year 2015 and 20.4% in

half year 2014. Short- term business continues to be

dominant, at 66.2% of total gross premiums a slight

change from the 66.4% in half year. The life

insurance business growth also slowed down,

growing at 9.62% compared to a growth of 17.9% in

half year 2015.

Over this period, market value of Britam and CIC

Insurance at the Nairobi Securities Exchange dropped

from 7.3% and 7.1% in half year 2015 to 5.5% and

6.46% in half year 2016 respectively. Highlighting

increasing competition, listed companies share of

total gross premiums in long-term segment stood at

57.7% compared to 70.9% in 2011.

Britam has the largest market share in the long-term

business particularly in ordinary life segment-stood

which stands at 38.95% as at June 2016.

IRA UGANDA Issues Draft Regulations for Banks to Sell Insurance The Insurance Regulatory Authority (IRA) has issued

draft regulations to be used by commercial banks in

the selling of insurance products. This is in part to

operationalize the amendments to the Financial

Institutions Act, 2016 that allows commercial banks

to start selling insurance.

The draft Insurance (Bancassurance) Regulations,

2016 were released today by the IRA at a workshop

with commercial banks, insurance companies, and

insurance brokers.

"Under the previous Financial Institutions Act,

commercial banks were not allowed to sell insurance

products. This constrained the expansion of insurance

penetration. With the amendments to the law and

issuance of regulations, this should boost insurance

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penetration in Uganda," said Mr Kaddunabbi Ibrahim

Lubega, the chief executive officer IRA .

Uganda's insurance penetration is at 0.8 percent of

GDP, according to 2015 statistics from IRA. Some of

the reasons cited for the low penetration are limited

knowledge of the sector and the reputation of the

industry in settling claims. According to the deputy

director of commercial banking supervision at Bank

of Uganda, Mr Geodfrey Yiga, the reach of licensed

financial institutions compared to insurance

companies is much bigger, which increases the

potential increased penetration.

"We wanted to enlarge services that can be issued by

financial institutions for them to become a one-stop-

centre for financial products," he added. In the

regulations, banks will have to submit an application

to the regulator if they intend to sell insurance

products developed by insurance companies. The

regulations note that "Bancassurance is an

arrangement between a financial institution and an

insurer under which the financial institution

distributes to its customers, through its distribution

channels, an insurance product of the insurer." Banks

will earn a commission from insurance companies

from selling products. Banks will also be required to

hire people responsible for selling these products

otherwise they could have their Bancassurance

licenses revoked. One of the more contentious

clauses in the regulations is that without notice, IRA

can revoke a license from a bank to sell insurance

products if they violate the rules. There is also a fine

of Shs50m for banks that are involved in undercutting

and payment of commissions beyond what is

approved by IRA.

Banks were also opposed to the 24-hour deadline to

remit insurance premiums to insurance companies

from the time of receipt. "We request that we are

given more time because 24 hours is a short period.

Our proposal is for that time to be adjusted to a month

when we do most of our reconciliation," one banker

noted during the workshop. However, IRA rejected

this proposal, noting that it complicates the payment

of claims that may arise before the end of the

reporting month.

Insurance companies and brokers noted that in the

short term, there would be implementation challenges

because of the competition and large size of some

banks. The regulations are expected to become

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operational by December 2016, once they are

gazetted.

Kenyan Insurers Losing Out to Foreign Schemes on Marine Cover

The local insurance industry is losing close to Sh20

billion through foreign marine Insurance covers with

players urging the government to intervene.

According to the Association of Kenya Insurers

(AKI), a lot of cargo importers are still tied up to the

idea of insuring their imports at the country of origin

therefore denying the country's insurance sector

massive revenue.

The sector is now calling on the Kenya Revenue

Authority (KRA) to hastily implement section 20 of

the insurance Act that will compel importers to buy

local insurance policies. "Very big part of the import

which comes into this country, the importers secure

their insurances from their countries of origin of those

goods. So, us we get the goods but the premium is not

recorded in this country and that is how we lose,"

AKI CEO Tom Gichuhi said.

Section 20 of the Insurance Act states: 'No insurer,

broker, agent or other person shall directly or

indirectly place any Kenya business other than

reinsurance business with an insurer not registered

under this Act without the approval, whether

individually or generally, in writing of the

Commissioner.'

AKI which has been in talks with KRA and other

authorities want introduction of a clearance document

that would not only force importers to buy local

policies but also penalize those who buy insurance

from foreign firms. "AKI is actively engaged with

other key stakeholders including, IRA, KRA, Kenya

International Freight and Warehousing Association

(KIFWA), Intergovernmental Standing Committee

on Shipping (ISCOS) and the Ministry of Transport

and Infrastructure in the process of implementing this

section of the Act, " AKI Deputy Chairman Hassan

Bashir said.

They were speaking during the release of the 2015

Insurance Industry Annual Report which saw the

sectors rise by 15.3percent in 2015 to Sh49.1 billion

from Sh42.6 billion in 2014. "You know when the

sector grows, that means there is increase in

premiums and of course rise in the number of claims,"

Mr Gichuhi said, not forgetting the increase of fraud

in the sector especially medical and motor covers.

Medical insurance claims had the highest claims at

Sh15.06 billion closely followed by Motor private

and motor commercial at Sh13.18 billion and

Sh12.87 billion respectively.

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Kenya Re Pre Tax Profits Jump 4% to Ksh 2.2 Billion

Kenya Re-Insurance has reported a 4% surge in its

half year Pretax Profits to Ksh. 2.212Billion against

Ksh. 2.125Billion posted in a similar period in 2015.

The listed re-insurer attributed the performance to

“strong investment returns and reinsurance premium

growth.”

During the period, its gross premiums increased by

14% to 7.096 Billion from Ksh. 6.204Billion posted

in 2015. On the other hand, investment income grew

by 20% to Ksh 1.72 Billion compared to Ksh 1.43

Billion posted in the period under review.

The company’s total income was up 19% to Ksh 8.2

Billion while net claims increased by 31% to Ksh 6

Billion compared to Ksh 4.7 Billion posted in the

previous year in a similar period.

Net Profit grew by a small margin to Ksh 1.56 Billion

versus Ksh 1.50 posted in June 2015.

Changes to NamibRE legislation affects all insurers

Cabinet’s recently approved changes to the Namibia Reinsurance Corporation Act, the per policy cession in terms of Section 39(1-3) of the Act, will require all insurance companies to cede a portion of every insurance policy issued – either in or outside to the country – to the Namibia National Reinsurance Corporation (NamibRE).

This requirement will include companies who in the past did not cede business to the corporation. Also, the cession per policy will apply to all registered insurance companies and all issued policies. However, NamibRE’s managing director, Patty Karuaihe-Martin, noted that a cession of the premium of every policy to the corporation requires that the corporation in turn pays the same percentage of the claims and acquisition cost of each policy back to the insurer. In addition, the corporation will implement the payment of over-rider commission to the insurer.

“In order to limit the impact on the most vulnerable consumers, the corporation and industry will agree on the definition of and exclusion from the cession of micro-insurance,” said Mrs Karuaihe-Martin. Micro-insurance is defined as very low cover and low cost products developed specifically for the low-income market. The Managing director added that the corporation aims to limit the impact on the consumer by virtue of its contribution to the

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claims and acquisition cost and the payment of over-rider commission.

Namibre was established by statute in terms of Section 2 of the Namibia National Reinsurance Corporation Act, 1998 and started formal operations in 2001. The corporation was established to create, develop and sustain local retention capacity in insurance and reinsurance business and to minimize the placement of insurance and reinsurance business outside the country, thereby limiting the outflow of capital from Namibia.

Mrs Karuaihe-Martin went on to explain that the corporation established three pillars for the cession of insurance and reinsurance business, with each of these pillars having a specific purpose in the overall process. Pillar 1 (Section 39 (1-3) of the Act) establishes the cession of a portion of each insurance policy issued in or outside the country for Namibian risks to be ceded to the corporation.

Pillar 1 allows for the building of the corporation’s balance sheet without further capital contribution by government. Pillar 2 (Section 39 (4-6)) establishes the cession of a portion of each reinsurance contact to the corporation. The purpose of Pillar 2 is to limit the flow of insurance capital out of the country, estimated to have reached N$1.3 billion in 2015.

Pillar 2 (Section 40) gives the corporation a right of refusal to take on reinsurance business over and above the compulsory cession of reinsurance in terms of Section 39 (4-6), as the balance sheet of the corporation grows.

Based on an initial agreement with the industry, the per policy cession in terms of Pillar 1 was postponed a number of times, and eventually in 2003, by way of Government Notice 4 of 2 January 2, 2003 set at zero percent. The cession per reinsurance contract as intended in Section 39 (4) and the right of refusal in terms of Section 40 Act will remain intact.

“The effect hereof is that Pillar 1 of the Act was never implemented, but a hybrid model was implemented that enforced only the Pillar 2 and 3 cession, and is open to abuse due to ambiguity in the model.

“For the corporation, the effect was the removal of a critical pillar of the cession model, being the pillar that builds the balance sheet of the corporation without further funding required from government. The stronger the balance sheet of the corporation, the more it is able to retain capital in the country through the enforcement of the Pillar 2 and Pillar 3 cessions of reinsurance,” Patty Karuaihe-Martin explained.

At the establishment of the corporation, in terms of Section 23 of the Act, government contributed N$20 million as share capital of the corporation. Since commencing operations, the corporation has not required additional capital from its shareholder. To date the corporation returned a total of N$73 million, which translates into a 266 percent return to the shareholder on the initial investment. The funds returned to the fiscus include the declaration of dividends and the payment of taxes, including income tax, value added taxation and employee’s tax.

“While the corporation has been profitable, the lack of implementation of Pillar 1 resulted in the growth of the balance sheet of the corporation lagging significantly behind that of the industry. For the period 2007 to 2014, the growth of the balance sheet of the corporation lagged behind that of industry by 83 percent. The follow-on effect hereof is that market share of the corporation dropped from a high of 21 percent in 2008 to 15 percent in 2014, which resulted in the insurance capital leaving the country actually growing over the period from a low of N$211 million to the current estimated N$1.3 billion,” Mrs Karuaihe-Martin noted. NamibRE is the only registered reinsurer operating in Namibia.

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Jumpstarting Africa's insurance through talent and regulation Interview with Delphine Maidou, CEO, Allianz Global, SA

Delphine Maidou –Allianz Global Corporate & Specialty Africa’s chief executive.

Photo©Allianz

Delphine Maidou –Allianz Global Corporate & Specialty Africa's Chief executive – is leading the

company's new African expansion. In an interview with The Africa Report, Ms Maidou spoke about

her strategy and the challenges affecting the insurance sector in terms of talent and regulation.

"Two years ago, we decided that we needed to do a bit more on the continent," she said. Last year,

the company opened an office in Kenya, and in July 2016, it announced the acquisition of Zurich

Morocco.

If we are going to invest in a market, it is important that we also invest in the people in that market

Although the company operates in Nigeria, Africa's second biggest economy, it does not have a

subsidiary there. "What determines whether we go into further acquisition or not is which segments

or what countries are growing and whether we are already doing business there," she added.

http://www.theafricareport.com/Southern-Africa/jumpstarting-africas-insurance-through-talent-and-regulation.html

http://www.theafricareport.com/Southern-Africa/jumpstarting-africas-insurance-through-talent-and-regulation.html

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With an annual turnover of close to €150bn ($168m), Allianz is one of the largest players in the world of insurance. In Africa, Allianz has built on the historical footprint of Assurance General de France, after acquiring 57.9% of its capital in 1998. In its long-term vision to be active across the continent, the company has to adapt its operations not only to market demands "but also to what regulators want, especially as we go into Ghana, Kenya and Morocco". The company counts 16 subsidiaries across the continent and also delivers international insurance programs in nearly 30 African countries.

Invaluable regulations Apart from the ease in replicating models across its historical French-speaking market, doing business in Francophone Africa has been much simpler because the financial and insurance markets in most of those countries fall under Conférence Interafricaine des Marchés d'Assurances (CIMA) regulations. The CIMA zone comprises 14 French-speaking countries in West and Central Africa. "A recent law passed in the CIMA region demands that 50% of a certain class of business must remain in that region," Ms Maidou said. A new set of CIMA reforms that came into force in June this year stipulates that every business

should be fully insured locally, within the CIMA country where they operate. In the area of reinsurance, however, the body only allows 50% of a certain type of business to be done outside the CIMA zone – a far cry from the 75% pre-June levels.

Some heavy hitters, including those in aviation, maritime, oil and gas exploration, among others, are allowed to seek 100% reinsurance outside the zone, but only after they have insured their installations locally or within the CIMA zone. Although this type of intervention through regulation can be an important means to boost the growth of the insurance sector in Africa, "[CIMA's] move is causing some tension among a few

international players, who do not have a flag on the ground," said Ms Maidou. Ms Maidou agrees that local content regulation in Nigeria and Kenya, "where they want to make sure that the local insurance market has participated on a certain insurance product before getting insured outside the continent", is encouraging, especially as some large firms circumvent African insurance companies to place their premiums abroad. A push for "no premium, no cover" clauses in regulations in a number of countries in recent years [Ghana 2014, Nigeria 2013, Gambia 2016 and Zambia], according to Ms Maidou, has helped reduce the practice of "people asking for insurance coverage that they've not paid for, which defeats the whole purpose of the insurance sector. "But while [that clause] is

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invaluable to us in the insurance sector, regulation is one thing and implementation is another". Although regulation and implementation are matters for the government, the insurance sector should make trust one of its top priorities, Ms Maidou said. She argued that "if there's an issue with penetration, it is likely because people are wondering whether insurance companies will come to the party and pay the claims when called upon to do so.

"The only way to build trust is delivering on the promise that we make to policyholders: transparency, availability, acceptability and affordability". Building trust, she said, also means educating the population about insurance and how it works. Access to data Growing its African operations largely means "adapting Allainz's products to the African context", explained Ms Maidou. "You cannot expect the same standards that you would get in places like Germany or somewhere else in Europe or the United States. So we have to look at products in the African context quite often." Access to data is necessary for an insurance company to decide to absorb another company's risks. Ms Maidou complained that the insurance sector across the continent faced "a major issue with data". The privatization of Nigeria's power sector in 2013 "has attracted a lot of insurance

companies looking to support it. It calls for a lot of answers from our end, as it is difficult to insure something without access to enough information". Africa's 70% mobile phone penetration rate has simplified data collection over the past decade, although the continental insurance penetration rate sits at only 2%, excluding South Africa's 14% penetration rate. "The question is: How do we tap into the vast penetration rates of the mobile phone sector to provide insurance to a wider group of people?" Ms Maidou asked. "Apart from helping us communicate with more people to help find what exactly it is that they want, mobile phones have opened new avenues like crop insurance – which is one of the key areas we are interested in, mainly because of the vast arable land that is available." Talent challenge

For Ms Maidou, boosting insurance penetration involves educating local populations and strengthening capacity in terms of local talent. At the helm of the Insurance Institute of South Africa since 2015, Ms Maidou – who is from Burkina Faso – says she is aware of the wide-scale lack of skills facing the insurance sector in Africa. And in a bid to address this challenge, she has joined other firms to promote a special insurance project led by the African Leadership University's [African Leadership Group has under its umbrella: AL Academy, AL University, AL Network, Africa Advisory Group] Fred Swaniker.

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The Mauritius-based African Leadership University, a recent addition to the Africa Leadership Group, opened its doors to students from across the continent in March 2016. Graça Machel, wife of the late Nelson Mandela and member of The Elders - serves as the university's chancellor. "Although we are competitors in the same market, we have one common goal," Ms Maidou said. "That's the only way for us to make insurance more sustainable and also make sure Africans lead the African insurance market in the long run." The top management at Allianz Africa's headquarters in South Africa is 90% African, while its top management around the continent has 70% local representation. "When I started here in South Africa, the management team consisted of about 17 people, of which six were expatriates," she added. "Now, we are down to one non-African expat. As people leave, we hire Africans to replace them.

"If we are going to invest in a market, it is important that we also invest in the people in that

market."

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REGIONAL NEWS

Insurance brokers in liquidity crisis following Treasury cash guidelines

Nelson Omolo, Chairman of Association of Insurance Brokers of Kenya. PHOTO/JEFF ANGOTE

Insurance brokers have since last year grappled with tight liquidity that has threatened their business following

introduction of new cash rules, the trade umbrella association says. Chairman of the Association of Insurance

Brokers of Kenya (AIBK) Nelson Omolo said many brokers have opted to close shop weighed down by piling

debts. The number fell by as much as a third in 2015 alone. “Since no credit can be extended to clients, in case

at the end of the financial period you have uncollected debts, one is forced to go back to shareholders to put in

an equivalent of the outstanding debt. This places brokers who may not have the required financial might in a

very difficult position leading to closure of some brokerages,” he said.

Mr Omolo also attributed the attrition to the advent of risk-based supervision, which he said places

responsibility on underwriters and brokers to collect premiums immediately. The same rules do not apply to

insurance agents. The latest industry report shows licensed insurance brokers in the country fell by nearly a

third to 139 last year from 198 in 2014 as the rules took a toll.

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According to the 2015 annual report by the

Association of Kenya Insurers (AKI) released

recently the current numbers are much lower than the

187 brokers recorded in 2013. There were 170

brokers in 2012 and 168 in 2011.

Brokers and agents are the main avenues for pushing

penetration of insurance in Kenya, which stood at

2.79 per cent last year and lags behind a number of

African markets such as South Africa whose

penetration stands at about 14 per cent. Mr Omolo

said the lobby is still canvassing the State against

Kenya Revenue Authority (KRA) multi-billion

shilling tax demand, which it says threatens to take

down more underwriters.

The disputed bill is related to unpaid excise taxes on

commissions earned between July 2013 and

December last year when the law exempting them

from paying the levy was repealed. “Most brokers do

not have the required capital to settle the huge

amounts of money being asked for by the tax man,”

Mr Omolo said in the interview.

The IRA data shows that between July 2013 and

December 2015 the brokers were paid commissions

amounting to Sh23.85 billion, meaning that they owe

the KRA Sh2.39 billion in unpaid taxes before

penalties.

FML Zimbabwe Gross Premium Rises to U.S.$60, 6 Million

Mr D Hoto, First Mutual Holdings CEO

First Mutual Holdings' (FML) gross premium written

for the six months to June 2016 increased by one

percent to US$60,6 million from US$60,2 million

last year on the back of improved performance from

the health, life assurance and pension business

segments. Consolidated rental income decreased by

five percent from US$3,7 million in 2015 to US$3,5

million this year reflecting the current challenges

faced by tenants.

The average rental per square metre decreased from

US$7,3 last year to US$7 this year. The occupancy

rate for the period was 72 percent compared to 77

percent in prior year. "Operating profit before the

outturn on the investment portfolio improved to

US$4,9 million compared to prior period profit of

US$1,9 million. This was largely due to the lower

claims in the insurance business for the shareholder;

US$900 000 reduction in administration expenses;

and a US$900 000 reduction in the provision for

credit losses," said FML chairman, Oliver Mtasa.

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The group incurred a net investment loss of US$300

000 for the period compared to a net investment loss

of US$2,7 million last year. This was mainly as a

result of the decrease in fair value losses on quoted

equities relative to prior period; increased interest

income from money market investments and held to

maturity investment.

The group achieved an overall profit of US$2,6

million compared to US$400 000 last year. The total

comprehensive income attributable to the equity

holder of the parent company for the period was

US$3,2 million from a loss of US$200 000 last year.

FML group chief executive officer, Douglas Hoto,

said the group achieved an overall performance with

a two percent growth in net premium earned from

prior period and attained an overall profit for the

period of US$2,6 million from a profit position of

US$400 000.

"We expect little change in the difficult economic

environment and this will demand greater resilience

from the group as well as increased focus on

customer service excellence, system efficiencies, cost

containment and a prudent investment philosophy,"

said Mr Hoto.

Zimbabwe Insurance and Pension Industry Raises U.S.$40 Million for Agriculture

INSURANCE companies and pension funds have

mobilized about $41 million to finance the 2016 /17

agriculture season, the Insurance and Pension

Commission has said. Chairperson Mrs Lynn

Mukonoweshuro said in an interview insurance

companies and pensions funds would participate in

agriculture instruments with prescribed asset status.

Some of the funds will also be channeled towards the

Government's command agriculture program.

Recently, Government launched command

agriculture with a target of financing 400 000

hectares of maize crop. The program is expected to

produce two million tons of maize, which would

drastically cut the food import bill or eliminate it.

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The Government has already appealed to pension

funds to assist in raising about $350 million of the

required amount. "Our budget for the forthcoming

season is $50 million and so far, we have mobilized

$41,2 million. We are close to reaching the target,"

said Mrs Mukonoweshuro. Finance and Economic

Development Minister Patrick Chinamasa said the

Government was engaging the banking and private

sector to mobilize funds to support farmers under

command agriculture.

Already, a facility to the tune of $85 million is now

in place, and is being co-ordinated through the Office

of the President and Cabinet. Of the targeted

hectarage, 264 000 hectares is dry land while 136 000

hectares is irrigable. This import substitution maize

production program is targeting both A1 and A2

farmer participants as well as Government

institutional farms, particularly those near water

bodies.

Over the past few years, the insurance and pension

industry has participated in prescribed papers worth

$150 million. These include housing, agriculture and

energy bonds. Pension funds are required to invest 10

percent of their assets funds in prescribed assets and

7,4 percent for life and funeral assurers. Short-term

insurers and short term re-insurers are required to

invest 5 percent.

While there had been an improvement in compliance

to the prescribed assets requirements across the

industry, a few players whose prescribed assets

holdings were far above the minimum requirement

accounted for the overall industry's compliance

above the minimum requirement.

The majority of the players remained non-compliant.

Out of 54 underwriters that were operating as at end

of March 2016, only 17 were compliant with the

minimum prescribed assets ratio, according to

Minister Chinamasa.

National Hospital Insurance Fund Kenya to introduce mandatory health insurance Plans are underway to reform the National Hospital

Insurance Fund to accept more members and increase

benefits. The reforms are partly driven by the Sh3.28

billion soft loan from Japan last year. The

announcement came as President Uhuru Kenyatta

prepared to give a report card on Kenya’s efforts to

achieve universal health coverage.

President Uhuru will announce the progress to

Japanese PM Shinzo Abe, World Bank president Jim

Yong, UNDP administrator Helen Clark and Global

Fund director Mark Dybul. Health CS Cleopa Mailu

said NHIF reforms are necessary to reduce out-of-

pocket expenditure by Kenyans.

Mark Mailu says Kenyans pay 30 per cent of all

health expenditure from their pockets, while donors

21


pay 30 per cent. He said the situation is unacceptable

and could delay achievement of universal health

coverage in the next 15 years. “The government is

developing a health financing strategy to introduce

mandatory health insurance,” he said. NHIF has

about 6.2 million principal members who contribute

Sh2.2 billion every month. Mr Mailu also announced

that donor funding for health activities will be

harmonised to improve efficiency.

Currently, the government does not control donor

funds but some countries have priority areas where

donors can contribute. Universal health coverage

ensures all people obtain the health services they need

without suffering financial hardship. Japan attained

this in 1961.

“There is a strong need to implement national

strategic programmes to tackle emerging and new

public health threats associated with high

expenditure, including out of pocket, which deter

Universal Health Coverage,” Mr Mailu said. He

spoke in Ethiopia where he attended a regional

meeting on UHC. The Japanese loan was provided in

the form of general budget support for policy actions

necessary for Kenya to attain UHC by 2030.

-The Star

OESAI / Conference Welcome Cocktail

Conference delegates Networking at the Tiger

Reef Grill& Bar

Fire display at the Farewell Gala in the Desert

OESAI Conference Farewell dinner in the

Desert

22


Interview

RISK,

UNCERTAINTY

AND THE CEO

LYDIA TANYANYIWA, MD,

MINERVA RISK SOLUTIONS ,

ZIMBABWE

Today’s CEO and business executive lives in a fast

paced and ever changing global environment which

requires constant adaptation at an individual and

business level to maintain relevance.

This pace and volatility leads to new risks emerging

daily, uncertainty about tomorrow and it increases the

responsibility role of the 21st century CEO.

Geographic borders among countries are no

longer as important as they were a decade ago

because of technological advances.

Competition is now global as goods can be

bought and services outsourced from anywhere

around the world at the click of a button.

Whereas in the past companies could operate

successfully within their national geographic

cocoons today’s CEO has to consider the likely

impact of an event in a remote country halfway

across the globe.

Consider this, after the outbreak of the Ebola

virus, countries that were far away from the

affected zones still experienced safari booking

cancellations ranging from 20-70% according

to a study by Safari Bookings.com. For CEO’s

whose companies had looked east, the

implications of the slow down in the China

economy, the recent decline in value on its

stock exchange and the sharp fall of the Russian

Rubble by over 40% cannot be ignored. Even

seemingly unconnected events like the rise of

ISIS ultimately have a trickle-down effect

however minute on the Zimbabwean executive.

What are the top risks the CEO should

consider in 2016/2017

According to our global partner Aon

International’s Global Risk Management

Survey of executives from all over the world

the top 10 risks identified are as indicated

below:

1. Damage to Brand Reputation

Reputation is a priceless and intangible asset which is

difficult to restore or regain once it is tarnished or

lost. Business leaders across the globe indicated that

23


this is their greatest risk as it could make or break a

company as well as the individual CEO’s personal

brand.

Remember the impact of 2 plane crashes in 2014 on

the Malaysia Airlines brand. Senior executives were

fired whilst bookings decreased and now the airline

is spending a considerable sum to restructure and try

to rebuild its brand.

Locally examples of compromised brand reputation

for certain banking and financial institutions and their

executives indicate the importance of this matter and

its potential impact on the executives, the

organisation and the economy as a whole.

2. Economic Slowdown/ slow recovery

At a global scale this is a very real risk though some

individual countries

maybe doing well. The

impact of China’s slow

down, the low oil

prices, low commodity

prices, the Greece factor

and tensions between

Russia and Ukraine are

just some of the matters

CEO’s are grappling

with.

In Zimbabwe this is a

very serious risk for

companies which are

besieged due to a recession that has been further

hampered by antiquated production facilities, cheaper

imports, unclear investment policies and sanctions

among a myriad of issues.

The local CEO is faced with the daunting risk of

ensuring the survival of their company in the present,

its revamping to become globally relevant and the

possibility of being in business in an uncertain future.

3. Regulatory/ Legislative changes

Increasingly, the cost and influence of regulations on

business are such that even marginally incremental

regulatory changes could add tremendous cost to a

corporation thereby restricting expansion.

Traditionally banks, healthcare, pharmaceuticals,

financial industry and automation industries have

been some of the most regulated globally. However,

more countries are turning their attention to

regulation of the telecommunications industry in

view of its emergence as a determinant platform for

most business operations.

While Zimbabwean companies have not been spared

from regulation, the challenge for most CEO’s is not

in the actual laws or codes but in the ever changing

application or interpretation of these by relevant

authorities. A case in point is the implementation of

the Indigenisation and Economic Empowerment Act

of 2007 which has differed over time, across

ministries and across industries. Such changes do

have a significant impact on business performance

and the potential participation of current and possible

foreign investment

partners.

More recently the

announcement by the

Ministry of Industry and

Trade that import

assessments on certain

products will be done

prior to them being

shipped to Zimbabwe

(whilst welcome to stop

the tide of sub-standard

goods), needs to be

correctly understood by

business leaders to avoid unnecessary delays of

critical goods.

4. Increasing Competition

Globalisation has made the world into one big market

place. Companies from emerging markets have

intensified their efforts to integrate into global

commerce to harness new trade and investment

opportunities.at the same time, they have to compete

with multinationals seeking to capitalise on the

booming middle class population in emerging

markets.

Zimbabwean businesses have had to grapple with

competition from the SADC region and even afar

24


field as Brazil, India and China especially in the

productive sector. As such, CEO’s have to

reconfigure their institutions in some dramatic and

often unpopular ways to ensure long term continuity

and viability.

5. Failure to attract or retain top talent

Organisations can only rise to the level of their

employees. No matter how much capital has been

pumped into a company, the rate of return on

investment is strongly linked to the quality and

caliber of the people running the business daily.

Globally, the fight is to attract and retain top talent,

locally whilst this is true in certain industries and at

executive posts, an illiquid job market has made

available a good pool of talent at middle and lower

management levels. Apart from those who left the

country pre 2009, skills flight has ebbed post

dollarisation in 2009 so a good team can be

assembled if required.

Another grave concern related to talent in Zimbabwe

is that most firms are overstaffed for the current

business levels and due to mechanisation of most

processes that required human input. As such CEO’s

are faced with the task of having to overhaul head

count to streamline business operations.

6. Failure to innovate/ meet customer needs

One of the most commonly used examples of a

company failing to innovate and meet customer needs

was Nokia’s Mobile division. The company at its

peak had about 44% of the handset market share but

it remained stuck in an innovation rut that saw it

overtaken by Samsung and Apple as the world moved

toward smartphones. By the time it was bought by

Microsoft in 2013, the company had only an

estimated 15% share of the handset market.

This risk has led to the demise of many a local

company as they failed to meet changing consumer

tastes and demands due to increased knowledge and

exposure to global trends. Large bus companies of

yester year failed to tap into the smaller commuter

omnibus market which they could have easily

dominated with first mover advantage and today they

are no-more.

CEO’s should ensure that their company systems

either have strategic units for research, product

development and innovation or a reward structure

that recognises and encourages incremental or

revolutionary improvements.

7. Business Interruption

While business interruption is usually related to large

catastrophic events such as tsunami’s or terrorist

attacks, smaller events like arson, industrial action by

workers and power supply disruptions can have a

significant impact on business performance.

Locally, apart from major events like fires or large

machinery breakdown incidents, because most

companies are operating at sub-optimum levels, most

business interruption has not been treated with the

urgency that it would deserve if operations were at

100%.

8. Third Party Liability

Third party liability refers to bodily injury, loss or

damage caused to a third party by the action, inaction

or negligence of the business. Whilst globally this is

a major matter due to the litigiousness of the

developed world, locally this is not a major risk for

most companies.

However, as Minerva, we have noted an increase in

litigation in areas related to road traffic accidents,

hospitality as well as the food and beverage industry.

Executives have to be aware of the liability exposure

inherent in their business operations.

9. Computer Crime/ Hacking/ Viruses/

Malicious codes

An increasing number of high-end data breaches have

been witnessed over the past 5 years. The risk of

computer crime is a growing worldwide phenomenon

that is compounded by internal threats (employees)

and external threats (hackers).

In April this year Ryanair confirmed that it

investigated a hack which had led to close to $5

million being fraudulently transferred to a Chinese

bank but later recovered. Last year major headlines

25


were made by data breaches at Sony and Home

Depot.

For most local businesses, the risk of computer crime

has been one of the most under-rated risks which has

not been given the relevance it deserves. Whilst we

may not have sensitive credit card information and

social security numbers, some companies like

financial institutions do store sensitive account

balances of companies, government departments and

individuals. Furthermore, such information if hacked

can be manipulated with funds being transferred or

withdrawn fraudulently.

Other companies are currently offering credit

facilities whose records of

debtors can be manipulated

via hacking. Furthermore,

institutions like

municipalities or electricity

distributors are prone to

internal fraudulent activity

via their billing system

being manipulated to

reflect less cash than that

which was collected by

cashiers.

The general rule of thumb

is that if your company is

on email, has a website,

social media platform and if it stores or handles

information you would not want in the public

domain, there is potential of this risk becoming

catastrophic for you.

10. Property Damage

Damage to property due to natural events like wild

bush fires, earthquakes, tornados and storms

combined with human factors like strikes, political

riot and arson were identified as a major global risk.

However, most of the natural matters do not rank high

for most Zimbabwean firms due to the favourable

geographic and tectonic location of our nation. The

human factors have been traditionally of a low factor

in property damage matters.

Risks unique to Africa and Zimbabwe

In addition to the global risks identified above the

Aon survey and Minerva’s analytics also identified

some risks which were unique to Africa and

Zimbabwe.

1. Cashflow / Liquidity Risk

This risk ranked second on the African continent as

most business leaders indicated that their business

plans and visions are being stifled due to cashflow

concerns. In Zimbabwe this is indeed true for the

nation as a whole due largely to an increasing

informal sector that does not bring money into formal

circulation via banks and hence affecting the

economic principles of money supply and

multiplication.

Furthermore, increased

debtor/loan defaults put

pressure on companies and

the banking institutions in a

manner that has a domino

effect on their performance

and long term viability.

Investment policies at

government level have also

not been too attractive to

foreign direct investment.

2. Crime/ Theft/

Employee Dishonesty

This ranked 10th on the African continent as there is

concern among executives. Locally this is an area

where as Minerva we have witnessed a surge in fraud

cases over the past year across the entire economy.

Most of the fraud witnessed has been of employees

working in collusion with outsiders as the methods of

fraud have become increasingly intricate.

The fledgling economy, lack of job security and

seemingly depressed salaries have all contributed as

push factors for the increase. Lax internal company

systems have also encouraged such activity.

3. Commodity Price Risk

Many African economies are commodities based. As

such, negative fluctuations on the world market

26


prices has dire effects not only on the companies but

on their entire economies. This risk ranked ninth in

Africa.

According to Zimstat quarter 4 report for 2014 more

than half the exports by Zimbabwe in that quarter

were from tobacco 40%, Semi manufactured gold

14% and Nickel Ores and concentrate 8.5%. The

nation does not directly have control on these

commodities prices yet its economy relies on them.

4. Political uncertainty and company

succession

Zimbabwe is at a watershed period where political

uncertainty complicates the CEO’s ability to make

long term concrete business decisions. Instead,

various what-if scenarios have to be formulated and

the better one will be adopted at the appropriate

occasion.

At a company level whilst notable progress has been

made in the private sector to renew leadership, most

public or quasi-public institutions are exposed to

succession risk to ensure viability in the long term.

Insurance Solutions for the CEO.

This risks explained above can lead to catastrophic

business and personal consequences executives.

There are a number of insurance solutions that the

CEO should consider that can help mitigate against

the impact of these risks. For each of these solutions

and many more call Minerva today and we will come

and discuss with you to enable us to design a bespoke

program for your business.

a. Directors and Officers Liability Insurance

Cover

This is a vital insurance cover which provides cover

for you and your executive team if you are sued in

your personal capacity for everyday business

decisions that you have made. These lawsuits could

emanate from a variety of stakeholders beyond

shareholders including customers, suppliers,

regulatory agencies, creditors, lenders and

employees.

These lawsuits could emanate from a number of areas

including Legislative breaches of the Companies Act,

27


Abusing powers, or acting contrary to the company's

Memorandum Articles of Association, disputes

arising from mergers and acquisition activity, action

arising from potentially libelous or slanderous

statements made by directors, employment practices

and wrongful acts perceived or otherwise that

directors maybe sued for.

b. Pension Fund Trustees Liability

The issue of pension fund administration has already

began to receive media attention and is bound to

attract greater scrutiny as more employees are

retrenched. As such it is important that executives

ensure that there is cover for the decisions they may

make on behalf of the pension fund as trustees. The

policy indemnifies against a number of things

including actual or alleged breach of trust,

settlements and awards for which trustees are legally

liable to pay, breach of statutory provision,

administration errors, omissions and misleading

statements in relation to the pension scheme.

c. Cyber Liability Cover

The risk and exposure brought by computer crime,

hacking and related matters can be mitigated by

putting in place an adequately structured cyber

liability program. Such a policy would provide cover

for various things which include payments for

liability to third parties due to the exposed data,

reputation and response costs, administrative

obligations, network interruption, cyber extortion and

multi-media liability.

d. Crime Cover

This cover protects the business from the impact of

fraudulent activities carried out by its own employees

including where there is collusion with outsiders.

Cover can be extended to include discoveries made

about thefts made by former employees and the

policy would respond given that there is reasonable

proof of loss prior to a court judgment.

e. Debtors/ Loan Protection Cover

For businesses where sales are mainly on credit,

executives should consider purchasing loan

protection cover. This policy is extremely flexible in

the manner in which it can be structured as no 2

business are similar in terms of their debtor

management. It would provide protection from

debtors who default on their payments due to things

such as death, liquidation and abscondment. It is a

pricy cover due to the prevailing liquidity crisis

which has led to a number of defaults and company

fold ups.

f. Property Damage and Business

Interruption cover

This is cover for the actual assets (buildings, plant,

machinery and equipment) and any resultant loss of

profits due to disruption in normal business activity

by perils like fire, machinery breakdown, storm

damage, flooding, theft, stock damage and non-

political riot. Though most businesses will have this

cover already in place, the executive has to ensure

that it is suited and adequate for their nature of

operations. A standard policy may not be adequate

for your unique business operations.

Other covers such as Employers and Residual

liability may also need to be considered. For each of

these solutions and many more call Minerva today

and we will come and discuss with you the design of

a bespoke program for your business.

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The OESAI Management Board and Secretariat invites you to the 40th OESAI Annual Conference

in Cape Town , South Africa

the chairman’s welcome -...

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