We are concerned about low insurance penetration in Africa – CRe GMD

As companies and businesses contend with economic downturn in the country, affecting consumer purchase, revenue generation and profitability, experts believe that formulating long and medium term growth strategies are critical for sustainability. Femi Oyetunji, group managing director, Continental Reinsurance Plc (CRe) in this interview with Modestus Anaesoronye bares his mind on what his company is doing to cope with the challenges as well as opportunities in the African market. Excerpts…
How did Continental Re fare in 2014 financial year, and what plans have you put in place to achieve set targets?
It was a challenging year. It was a year when we completed putting the building blocks in place in terms of our strategy but overall, it turned out to be a satisfactory year.  We anticipate exceptional growth in 2015.

We rolled out our strategy in 2012 and this should be completed in 2017. It is a five year strategy and we are very much on track. The first part of the strategy was to put things in place for us to cover Africa completely and correctly. We have moved away from just branch representation into being local in each region where we play.  And being local, apart from giving us the access to domesticate our lines of business, also gives us the opportunity to invest back in the different areas in terms of employing people from those regions, and also in terms of having close access to that region. We started in 2012 by converting our branch in Kenya into a subsidiary. In the same year, we opened a branch in Abidjan to effectively cover all the francophone territories. We now cover the whole of Francophone from Douala and Abidjan. In 2013, we opened in Tunis a branch office to start with, to look after the North African business. Last year 2014, we opened up a subsidiary in Gaborone, Botswana to look after the southern region. We have executed our plan in accordance with our five years strategy which was to cover the whole of Africa. Tunis for Northern Africa, Kenya for Eastern Africa, Lagos for Anglophone West Africa, Douala and Abidjan for Francophone and finally, Botswana to look after the Southern region. In terms of our five year strategy, we have achieved what we set out to do. Now that the platform is in place, our focus is on using it to generate business.
Capital flight in the Continent is a major issue for the insurance industry, what are you doing as an organisation?
Insurance companies are looking out for security and that is why they talk about reinsuring with European reinsurance companies. This we have been able to demonstrate because we have a B+ rating which is a secure rating and one of the best in the continent of Africa. So being present in those regions and by being close to the clients, they are able to trust us with their business instead of ceding most of it to Europe and United States. They now transact their business with us. That in some ways helps with our vision to retain as much premium as possible in Africa. We are getting there, and for us at Continental Re, we shall continue to grow our balance sheet and grow our talent and skills so that we can provide international best practice and service to our clients.
In what other ways are you helping African insurance companies to grow?
One of the greatest things people talk about is the training programmes we offer to insurance companies. When I met one of the chief executive officers of an insurance company recently, the first question he asked me was “where is your training programme for this year?” We train a lot so that we can build capacity in Africa because the better the insurance companies are at what they do, the better the type and quality of business that we get and that makes our business operation easier. We are also building on our skills set by introducing products, new ideas through partnership with people that we have relationships with in Europe who come and bring those skills locally through joint training programmes. If those reinsurance companies that have the skills can train the insurance companies across Africa, it will enable introduction of new products so that we can do insurance better and also deepen insurance penetration. It is one thing that most companies applaud us for.
When is the next chief executive officers summit for African companies holding?We did the first chief executive seminar for insurance companies last year in 2014 in Mombasa, Kenya. The second one was in Limpopo, South Africa this year. It is an annual event so definitely we will do one in 2016. For us at Continental Re, it is a platform to exchange ideas, train on leadership and look for new ways of doing business with the insurance companies. The level of insurance penetration in Africa as a whole, excluding South Africa, is very low and we must do something about it. It is one of the reasons why the business leaders in Africa should be able to sit back and just think of strategy. That was the reason why we created the CEO Summit and Continental Re was the first Reinsurance Company in Africa to create such platform.
What is the Nigerian insurance industry yet to get right?I think it is our savings culture. We don’t have a good savings culture as a nation because of past experience. Inflation, devaluation makes savings unattractive to the citizens. And as you know, in insurance, apart from the non-life, life insurance is what drives the economy because it is long term. And if somebody puts in N100 per month and is expecting N1,000 at the end of 10 years, when 10 years come by, the N1,000 that he is expecting is not even able to buy lunch, it thus becomes unattractive. The challenge we now have as an industry is to address such concerns – how we introduce products that will be resistant to inflation or devaluation.  I think that is the way to go.
What are the challenges reinsurers are facing in Africa compared to their foreign counterparts?The number one challenge is the emphasis on security ratings when it comes to placement of insurance or reinsurance. As you know, the rating agencies directly or indirectly limit your rating by a sovereign rating of where your head office is. In the whole of Africa, the only A rated country is Botswana. So when it comes to competition, most of us, except Africa Re, have no A rating and we are not able to participate in some risks. So you find that this situation is not providing a level playing field.  I would like to add that being triple A today doesn’t make you triple A tomorrow. And even if you are triple A tomorrow, it does not show willingness to pay a claim.  So, there is the ability to pay claims and there is also the question of willingness to pay. I think for us as African reinsurers committed to this continent, the willingness to pay is there but we are restricted on the ability to participate in those risks because of our rating leading to
premium flight.
How can government help the insurance industry in Africa?
One of the things we discussed at our CEO forum is that for a starting point, each country should have a national policy on insurance and we will push for it in Nigeria. Most countries don’t. If we have a national policy, we will see growth in the insurance industry. Part of the policy will be the creation of awareness. If the government has a policy on insurance, the parastatals, the ministries must be the first to implement that policy and we will then see more insurance coming from government.  By so doing, the government will be demonstrating its belief in insurance and that will have an effect on the generality of the populace.
What is the way forward for the African insurance industry?The industry will thrive based on strong, highly capitalized, well skilled companies and I think we should as an industry concentrate on bringing skills into the industry that will assist the industry to grow. Hitherto we should always look inward. You can’t insure a building if you have no knowledge of engineering, you can’t make projections of a life policy if you don’t have an actuary. You can’t insure medical products if you are not a pharmacist or doctor. You need to attract those skills into the industry and we need to attract skills from outside of Africa because we have a lot of Africans in the US, in Europe that are doing great work in insurance to the benefit of Europe and the US, whom we must attract back to Africa so that we can develop the insurance industry in Africa.