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Untitled-2 1 3/2/12 3:26 PM

3riskAFRICA

It is a fact that legitimate hunters are by necessity conservationists. Indiscriminate culling would soon lead to fewer and fewer species and eventually their extinction. Nearly every hunter I know has a deep love of the outdoors and respects the environment he (or she) is privileged to be in. I find it an anathema that the anti-hunting lobby can sometimes be so short sighted to the benefits this industry brings to our region. Hunting attracts millions of dollars into sub-Saharan Africa each year.

Pick n Pay director, Suzanne Ackerman-Berman, has taken a stand against Donald Trump’s children over a hunting trip they undertook to Zimbabwe two years ago. Her knee jerk reaction over the Trumps trophy-hunting smacks of ignorance. A ban on hunting would

result in huge tracts of unspoiled land being lost to commercial farming as new revenue streams are sought – not to mention the loss of game as sensitive biospheres strain to come to terms with out of control herd numbers. Poaching on the other hand is a diabolical attack on our natural resources and this scourge must be stopped at all costs.

RISKAFRICA (backed by Pro Sano Medical Scheme and Netstar) is raising money and awareness around rhino conservation. In June we’ll be travelling through Namibia, Zambia, Zimbabwe, Malawi and Mozambique spreading the message. I hope you’ll support our efforts (visit www.riskafrica.com) for details and read Hanna Barry’s hunting focus in this issue.

Enjoy the read,

Andy Mark - publisher

Publisher & editor in chiefAndy Mark

Managing editorNicky Mark

Copy editorMargy Beves-Gibson

Feature writersAngelique Ruzicka

Bianca WrightElvorne Palmer

Hanna BarryLize van Coeverden

Design and layoutDries van der Westhuizen

Gareth Grey

10 Old Power Station Building Cnr of Nobel & Armstrong Street

Southern Industrial Area Windhoek Namibia

Editorial enquiriesinfo@riskafrica.com

Advertising and salesMichael Kaufmann | michaelk@riskafrica.com

Tel: +2721 555 3577 | Fax: +2721 555 3569 Tel: +264 61 400 717

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Opinions expressed in this publication are those of the authors and do not necessarily reflect those of the Publisher, Cosa Communications (Pty) Ltd, COSA Media, and or THE RISKAFRICA MAGAZINE PUBLISHER CC. The mention of specific products in articles or advertisements does not imply that they are endorsed or recommended by this journal or its publishers in preference to others of a similar nature, which are not mentioned or advertised. While every effort is made to ensure accuracy of editorial content, the publishers do not accept responsibility for omissions, errors or any consequences that may arise therefrom. Reliance on any information contained in this publication is at your own risk. The publishers make no representations or warranties, express or implied, as to the correctness or suitability of the information contained and/or the products advertised in this publication. The publishers shall not be liable for any damages or loss, howsoever arising, incurred by readers of this publication or any other person/s. The publishers disclaim all responsibility and liability for any damages, including pure economic loss and any consequential damages, resulting from the use of any service or product advertised in this publication. Readers of this publication indemnify and hold harmless the publishers of this magazine, its officers, employees and servants for any demand, action, application or other proceedings made by any third party and arising out of or in connection with the use of any services and/or pro-ducts or the reliance of any information contained in this publication.

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Dear Reader

CONTENTS

Andy Mark

The truth about hunting

Product focus – ExecuMed: Health insurance gets a facelift

Why Africa?

Is PPP the panacea?

Reinsurance news round-up

News

Insurance in Uganda

Geared for growth

Insurance – upwardly mobile in Africa

L is for Loyalty

Dig deep – finding capital growth in a deflated investment environment

04

10

12

14

16

20

22

24

26

28

36

On target the truth abOut hunting

• Hunting

“Professional hunters have a keen understanding of the environments

in which they hunt and are sensitive to the ecological nuances and needs

of these areas.”

By Hanna Barry

Hunters are conservationists and community-builders. With hunting season well underway in Namibia, a bit of research shows its contribution to the environment and economy to be truly staggering.

Hunting helps to preserve the fauna and flora of various

environments by stabilising fluctuating game numbers and

monitoring land use. The industry also brings in significant

revenue for local communities and conservation efforts.

Some of the largest and best managed game and trophy

hunting ranches are to be found in Namibia, highlighting

the vital role that the insurance industry plays in

protecting this key industry.

While much of society may view hunting as a gruesome

sport in which helpless animals are gunned down by

aggressive men with oversized guns, professional hunters

and those with a love of the bush paint a different

picture entirely.

5riskAFRICA

A FINE ART

Professional hunters have a keen

understanding of the environments in which

they hunt and are sensitive to the ecological

nuances and needs of these areas.

For example, a game farm owner will

understand that if there are too many eland,

the soetdoring bush will be eaten too quickly

for the rooibokke to have their share. This

means that killing a certain number of eland

will benefit and protect the environment

and its dependents. This is just one of many

examples of the delicate balances within

nature that are understood and kept intact by

the professional hunter.

The hunt itself requires absolute focus on

the surrounding bush, as the hunter carefully

stalks their prey, every rustling bush and

crackling leaf amplified. Handling a hunting

rifle is no cheap trick and requires proficiency

and craftsmanship. A successful shot involves

hitting a target the size of a 50 cent coin from

approximately 100 metres away, on foot.

Handling dangerous weaponry demands skill.

But should something go wrong, adequate

insurance cover is vital, too.

RISKy BUSINESS

Wild animals, dangerous weapons and

accidents, such as falling off the back of

a hunting vehicle, are only some of the

risks facing hunters. Wounded animals are

particularly dangerous and approaching an

animal believed to be dead, when it is not, can

prove fatal. For example, wounded gemsbok

tend to hide in a bush and play dead, only

to skewer their attacker on approach. While

a professional hunter should be on hand

to ensure that the client doesn’t sustain this

type of injury, it is important to have medical

travel insurance in place should this type of

unexpected event occur.

Hunters’ public liability is equally important as

it protects those hunting should they become

liable for death, injury or damage to property

caused to third parties during the course of

the hunting activity. One hunter experienced

the devastation of accidentally shooting his

tracker. The tracker had crouched down in

front of the hunter to allow him to take a

shot. The first shot only wounded the animal

and so the hunter immediately reloaded his

gun and took another, by which time the

tracker had stood up.

To avoid this type of accident, some hunters

simply rule never to shoot when there is a

person in front of them – no matter how

compelling the shot. In fact, one hunter told

us that there are no hunting accidents, only

hunters who fail to follow proper procedures,

take careful precautions and strictly adhere to

the rules of the hunt.

Nonetheless, medical and liability cover

remain crucial. “Potentially the highest risk to

a hunting operation is the reputational risk

when a hunting accident happens,” said chief

operating officer of Marsh, Bennie Visser.

“This is best managed by a combination of the

liability cover and emergency evacuation and

medical cover for both clients and staff.”

Marsh place specialised emergency evacuation

and personal accident covers with Lloyd’s of

London. “Our local contracted service providers

are Emed Rescue 24, as well as ISOS,” said

Visser. “Normal assets and motor insurance are

placed in the local insurance market with various

underwriters, such as Santam, Mutual & Federal,

Hollard and Western National.”

Santam represents specialist liability

underwriters, Stalker Hutchison &

Associates, which has an industry specific

hunters’ liability product.

Additional risks include loss or damage to

the assets of the hunting operation or farm,

which include fixed assets and game. Examples

of these include disease; and loss of grazing

for game. Natural disasters such as drought,

floods and fires can have devastating effects

that may deliver a blow from which the farmer

cannot recover. “Almost all hunting operations in

Namibia insure the so-called catastrophe cover,

which is cover for liability and fire,” said Visser.

Marsh offers a veld cover policy, under which

the latter can be insured. The policy is placed

with Santam and known as the Fire on

Grazing-land Policy. It enables farmers to

“Potentially the highest risk to a hunting operation is the

reputational risk when a hunting accident happens.”

“One hunter experienced the devastation of accidentally shooting

his tracker.”

6 riskAFRICA

supply stock feed to their animals

and enable the grazing land to

recover, following the damaging

effects of a fire. Sums insured

for grazing are negotiated with

farmers beforehand, taking into

consideration the number of

hectares the farmer wants to

insure and the carrying capacity of

the area where the farm is located.

The product was launched in

Namibia a year or two ago and

is still unknown to most farmers.

“Santam is currently busy with a

marketing campaign to introduce

the product to game and stock

farmers and we hope it will take

off soon,” said Basjan Rothmann,

relationship manager at Santam,

“especially in this year, as we had

a lot of rain and the risk of veld

fires is very high because of high

volumes of grass.”

Hunters are also exposed to the

over-utilisation of game within the

surrounding farming community,

but this is usually managed through

the formation of conservancies,

which have grown in popularity in

recent years.

TURNING THE TIDE

In 1996, the Ministry of

Environment and Tourism

(MET) introduced legislation

that gave conditional use

rights over wildlife and natural

resources to communities in

communal areas, leading to the

formation of conservancies.

Research released last year by

the Namibian Association of

CBNRM (community-based

natural resource management)

Support Organisations (NACSO),

entitled Namibia’s Communal

Conservancies, reveals that

CBNRM promotes

sustainable development.

Communal area conservancies

are now found in 11 of the 13

regions of the country. The

conservancy approach has

proven effective as a conservation

strategy, as can be seen by the

increase in wildlife in many of

Namibia’s communal areas. It

also represents a successful rural

development strategy, generating

income for local communities,

creating new jobs and developing

skills and expertise.

Income from the overall CBNRM

programme grew from zero in

1994 to over N$45 million in

2010. Conservancies earned

more than N$39.5 million,

approximately 86 per cent of the

total CBNRM income.

“The biggest risk is cheap premiums that do not suit the risks and underwriters or insurers who do not understand the wildlife industry

and the risk factors.”

The vision of these conservancies

is supported by the Namibia

Professional Hunting Association

(NAPHA), which promotes

ethical and professional trophy

hunting in Namibia. According to

Visser, with over 400 registered

hunting professionals, the NAPHA

works closely with the Ministry

of Environment and Tourism

(MET) to regulate the industry

and is committed to sustainable

game utilisation. Unfortunately,

after repeated attempts to secure

comment from the NAPHA, none

could be obtained.

Of course, all of this rests on the

existence of wildlife, which means

that the hunting industry has a vested

interest in seeing wildlife preserved.

“Professional trophy hunting has been

one of the main conservation drivers

in Namibia, however odd that may

sound. Namibia is an arid land and

its other main agricultural activity

has always been livestock farming.

Responsible trophy hunting and cattle

farming have co-existed over many

years,” said Visser.

Trophy hunting concessions currently

provide the second-highest source of

income for conservancies, generating

N$13.9 million in 2010 or 28.2 per

cent of conservancy income. This is

second only to joint venture tourism

at N$18 682 342 or 47.3 per cent

and significantly higher than any other

source of income in conservancies.

In 2010, the total income generated

from direct wildlife utilisation was

N$17 million (43 per cent of all

conservancy income), with the

key activities being trophy hunting,

premium hunting, own use hunting

and shoot and sell. Of the total

generated, approximately N$4.36

million was in the form of game meat

that was distributed among members

of conservancies – a key form of

benefits for local people.

Visser explained that the hunting

industry generates employment

“Santam is currently busy

with a marketing campaign to introduce the

product to game and stock farmers and we hope it will

take off soon.”

8 riskAFRICA

where it is needed most, in the rural farming

communities, as well as communal areas of

Namibia. “There is also a major spin-off to other

sectors of the tourism industry as hunting clients

often combine their hunt with a vacation or

safari in Namibia,” he noted.

This is particularly true of foreign clients. In

fact, CEO of Aon Namibia, Richard Aston, said

that the biggest threat to the hunting industry

currently is the economic downturn in Europe

and the United States.

In light of the important role that professional

hunting plays in conservation and economic

development, the role of the insurance industry

in ensuring its sustainability is crucial. Insurance

cover provides vital risk mitigation strategies

to hunting outfitters and professional hunters,

protecting assets and business continuity, and in

so doing protecting livelihoods. “A major fire loss

or a liability claim can potentially ruin the lives and

futures of many people, from the professional

hunter, the trackers, the skinners, all the way

through to the farm kitchen staff,” said Visser.

Legislation in Namibia requires that hunting

outfitters have at least N$2.5 million public and

professional hunting liability and N$5 million

motor passengers’ liability. In order to obtain a

professional hunter (PH) licence, the certificate

of insurance must be submitted to the MET.

“Most hunters take out only the required limit,

which could prove problematic when a claim

occurs,” noted Aston.

This is where the advice of a good broker

proves invaluable.

A WORD FOR THE BROKER

Brokers need to have a clear

understanding and knowledge of the

potential risks associated with the hunting

operation. “If you want to be a broker

to this industry, make sure you spend

enough time with a professional hunter,

to fully understand what they do,”

advised Visser.

“The broker should understand liability

and negligence and have a good

knowledge of common law. When a claim

or potential claim arises, brokers must be

able to advise the professional hunter on

how to manage the emergency correctly.

Admitting negligence can jeopardise the

liability insurance cover,” added Visser. “If a

broker does not understand the full extent

of the hunting operation, some risks

may be overlooked – especially when

professional hunters work in remote locations and

even in other countries.”

Brokers explain uninsured risks to farmers and

professional hunters. “Insurers generally do not cover

unroadworthy vehicles. However, most hunting

outfits make use of unroadworthy vehicles while

driving on the farm. Brokers recognise this gap in

cover and negotiate appropriate cover with insurers,”

explained Aston.

One area in which the value of the advice given by

a broker is underscored is in the insurance of exotic

game species. Marsh places this insurance with Etana,

through Hollard Insurance Namibia. Head of Etana

Wildlife and Tourism, Joan Jackson, said that brokers

selling these products need training and expertise.

“This is a totally different industry to the normal

agri market, whether with livestock or commercial

business,” said Jackson.

She explained that insurance products need to grow

with the wildlife industry. “Generic products are

outdated and do not always suit the African markets.”

Animals have become very expensive, leaving

the insurance industry to find capacity, with

affordable rates and underwriting criteria

that benefits the farmer but also secures the

sustainability of the insurance industry. “The

biggest risk is cheap premiums that do not suit

the risks and underwriters or insurers who do

not understand the wildlife industry and the risk

factors. This is not a quick buck industry. This is

a niche market and only players that are there

to protect and support the industry should be

allowed to operate.”

With an industry that has as much positive impact

as this one, we tend to agree.

WILD CLAIMS

Etana had a claim where the buyer paid

R350 000 for a golden gemsbok and lost

the animal due to the capture procedures

by the seller in Namibia. The animal died

while in transit to the buyer’s location.

The seller claimed the buyer had received

the animal in good health, but the stress

factors manifested hours later. Etana paid

the claim and paid for the pre-loss vet fees

incurred to try and save the animal.

“Generic products are outdated and do not always suit the

African markets.”

10 riskAFRICA

premiums, while 82.8 per cent said they did not see

the importance of insurance.

The report cited a number of reasons for the low take-

up of livestock insurance, which included low levels of

education, lack of awareness of the insurance schemes,

poor rural infrastructure (making communication

difficult and limiting access to insurance), affordability,

degree of farmers’ risk aversion and the diversification

of farm enterprises.

With cost as a contributing factor to the low take-up,

the report concludes that insurers need to increase

awareness of the role of livestock insurance to farmers

and said that a combined effort was needed with

governments, civic society organisations and the private

sector. But how realistic is this notion?

The cover conundrum

The other problem that farmers face is that the cover

they require from major players is not always available.

There are a whole host of reasons for this but mainly

it’s because the insurer sees the risk as too high

and therefore will not provide the cover. Cover for

farmers’ assets, such as cars, tractors, homes, sheds,

plant and farming equipment, is generally offered but

cover for certain types of crop or natural catastrophes

is not so readily available.

• Insuring farmers

In 2009, the Department of Agriculture in

Namibia conducted a risk management study

where it questioned over 200 commercial and

communal cattle farmers, particularly those of the

Omaheke and Otjozondjupa regions.

The report cited natural disasters such as floods

and bush fires as having a major impact on

the management and financial viability of rural

properties and on animal welfare. But livestock

were also affected by man-made disasters such

as theft and arson. In Namibia, cattle farming is

the main agricultural production sector, according

to the report, with an annual estimated value

of N$900 million. In 2006, the total number of

cattle was estimated to be around 2.3 million,

according to the Meat Board of Namibia. With

cattle farming providing such a vital source of

income for Namibia, the department tried

to investigate the perceptions of risk and risk

management as well as the importance of

insurance for farmers.

The study found that 95.2 per cent of commercial and

98.2 per cent of communal farmers in the Omaheke

and Otjozondjupa regions had no insurance cover for

their livestock. It said that the farmers used non-farm

income and diversification of their farm activities as

a means of risk management. Riaan Louw, head of

Santam agriculture for South Africa, who was formerly

the CEO of Santam in Namibia, said he was aware of

farmers adopting their own risk management practices

to mitigate risk. “Farmers do spread their risk as well.

Some will rent farms in Namibia in different areas and

move their flock between the farms so the risk is not

so concentrated.”

Of those farmers who took part in the study, 26.2

per cent of commercial farmers revealed that they

cannot afford to pay insurance premiums. However,

there appeared to be a lack of awareness about the

importance of insurance as 27 per cent revealed

they did not see the importance of insuring livestock.

When communal farmers were posed the same

question, 17.2 per cent said they could not afford the

Is PPP the panacea?Farmers are underinsuring or forgoing

insurance all together when it comes

to certain risks in Africa. Insurers are

also reluctant to insure certain types

of risk. Public private partnerships are

often mooted as the answer to this

problem but what are the benefits of

adopting such schemes and have they

worked elsewhere?

By ANGELIqUE RUZICKA

11riskAFRICA

Louw admitted that there were risks that Santam

did not insure. “There are definitely perils that

we don’t insure such as bad farming habits. If

farmers do not undertake proper maintenance

then we do not insure that either,” he said. He

added that fruit could also not be insured against

insect infestation as this was seen as a risk that

farmers could prevent through the use of pesticides.

“We do insure farmers against acts of God but there

are ways a farmer can manage insect infestation.”

Insurance cover is priced on historical data and what

insurers predict will happen in the future. But some

markets are too small to offer certain types of cover.

While insurers do provide cover in countries such as

Namibia others, like South Africa, get offered more

variety as the market is bigger. According to Santam

there are around 3 500 commercial farmers in

Namibia, which is small fry compared to the 36

000 in South Africa. “We will price it [insurance

product] to make a profit or some return.

Farmers are spread out in Namibia and the risk

for the farmers differ. Farmers in the south tend

sheep and they want theft cover. They do not

want lightning insurance as it seldom rains there.

However, that’s expensive and we don’t provide

it. So the need and what is available do not always

correlate,” said Louw.

Louw added that in South Africa only 25 per cent of

farmers insure their crop. “There are a combination

of reasons: they don’t believe in insurance; they

don't consider it a risk for them; or they are

financially sound to take the risk on themselves, or

the cost of it,” he explained.

Seeking a solution

Farmers argue that the obvious solution is for

insurers to lower their premiums. Meanwhile,

insurers are reluctant to do so unless they get more

take-up from farmers. But even if insurers were to

suddenly reduce their premiums, the problem is that

there are still some risks that they are unwilling or

unable to cover for fear of losing business or going

bust under the strain of paying hefty claims.

Public private partnerships (PPP) are often mooted

as a solution to the problem of affordability and

adequate risk cover. However, when approached on

the subject, insurers are protective over the business

that they already do well in and provide general

cover for. “On asset insurance the market is well

developed and is affordable. It’s actually cheaper than

a personal or individual policy,” said Louw.

Others point out that a one-size-fits-all PPP scheme

would not work for Africa as a whole. “There is not

a single answer to it. you need to look at the risk

on a case-by-case basis. We have an agency that

specialises in insuring the farmer’s assets but not the

crop. At the same time we are involved in reinsuring

crop business. There are lots of factors that go into

it and I think each territory has to work out its own

solution,” said Achim Klennert, managing director of

Hannover Re Group Africa.

Areas where insurers are taking all the risk should

also be reviewed, said Klennert: “There is a lot more

space for PPP in general and not just in crop. The

earthquake in Haiti was devastating for that country

but it was almost a non-event for reinsurers. On the

other hand, the Japanese earthquake was a major

loss for every reinsurer in the world. So I think this

is where partnerships could play a bigger role than

what they are doing at the moment.”

Louw argues that farmers would benefit more from

PPP in areas where it is desperately needed such

as insuring crop. He points out that PPP schemes

are already in place in Europe and South America

and working well. Some insurers and reinsurers

have already engaged heavily with governments

in Europe and Asia to get PPP initiatives up and

running. Swiss Re has reported that China has

entered into a PPP scheme for its crop farmers.

The reinsurer is working with the Beijing Municipal

Government to provide reinsurance coverage for

catastrophe risks under China’s government-funded

agricultural insurance scheme.

Similar projects are also being promoted by the

reinsurer in Europe. In November last year, Swiss

Re, in co-operation with the Swiss Embassy to

Ukraine, held a seminar in Kiev to discuss the

advantages of PPP. The insurer said on its website

that the country is considered the potential

breadbasket of Europe and that 71 per cent of the

country’s total surface is agricultural land. Swiss Re

argued that the country could remarkably increase its

agricultural production and that its current yield per

hectare is still substantially below the average yield

in the EU.

It is arguments such as these that form the main

reason behind PPP schemes. It creates more

investment in the agricultural sector and more

certainty of sustainability in the practice. However,

there are plenty of obstacles and red tape to

overcome before most of Africa adopts PPP

strategies that work.

But the benefits appear to outweigh the

disadvantages and trouble of putting it all in place.

“If crop insurance were partly subsidised by

governments here in Africa not only will it make

insurance more affordable, but it would make the

farming of crops more sustainable. We have a

lot of farmers who leave the industry as they are

not financially capable of farming any more after a

drought or hail storm. It will secure food security if

the country will help upcoming farmers to survive

the bad seasons,” said Louw.

With more foreign direct investment ploughing into

Africa, particularly from Asia, the continent would

do well to investigate the benefits of PPP to increase

production and attract investors even further. “Africa

is the next best thing and countries like China and

Japan are buying up vast pieces of land. There are

different schemes being set up and they will need

insurance to make those sustainable. I think Africa

will show the fastest growth with regard to crop

insurance in the future,” said Louw.

He argued that Africa could enjoy similar if not the

same success that China has enjoyed. He pointed

out that two years ago China was number 17 in the

world when it came to raking in premium income

from crop insurance. But now the country stands at

number two. “I think Africa will head the same way.

There is a lot of good farmland not being used for

farming, but this will all depend on the skills and the

investments in the countries to make it sustainable,”

said Louw. If lessons in Europe and Asia are anything

to go by, it looks like a little push from the insurance

industry will go a long way to ensuring that such

initiatives take flight.

“If crop insurance were partly subsidised by governments here in Africa not only will it make

insurance more affordable, but it would make the farming of

crops more sustainable.”

“On asset insurance the market is well developed and is affordable.

It’s actually cheaper than a personal or individual policy”

• Covering construction

“If we do not have a license in a particular country, we are able to facilitate that business through our network of partners and joint ventures across the

continent.”

12 riskAFRICA

for growth

13riskAFRICA

A construction boom is sweeping the continent of Africa. Despite a global economic downturn, most of the top growing

economies are African; and sub-Saharan Africa comes second only to emerging Asia for economic growth prospects from 2011 to 2020.

This focus on infrastructure gives rise to the need for insurance solutions that will help protect and nurture the African growth story. There has never been a more critical time for brokers and insurers to be innovative and deliver knowledgeable guidance and advice for contemporary Africa.

Knowledge for now “The advice we and our brokers give to clients in the specialist fields of engineering and construction could mean the difference to that company’s very survival. We need to help spot and insure against risks that are often not identified by inexperienced insurers or brokers and at the same time develop relationships built on trust,” said Jim Connolly, managing director of engineering specialist, Scintilla.

Scintilla is a partner of Hollard, which has established a footprint in the SADC region over the past 10 years, with the vision to develop local licenses and businesses in Africa. The insurer has developed local players in Namibia, Botswana, Mozambique and Zambia. These businesses are built on the premise of building local expertise and capabilities and developing key, long-term partnerships in these local markets.

In partnership with Scintilla, Hollard has tapped into the growing infrastructure and construction sector in these developing economies. “Hollard offers significant capacity and expertise in the construction

space. Together with Scintilla, our unique model allows us to offer a one-stop shop and seamless solution for all engineering and related business – whether you are in Johannesburg or Namibia,” said Johan Barnard, CEO of Hollard Namibia. “If we do not have a license in a particular country, we are able to facilitate that business through our network of partners and joint ventures across the continent.”

Africa is often referred to as not for sissies and the continent certainly presents some unique challenges, from transport difficulties to traditions and customs that need to be carefully navigated. “We have to be dynamic and nimble in the way we deal with challenges in Africa, some of which are totally different from any experienced in First World countries,” noted Connolly.

Not to mention the challenges connected to insuring construction projects themselves. This is one sector in which you should expect the unexpected. Scintilla experienced a recent claim in South Africa where very high winds toppled a crane into one of the country’s stadiums. This damaged the crane as well as the surrounding construction work. This type of high risk environment stresses the need for a good broker and tailored insurance policy.

Consider the contractContractors’ plant insurance provides indemnity in respect of accidental, physical loss or damage to the insured item. Some of the risks that can be insured against include accident damage, fire damage and theft.

According to Connolly, under-insurance is one of the most common disputes that arise within contractors’ plant insurance losses. “It is the plant owner’s responsibility to provide the insurance

broker with the correct sum insured when purchasing the cover. The pricing is based on either the new replacement value or market value,” said Connolly.

“Unlike motor insurance, it is not an easy exercise to obtain the correct values for the sum insured and this often leads to disputes at claim settlement stage.” This leaves the insured feeling frustrated and short-changed. “Obtaining the correct values can be cumbersome, but most original equipment manufacturers will be able to assist with the correct values, or alternatively, loss adjusters can be appointed at an additional cost.” Crucially, discounts received at the time of purchase must be worked back into the sum insured, so that the purchase price reflects the listed price from the original equipment manufacturer, free of all discounts.

The fluctuation in the exchange rate is something else to consider. “A prudent plant owner and insurance broker will periodically adjust the values of the sum insured, especially when there is movement in the exchange rate,” said Connolly. The cost to import the item, including freight duties, custom duties and any other additional taxes must be included in the sum insured, as well as the erection cost of the item.

When the insurance policy is renewed, this exercise must be repeated in order to provide the most accurate details. Connolly advised discussing various claims scenarios with your client in order to ascertain if the correct insurance cover is in place.

With infrastructure projects growing at the rate they are in Africa, there is no better time for a good broker to show his true colours.

14 riskAFRICA

•Broker loyalty

The relationship between broker and insurer is necessarily mutually beneficial. Insurers want commitment and the certainty that you’ll still be there selling their products tomorrow. You, as broker, want to know that you’re taken care of and can count on your insurer. RISKAFRICA goes in search of the answer to how broker loyalty can be fostered and speaks to Santam Namibia’s CEO, Franco Feris, for his thoughts on the matter.

L is for Loyalty

“Our brand position of Insurance, good and proper also resonates

well with both brokers and clients.”

15riskAFRICA

RA = RISKAFRICA

FF = Franco Feris, CEO, Santam

Namibia

RA: How many brokers does

Santam have in Namibia?

FF: Currently, we have 68 brokers

and 44 agents doing business with us

in Namibia.

RA: What is your strategy to

maintain broker loyalty? Do you

offer incentives, an attractive

commission structure, exclusivity or a

combination of these elements?

FF: To retain and strengthen broker

loyalty, Santam Namibia provides our

brokers with the following:

• Agoodcommissionstructure

in terms of legislation. Santam

promotes compliance at all times.

• Ongoingtrainingandforums.We

provide product and wording

training on a continuous basis to

empower our brokers.

• Comprehensivemarketing.

Santam Namibia’s channel of

operation is almost exclusively via

the brokers, so in all our marketing

efforts we promote the broker

value chain.

• Greatservice.Santampromotes

and strives to maintain an open

door policy and quick services.

• Goodclaimsservice.Our

reputation for and promotion of

fair claims settlement goes a long

way to improving broker loyalty.

• BrokerAwards.Werecogniseand

appreciate the value our brokers

add to our business.

RA: What do you think gives

Santam the advantage over your

competitors when it comes to

maintaining broker loyalty?

FF: There are two main factors that

are currently giving Santam Namibia

a competitive advantage. Our

dedication to training our brokers

and providing a forum environment

for discussion empowers our

brokers to provide improved service

to clients. The strength of our

brand, skills within the group and

the underwriting agencies that are

connected to the brand are also a

strong drawcard.

RA: What role do your Broker

Awards play in encouraging Santam’s

brokers to perform and remain loyal

to the company?

FF: The awards act as a motivator

to channel growth while underwriting

risk profitably. It gives brokers

and groups in different areas the

opportunity to compete within their

business enviroment, which means

that they are exposed to different

ways of doing business and putting

customers first.

Roles are fluid in Namibia. your client

may be a bank manager by day and

a wildlife trophy hunter and guide by

night. In this environment, keeping

up with legislation, developments in

the industry and providing support

to brokers is a key factor to fostering

happy broker relationships and

creating brand loyalty. For a broker

it is more valuable in the long run

to get the deal every time than

having limited success at a higher

commission rate. Creating a sense

of pride and appreciation of the

work that brokers do is another

important aspect of bringing out the

best in brokers, and Santam’s Broker

Awards show an understanding of

this principle, too.

Herein lies the key to fostering and

maintaining broker loyalty. Perhaps it

is time that your insurer takes a few

feathers out of this hat to improve

broker retention and also in the hope

of increasing their market share.

Santam’s long-standing success in

South Africa and Namibia can be

attributed to its innovative approach

to its market. For Santam Namibia,

the future holds a shift in focus from

traditional markets to products

that also serve niche markets and

lower income groups, to ensure the

company can maintain its crown as

Namibia’s leading insurer and can

realise its growth potential even

during times of global economic

downturn.

With a market share of approximately 30 per cent, Santam is the biggest short-term insurer in South Africa and Namibia.

Active for more than 50 years in Namibia and more than 80 years in South Africa, one may be tempted to say that the

company has perfected the broker-based insurance model. With 95 per cent of its business coming from brokers, Santam

has ensured that it has a network of more than 60 offices in South Africa and Namibia to support approximately 7 500

intermediaries. For the past four consecutive years, Santam Namibia received the PMR award for the best short-term insurer

in Namibia, which is based on market surveys among business partners and brokers. In March, Santam Namibia held its annual

Broker Awards ceremony (read more about the winners on page …), which rewards and acknowledges brokers who excel.

A good broker is one of the most valuable assets for any insurer, but the nature of the work dictates that a broker could work

for anyone, anywhere, and as such it is very easy for a broker to jump ship in search of better incentives elsewhere. So what

do insurers think are the key to keeping brokers happy and in their camp and how successful is this recipe?

A good broker is one of the most valuable assets

for any insurer.

16 riskAFRICA

you’ve heard of short-term insurance cover for the property and vehicles of high net worth individuals,

but what about a new kind of medical cover targeting this niche? In 2008, Namibia’s Prosperity Lifecare

Insurance launched the ExecuMed product range as a health insurance product rather than a traditional

medical aid. According to managing director of the Prosperity Group, Kobus Struwig, the ExecuMed

products have performed well over the past three years and recently underwent some changes to be even

more relevant to the market it serves.

Although the Prosperity Group has strategic partnerships and activities in numerous African countries

(including Botswana, Lesotho and South Africa), ExecuMed is available only in Namibia. Its target market,

since inception, has been affluent individuals and their families in search of cover for their medical needs

that is progressive and unlimited in the traditional sense in which conventional medical aid cover is

limited. With no tariff restrictions, no co-payments or levies, no sub-limits on associate benefits,

N$2 million (R2 million) per life for hospitalisation a year and N$40 000 (R40 000) per family for day-

to-day medical costs, Prosperity has designed a product rich in benefits that has enjoyed good uptake

in the niche market it is targeting. A unique feature of the ExecuMed line is cover for cosmetic surgery,

procedures that have never been covered by even the most progressive and expensive medical aids.

Health insurance gets a facelift

Product focus ExecuMed

N$2 million (R2 million) per life for hospitalisation

a year and N$40 000 (R40 000) per family for

day-to-day medical costs, Prosperity has designed

a product rich in benefits that has enjoyed good

uptake in the niche market it is targeting.

• New medical products

Experience the new ExecuMed

The most striking feature of the ExecuMed range is its simplicity in offering a healthcare plan that provides all the cover of medical insurance without the hassle of co-payments, levies limitations or sub-limit-constraints.

Apart from the impressive core benefits i.e hospital benefits and out of hospital cove, ExecuMed further provides additional peace of mind features through the Rescue Me Medical Evacuation Plan and the Travel Care Assistance programme. This programme provides financial assistance for travel expenses such as flight costs, hotel accommodation, fuel expenses, rentals and food - in - curred to obtain medical treatment not available within the town of residence.

Benefit Snapshot

• N$ 2 million per life for hospitalisation per annum• N$ 40 000 per family for day-to-day / out of hospital medical cost per annum• No co-payments or levies on medical services• No sub-limits on associate benefits.• Pay at maximum cost with no tariff restriction• Gym rebate, Rescue Me Emergency Evacuation and Travel Care• Cosmetic Surgery

To experience ExecuMed, call 061 2999 393 or visit www.execumed.com.na

Execumed Advert.indd 1 14/3/12 15:11:52

18 riskAFRICA

“The ExecuMed products have performed well over the past three

years and recently underwent some changes to be even more

relevant to the market it serves.”

Although the ExecuMed product is not a medical aid in the classic sense,

it shares many features and benefits of medical aid cover that customers

have come to know and recognise:

• MRIandCTscansinhospitalarecoveredupto100percentofthe

cost per person.

• GPs,specialists,radiologyandpathologyservicesarecoveredat100

per cent of cost.

• Directpaymentagreementswithcertainspecialistsmeanthat

approved procedures are covered in full at lower costs.

• Emergencyandplannedhospitaladmissions(subjecttoauthorisation)

are covered with an overall limit of N$2 million per person.

• In-hospitalmedicalservices(suchashospitalaccommodation,theatre

and ward fees, surgeons and anaesthetists, prosthesis, oncology,

caesareans, casualty or outpatient emergency treatment, etc.) have

no sub-limits.

• TheN$40000ayearperfamilyday-to-daybenefitcovers

consultations and specialist visits, acute and chronic medication,

auxiliary services, outpatient medical services and specialised and

conservative dentistry.

Besides the cover for cosmetic surgery, another new feature

unique to ExecuMed is an optional Extended Day Cover Savings

Plan. This optional extra provides additional cover for routine

day-to-day (out of hospital) medical expenses and the level of

contributions is determined by the member, with no prescribed

limits. Any unused funds are accumulated annually and rolled

over to the next benefit year, and similarly to any normal savings

account, the funds remain the member’s and will be refunded

on termination of membership. Other benefits include a

comprehensive range of medical services cover, including:

• Atravelassistancebenefitprovidingfinancialassistancefortravel

expenses if medical treatment is not available in the family’s town of

residence in or outside of Namibia.

• Agymrebateprogrammethatreimbursesmembers100percent

of the cost of participating at gyms that are part of the programme,

including Virgin Active, Curves, Power Zone Gym, and others.

• A24-houremergencyandhealthsupportlineprovidingadviceand

support in times of need.

• ASADCemergencybenefitthatprovidesemergencyevacuationand

repatriation in Namibia and from SADC countries to Namibia or South

Africa when necessary. This benefit also includes guaranteed admission

to a private hospital in the event of an emergency when travelling or

working outside of Namibia and transportation of mortal remains from

place of death to the place of burial in Namibia.

• InternationalmedicalemergencycoverofuptoN$10millionper

person.

• Acontributionprotectorbenefitwhichensurescontinuationof

contribution payments for three months after death to ensure that his

or her dependents are taken care of in a time of transition.

• TheHospicashbenefitwhichprovidesfinancialassistanceofupto

N$12 500 a person when hospitalised at specific daily rates.

Prosperity markets ExecuMed as “a new benchmark in healthcare” and it

marks a significant departure from the way medical aid programmes usually

function. It is a common misconception that affluent individuals do not care

about value for money and a commitment to designing creative and simple

solutions that are flexible enough to meet the needs of its target market is an

attitude which has stood Prosperity in good stead in recent years, based on

the reception ExecuMed has received. This product offers comprehensive

medical cover for your high net worth clients and their families with

numerous value-added features to ensure that your customers know their

needs will be met from one day to the next and in times of crisis.

*For specified cosmetic surgery (defined procedures subject to approval), a

member must have been on the ExecuMed product for one year and must

remain on this product for another year after the surgery. Only qualified

and accredited cosmetic service providers may be used and a procedure

contract must be signed with the insurer. For detailed terms and conditions,

please contact a Prosperity branch or visit www.execumed.com.na.

Struwig explained, “Prosperity has been looking at the trends of healthcare in Namibia

and the needs of the market for years, and noticed that there was a growing need for

coverage of cosmetic surgery due to the modern lifestyle of specifically high-income

groups.” ExecuMed has now been developed and adapted to address that need. A 12-

month waiting period does apply in order to claim for cosmetic surgery*, after which 95

per cent of the cost of a procedure costing up to N$5 000 is covered, or 75 per cent, if

the cost of the procedure is in excess of N$5 000.

20 riskAFRICA

Is distributing insurance products via mobile phone the future of insurance in Africa? From the westernised point of view it seems hard to imagine anyone buying anything – not to mention a complex financial product – via their mobile phone. But then again, in Africa, the rules just don’t seem to apply.

Africa has over a billion potential consumers, most of

whom don’t have access to services and goods. And

apparently, there is a demand for insurance products;

it’s simply a case of not being able to purchase it

through the traditional channels. Most businesses will

find it costly and time consuming – though worthwhile

– to gain access to this growing market in coming years

as African economies boom and development spreads

rapidly. Mobile technology in recent years proved to

be a very effective means of opening up the African

market. While less than 10 per cent of Africans have

access to the Internet, more than half – and counting –

have a mobile phone.

Mobile phones have been used to successfully sell and

administrate banking and other financial products. So it

was simply a matter of time before someone started

selling insurance using mobile phone technology.

There are several large case studies in Africa and

other developing regions of the world. Some are

very successful, others less so. Which is why when

RISKAFRICA heard Trustco Group International (TGI)

was launching a micro insurance product via mobile

phone locally, we had to find out about the nuts

and bolts of the service. We asked Herman Smit, a

research associate at non-profit financial services

and microfinance think tank, the Centre for Financial

Regulation and Inclusion (Cenfri), to shed some

light on the subject of distributing insurance through

mobile technology.

“There are various business models, but most of

them involve an insurer or distributor partner initiating

contact with the client,” Smit said. “Popular forms of

insurance products are those embedded into other

products or services and those that are actively sold.

Those that are sold are typically available through

unstructured supplementary service data (USSD),

technology that collects premium from airtime, or a

type scratch card that is purchased to allow one to

register for the product or service.”

Metropolitan, in South Africa’s recent endeavour to

sell personal accident and travel cover to the lower

income market provide an example of using USSD

technology to initiate contact, as well as administrate

and manage policy details. It involved an SMS-based

marketing campaign inviting customers to reply via

SMS to buy cover and manage their policy details,

while premiums were collected from their airtime.

“A completely different example is the MaxDJ micro

health initiative piloted in India. It saw agents with

mobile devices actively market health insurance to

the public. The agents would capture customers’

details on the GSM (Global System for Mobile

Communications) device and sign policies there and

then,” Smit said.

“MTN and Tigo (Millicom International) has had

success selling embedded products in Ghana, but

most people would be more familiar with Kilimo

Salama in Kenya. The globally publicised initiative is a

form of agricultural input insurance. When a farmer

purchases fertiliser, the dealer captures their details via

a mobile phone provided by Safaricom (a partner in

the initiative) and scans the barcode of the purchased

product. Weather stations determine when there

is a drought and affected farmers get an immediate

payment into their accounts from insurer UAP

Insurance. There’s no claims process, everything is

automated.”

Smit maintained that these initiatives are aimed at the

lower income market, but that the scale and uptake

of the product is what makes or breaks the project.

For this reason, compulsory or embedded insurance

products (often created with affinity agreements

between insurers and other industry) generally fare

better than those that are actively sold.

We spoke to TGI’s public relations and media

manager for Namibia, Jaco Klynsmith.

Why do you believe distributing through mobile is the way forward for micro insurance in Africa? Micro insurance features little or no premiums and,

in some cases, low caps and coverage. Micro refers

to the small financial transaction that each policy

22118_NAMIBIA "Good And Proper" 130x175.indd 1 2011/10/07 1:49 PM

generates. For micro insurance to be truly successful,

a large number of people need to be insured. As a

result of this large base, the risk of adverse selection is

greatly diminished, allowing you to offer the product

at a lower price. The African Mobile Factbook by

HASH stated that mobile penetration in Africa was

already at over 30 per cent in 2007, with projections

of up to 100 per cent in certain territories by the year

2012. So looking at these stats, it’s obvious to see that

the best and swiftest way to reach the mass market

on our continent is through mobile phones.

Just what is selling insurance through mobile technology?Selling/purchasing insurance through a mobile device

is simpler, faster and mostly paperless. Details such

as change of beneficiary can easily be updated via the

insured person’s mobile phone. The premiums may

be paid by the mobile operator who subtracts it from

the customer’s airtime and pays it to the underwriting

company. Another method of payment is through a

mobile money/banking platform. Trustco Mobile is proud

to say that we can offer this platform to our clients.

You’ve launched similar products elsewhere, why do you think this distribution channel worked there? The life insurance penetration in two other African

countries was minimal, while most of the population

owned a mobile phone. In one of these, large

portions of the population lost their life savings due

to hyper-inflation. They needed a way to provide for

their dependants, should they pass away. Since our

product was offered at no charge, mobile subscribers

gave in to that little economist lurking in all of us and

attempted to obtain the highest level of cover.

Is the situation similar in Namibia, i.e. do you think your product will work for the same reasons, or for a different reason? The only similarity between Namibia and some

other African nations is the ratio of insurance and

mobile phone penetration. The Namibian economy

is currently stable and there is no prediction of

circumstances which would cause hyper-inflation in

the near future. The success of this product depends

on how the service is offered to consumers. Where

Trustco Mobile has the edge on its competitors is that

we have managed to come up with a model which

offers life insurance to the subscribers of the mobile

operator at no additional cost. In simple terms, we

offer the operator’s clients something for nothing.

How is your target client different from the traditional insurance consumer? Traditional insurance products rely on timeous fixed

premium collections, while clients in turn need a

relatively high fixed income to be able to afford

the payments. Penetration is also limited to urban

areas. The traditional form of insurance is designed

for the top half of a populace. The ease, cost and

penetration level that results from offering insurance

through mobile phones makes it very easy to reach

the majority of the market and therefore includes

clients from all walks of life.

What are the advantages and disadvantages of using this method of distribution? The key advantage of using this method of

distribution is the speed at which you are able to

communicate your product to the masses. The

biggest disadvantage is that there’s no face-to-face

interaction, so you need the underwriting capacity

and strong fraud detection software to avoid

fraudulent claims.

Do you think it is the future of insurance in Africa?Trustco truly believes that this is the future of

insurance – not just in Africa. Fortunately and

unfortunately, like any technology, cellphones will

one day be replaced by the next big thing. No-one

can say whether it’s going to be in the next five

or 20 years. But until then, I think there are a few

people who would question that the future of

marketing and distribution of insurance products is

via mobile phones.

22 riskAFRICA

• Investments

– finding capital growth in a deflated investment environment

By Elvorne Palmer

Depressed; four months into the year and this is the word most commentators use to describe the investment environment, globally and locally. Europe seems to be on track toward solving the Greek debt issue, while China averted sinking into a recession, but all is not well at the southern tip of Africa.

Dig deep

Business confidence in Namibia declined earlier this year,

as did imports due to dwindling demand, while investment

remains subdued. Growth is expected to be around 4.4

per cent here though, which is more than can be said for

neighbouring South Africa where growth is slowing as inflation

threatens to spike in the coming months. It seems that finding

meaningful capital appreciation is becoming a tricky game.

RISKAFRICA spoke to the CEO of Namibia’s largest and only

NSE listed asset manager, Namibias Asset Management, Eino

Emvula, to find out where investors should be placing their

“In our view, equities remain the preferred asset class in

such an environment, although the upside is not huge.”

capital. But we wanted a duel-view perspective.

Thus for the South African view, we spoke to Marriot

Asset Management, who maintains that focusing on

reliable income streams when constructing a portfolio

will be vital for the remainder of the year.

EINO EMVULA, CEO OF NAMIBIA ASSET MANAGEMENT

What factors are affecting current markets locally and internationally?

Globally, not many countries’ balance sheets are in

good shape. Greece is one. Despite having reached

a compromise with creditors (mainly banks that will

have to write off 53.5 per cent of its debt), austerity

measures will be painful and there’s no guarantee they

will work. Are European banks lending at the rate at

which their economies are being stimulated? Or are

these economies starved of capital? Furthermore,

the level of commodity prices and their impact on

commodity-producing countries is a concern for

long-term investors. Rising inflation along with stagnant

growth in the world’s major economies is clearly

another concern for investors.

How do these affect our investment choices?

In a lower growth/high inflation environment, achieving

inflation-beating returns is a challenge. In our view,

equities remain the preferred asset class in such an

environment, although the upside is not huge. Our bias

also remains towards global equities due to valuation.

Global equities are attractively priced with many blue

chip companies trading on 12-14 PE multiples and

three to four per cent dividend yields. The JSE on the

other hand is looking fairly priced and not much liquidity

is available on the NSX. An inflation-linked bond (ILB)

is another asset class in which we see value, given our

negative outlook on inflation, but these instruments are

not available in Namibia. Perhaps that is another asset

class that corporations and the government can look at

issuing in the future.

There has been a marked drive to get Namibians to invest locally rather than offshore, is this happening at the moment?

That drive is a bit historic. Over the years (certainly

the past two years), the approach has been balanced

in terms of increasing the offshore allowance for non-

discretionary savings to a maximum of 35 per cent,

with an additional five per cent allocation to Africa.

The minimum investment in the local investment

instruments (including primary listed Namibian stocks

and dual listed stocks) remains 35 per cent. While the

minimum allocation to local instruments is a noble

regulation, it has posed some practical challenges to

investors which have resulted in banks being cash-flush

due to the limited investment opportunities on the local

listed space.

23riskAFRICA

In your opinion, what are the pros and cons of investing locally; and offshore?

The negatives with regard to investing locally are

more structural than anything else – too much

money chasing after a few investment opportunities,

particularly in the listed space. This has the potential

to inflate investment assets way beyond their

intrinsic values and, as a result, create bubbles. On

the flip side this scenario should be encouraging to

businesses with growth potential and ambitions as

well as those that are in need of capital. We believe

there are a few quality Namibian businesses that

could be listed, but whether or not they need to list

remains a question.

There are good reasons to be invested offshore.

A number of global equities have de-rated over

the past 10 years and currently offer good value.

In addition, a number of these offshore companies

are geographically diversified both from an

earnings and currency perspective, resulting in a

balanced and stable earnings stream.

What are the best investment options for someone wanting to invest locally?

In terms of listed investment options, some

local equities (seven stocks) present good

opportunities. Stocks such as FNB Namibia and

Bidvest offer good value. FNB trades on a 6.7 PE

multiple and a good dividend yield of 6 per cent.

Bidvest trades on a seven PE multiple and similar

dividend yield. Oryx too, offers good value at

current levels.

What are the best investment options in Africa?

Companies exposed to the emerging African

consumer market are of most interest and

some world-class businesses can be bought on

very attractive ratings in the brewing, cement,

telecoms and food sectors in countries such as

Nigeria, Egypt, Kenya and Ghana.

What are the best options internationally?

Like all our investment decisions, allocation to

international markets is valuation based. We

do find good value in some developed market

equities. These include companies such as

Microsoft, Vodafone and others that trade on

undemanding valuations. Emerging market

equities in countries such as India and Brazil also

offer good value.

MARRIOT ASSET MANAGEMENT, SOUTH AFRICA

2011 saw household consumption slow while inflation increased, what will we see globally in 2012?

It is set to be another trying year for investors.

Over-indebtedness of many First World

economies has forced authorities in these

regions to reduce fiscal deficits by lowering

spending and increasing taxes (austerity

measures). This cutback in spending is expected

to be a drag on global economic growth for

many years to come. A debt-to-GDP ratio of

60 per cent is often noted as a prudent limit for

developed countries. But the US, England and

France’s percentage are currently in the 90-

somethings, while Italy’s debt to GDP remains

128 per cent.

What will the impact be in South Africa?

Despite a slowing economy, local inflation is set

to continue rising as South Africa is yet to feel the

full impact of a weaker Rand. Almost one-third

of South Africa’s expenses consist of imports.

Thus the Rand’s 22 per cent depreciation against

the US Dollar during 2011 will exert significant

upward pressure on inflation in the months ahead

as import costs rise.

An environment characterised by rising inflation

and subdued dividend growth suggests that the

current low dividend yields of many South African

asset classes cannot be justified. Internationally,

First World markets are offering investors

substantially better value.

Where should we be investing in South Africa in 2012?

We continue to favour inflation-linked SA

bonds over fixed interest bonds due to their

relatively attractive real yields and inflation-

hedged income. Based on our current medium

term inflation estimate of at least seven per

cent per annum, the real returns on inflation-

linked bonds are higher.

Administered prices continue to escalate well

ahead of inflation and their impact on property

expenses is starting to significantly subdue the

income growth prospects of SA listed property.

As a result of subdued property distribution

growth prospects, investors should be

compensated with higher yields than are

currently available in the market.

SA Money Market instruments could be a safe

way of preserving capital. Despite rising inflation,

cash interest rates during 2011 remained

unchanged. The outlook for interest rates for the

year ahead is uncertain as it remains unclear to

what extent the governor of the Reserve Bank,

Gill Marcus, will favour stimulating economic

growth over combating inflation.

Then there are SA listed equities. Although

dividends generated by South African companies

increased by approximately 31 per cent during

the course of 2011, the average dividend growth

since 2008 has been approximately -1 per cent.

This recovery in dividends, coupled with

minimal share price appreciation has resulted

in the dividend yields of South African equities

increasing from 2.2 per cent at the beginning of

2011 to 2.9 per cent today. Despite this, local

equity yields in general remain well below their

long-term historic averages. To justify current

valuations, South African companies must

continue to produce above-average dividend

growth, but this appears highly unlikely given

slowing global economic growth and a strained

SA consumer.

Internationally, real estate continues to offer

investors fair yields with inflation-hedged

income growth prospects. While First World

large cap stocks continue to offer good value.

Dividend yields of some of the largest and most

recognisable companies in the world remain well

above their long-term historic averages, as well

as being higher than international bond yields,

cash interest rates and inflation. It should be

noted that these First World large cap equities

operate globally and derive a substantial portion

of their revenues from emerging markets. Take

for example, British American Tobacco and

Unilever with over 40 per cent emerging market

exposure; Proctor & Gamble are at 34 per cent;

and Vodafone close behind with 29 per cent.

“There are good reasons to be invested offshore. A number of global equities

have de-rated over the past 10 years and currently offer good value.”

24 riskAFRICA

Show me the money

According to the International Monetary Fund

(IMF), seven out of the 10 fastest-growing

economies for 2011 to 2015 will be African.

With growth rates well above five per

cent, countries on the list include Ethiopia,

Mozambique, Tanzania, Congo, Ghana,

Zambia and Nigeria. Africa has an ever-

improving business environment and more

people of working capacity than both India

and China. The possibilities are enormous.

yet despite being ripe for investment,

Africa presents a complex investment

case and the continent faces serious

investment challenges.

overcoming obStacleS

Five key issues affecting accelerated growth,

development and investment attractiveness

were consistently raised at the SGF.

While presenting barriers to the African

growth story, these challenges highlight

opportunities, too.

1. Perceptions that Africa is inherently corrupt

While corruption remains a key challenge

across the continent, governor of the

Central Bank of Nigeria, Sanusi L Sanusi,

described how endemic corruption in the

country’s financial sector has been rooted

out. What other government criminally

prosecuted CEOs of leading banks in

the wake of the global economic crisis?

Nevertheless, simply the perception

that Africa is corrupt is enough to squash

investor confidence.

2. Regional integration

Breaking down barriers to intra-African

trade and greater regulatory harmonisation

will create larger markets and boost growth

and development. South African Deputy

President Kgalema Motlanthe spoke of

his government’s commitment to the

implementation of a tripartite free trade

area, combining 26 countries and creating a

market of up to 600 million people.

By Hanna Barry

“Rethinking product design is only one of many elements required to

ensure a successful growth strategy in Africa.”

Why AfRICA?Africa is alive and well and ready for growth. This was the message at Ernst & Young’s Strategic Growth Forum (SGF) Africa in March. The forum saw business, entrepreneurial and government leaders from around the world gather in Cape Town, South Africa to share ideas and insights on how to unlock value in Africa. Why all this excitement about Africa’s investment potential? The bottom line, of course.

By Hanna Barry

• Growth in Africa

25riskAFRICA

Approaching Africa from a regional perspective

will yield greater return on investments and

avoid the danger of markets becoming too

small and fragmented. For example, while the

Kenyan market comprises 40 million consumers,

this number increases to 110 million when the

whole East Africa region is considered.

3. Africa’s infrastructure deficit

A major constraint to doing business, weak

infrastructure and the financing needed to tackle

it, provide both challenge and opportunity. A

study of infrastructure across 24 sub-Saharan

countries by the African Development Bank,

estimates that US$93 billion (N$708.5 billion)

will be needed annually over the next decade to

develop the infrastructure required for Africa to

realise its true economic potential. This will not

be funded by government alone. Donor funds,

the private sector, pension funds and private

equity players all have a role to play.

4. Unlocking human capital

Education, skills development, job creation

and poverty reduction remain critical long-

term challenges. But there are also short-

term opportunities, such as reconnecting

the diaspora and removing barriers to the

mobility of African professional talent across

the continent.

A strong talent base is vital. Highly successful

alcohol beverage company, Brandhouse, takes

in graduates every year across its businesses

to build a pipeline of young talent into the

company. It also looks to the diaspora and

managing director, Gerald Mahinda, said that

he has quite literally gone to Europe and

the United States to find Africans working

elsewhere and offer them job opportunities to

bring skills back into Africa.

5. Relationship between government and business

Finally, businesses are a key partner in enabling

sustainable economic and social development

in Africa. African governments are making

progress towards creating more business-

friendly environments, but more can be done.

Reported figures reveal that it is up to 40 per

cent more expensive to do business in Africa

than in other emerging markets. In spite

of this, businesses are still making profits.

Nevertheless, red tape and bureaucracy stops

the growth of SMMEs, which are the major

job creators. With these challenges in mind,

companies that have effectively grabbed hold

of the opportunities which Africa nonetheless

offers shared some insights into their success.

DreSSeD for SucceSS

A young and swiftly growing consumer

base, coupled with natural resources, rapid

urbanisation and a deepening financial services

sector, makes Africa good for business.

Managing director of DHL sub-Saharan Africa,

Charles Brewer, noted that over 34 years, DHL

businesses have consistently delivered solid

growth and returns on investment in all 51 African

countries. DHL’s success story is one of many. But

how exactly have the DHLs, Standard Banks and

Shoprites of this world done so well?

General manager of Engen’s international

business division, Wayne Hartman, outlined four

Ps to investing successfully in Africa: persistence,

patience, people and a portfolio approach.

Securing returns on investment in Africa does

not happen overnight (you need to be in it for

the long haul) and is best done through a broad

range of investments over a wider area. The

people who form part of your business ventures

are equally vital; both your internal team and

external stakeholders.

The people in the communities in which

you operate are also a crucial part of your

business operation. In a panel discussion on the

socioeconomic impact of private investment in

Africa, CEO of the Investment Climate Facility for

Africa, Omar Issa, said that businesses will operate

harmoniously if the community they operate

in has bought into the vision of the business.

Therefore, it’s important for businesses to find

out what the community’s priorities are and take

these onboard.

Making social imperatives a core part of your

business function, also captured as doing good

by doing good business, was a recurring theme

at the SGF. For example, sourcing locally not

only reduces business costs, but also empowers

the local community. In order to have this kind

of positive impact while successfully growing

a business, investors will need to know their

consumers and markets much better than before.

Know the nuanceS

Chief operating officer at Old Mutual African

Operations, Grant Pote, highlighted the

importance of good market research to

understand the particularities of the countries

and cultures in which your business is seeking

out growth. For example, in some countries it

is not acceptable to talk openly about death,

which makes selling funeral products very

difficult. But people still have a need for formal

savings products and financial security in these

countries. “It’s about how you package the

solution, rather than saying that the consumer

doesn’t require that solution,” noted Pote.

He added that often consumers need to

be educated about the product, referring

specifically to financial services products,

before it can be sold to them. But getting to

the heart of what people need and want and

incorporating this into your product designs and

benefits is key.

Ernst & young consumer products leader for

Africa, Derek Engelbrecht, suggested considering

the following when designing products for the

African market: moving from selling to rental

models; developing single products that will

have many users and many uses; employing

pay-as-you-consume models; and fundamentally

addressing affordability by simplifying complex

products and unpacking the various elements

within them. Rethinking product design is only

one of many elements required to ensure a

successful growth strategy in Africa.

While the growth potential is staggering, the

challenges are real. But one thing is certain: It’s

time for Africa.

“A strong talent base is vital. Highly successful alcohol beverage

company, Brandhouse, takes in graduates every year across its businesses to build a pipeline of

young talent into their business.”

“The people who form part of your business ventures are equally vital; both your internal team and

external stakeholders.”Why AfRICA?

26 riskAFRICA

Reinsurance news round-up

• Reinsurance

“We have made a small profit in an unusually difficult year. Some key rates are rising; we are employing

some brilliant talent; we have fledgling businesses poised for growth and profit; and our mature businesses

have small market shares and enormous opportunities.

27riskAFRICA

QBE to combine its reinsurance operationsqBE is making moves to combine its worldwide reinsurance operations under a single management team and unified brand. The new structure, qBE Re, will bring together Syndicate 566, qBE Re Europe, Secura NV and qBE Re Americas. Gross written premiums will amount to $1.5 billion which will include the property, casualty and speciality lines portfolios. The business will be headed up by European chief of underwriting officer, Jonathan Parry, who will be appointed chief underwriting officer of qBE Re.

Scor announces €330 million profit Scor reported a €330 million profit and a rise of 13.6 per cent in gross written premiums to €7.6 billion. Shareholders’ equity was up to €4 410 million at the end of 2011, with book value per share at €23.83. It also reported a 3.7 per cent return on invested assets despite a challenging economic and financial environment. The Group said it was able to seize growth opportunities, both internally driven, due to its strong franchise and expertise and through the acquisition of Transamerica Re. Denis Kessler, chairman and CEO of SCOR, said: “The resilience of SCOR’s business model has once again been proven in 2011 by its capacity to combine profitability, growth and solvency in the context of an exceptional accumulation of natural catastrophes and financial market stresses. Catastrophes such as the Japan earthquake and the Thai floods have shown the efficiency of the robust capital shield policy that the Group has put into place, while our prudent asset allocation has protected us from most of the effects of the turmoil in the markets, and notably from the Eurozone sovereign debt crisis.”

Lloyd’s underwriter’s evidence helps to convict StanfordUnderwriters from Lloyd’s were able to help prove that Allen Stanford “knowingly committed acts of money laundering” to the

extent that he was unable to claim under his $100 million directors’ and officers’ policy. A federal jury in Houston convicted Stanford of a $7 billion Ponzi fraud which involved him creating bogus certificates of deposit at his Antigua-based bank. He managed to defraud about 30 000 investors over two decades in 113 countries with this strategy. The jury found Stanford guilty of 13 of the 14 counts against him, including wire and mail fraud and obstructing an investigation by the US Securities Exchange Commission (SEC).

Wise words from the SageAll eyes were once again on Warren Buffett, chairman and CEO of Berkshire Hathaway, and his annual letter to shareholders. In it he maintained his enthusiasm for insurance business and the “terrific managers running some extraordinary insurance operations” at his business. Berkshire’s insurance businesses provide insurance and reinsurance of property and casualty risks primarily in the United States.

His advice to running a sound insurance operation was the following:

• Understandallexposuresthatmaycausea policy to incur losses.

• Conservativelyevaluatethelikelihoodof any exposure causing a loss and the probable cost if it does.

• Setapremiumthatwilldeliveraprofit,onaverage, after both prospective loss costs and operating expenses are covered.

• Bewillingtowalkawayiftheappropriatepremium can’t be agreed upon.

He said the last discipline on this list was one that many insurers flunk. “They simply can’t turn their back on business that their competitors are eagerly writing. That old line ‘The other guy is doing it so we must as well’, spells trouble in any business, but none more so than in insurance,” said Buffett.

Hiscox chairman to step down in 2013Chairman of Hiscox, Robert Hiscox, is due to step down from the board next year. This announcement was confirmed when the company issued its full year results ending 31 December 2011. The company reported a pre-tax profit of £17.3 million down from the £211.4 million it reported in 2010. Gross written premiums were level at £1 449.2 million for 2011, only slightly up from the £1 432.7 million reported in 2010. Earnings per share were 5.5p. Hiscox London Market achieved a profit of £57.6 million, offsetting catastrophe reinsurance losses with profits in international property, marine and other specialist lines. It said that rates are increasing in reinsurance and slowly increasing in other specialty lines.

Allied makes changes to management teamAllied World Assurance Company Holdings announced several changes to its global executive management team in March. David Bell, chief operating officer, will be leaving the company to pursue interests in Montana but he will remain with the company until 1 May 2012. John McElroy will take over from him as chief operating officer and will be responsible for overseeing Allied World’s operations, administration, information technology, ceded reinsurance and new product development functions on a global basis. McElroy recently held the role of president, professional lines for Allied World US. Meanwhile, Wesley Dupont, executive vice-president, general counsel and corporate secretary has assumed the additional responsibilities of overseeing the claims and human resources functions globally, which were formerly the remit of the chief operating officer. Additionally, John Bender, president and chief operating officer of Allied World Reinsurance Company, has assumed responsibility for Allied World’s global reinsurance operations.

Set a premium that will deliver a profit, on average, after both

prospective loss costs and operating expenses are covered

28 riskAFRICA

NEWS Botswana – John Haenen appointed as CEO of BIHL’s short-term division

Recently diversified Botswana Insurance Holding Limited announced the

appointment of a CEO for its short-term business. Board members were told

recently that John Haenen had been running Heritage Insurance, Tanzania’s

biggest insurance company, for six years under the watchful eye of the United

Nations Development Programme and brings valuable experience to BIHL.

This is the last of BIHL’s divisions to receive a head, likely marking the

end of the diversification process. Each of the property, short-term, asset

management (Bifm) and life insurance (Botswana Life) divisions has its own

CEO, with Gaffar Hassam as Group CEO.

BIHL manages over P18 billion worth of assets and has over 295 000 client

policies in its life insurance business. Despite having faced several challenges

in 2011 (strike action, a harsh economic climate and dwindling household

incomes), BILHL Group managed to post 42 per cent profits by 31

December. Hassam noted that 2012 was not likely to be any easier, but that it

will build on 2011 and focus on designing new products and bettering service

delivery this year.

Chairperson Batsho Dambe-Groth addressed board members at the

announcement ceremony, highlighting the radical paradigm shift required

to remain financially sustainable. “If we continue doing the same in order to

stay profitable, we will just end up having a series of retrenchments to sustain

our profitability, which provides an extremely negative short-term solution.

2012 promises to be a challenging year with the possible looming recession. I

believe it is incumbent upon all of us to make a difference in counteracting the

effects which the recession might bring,” she said.

Namibia – Marcelina Gaoses is new MD of Mutual AND Federal Namibia

Mutual & Federal, a member of the Old Mutual Group, has appointed

Marcelina Gaoses to the position of managing director of its business

in Namibia.

Having held a number of senior positions in Swaziland, Botswana and

Namibia, Gaoses brings a wealth of experience of the Southern African

insurance industry to the table. She left her position as director of insurance

and pensions at Botswana’s Non-Bank Financial Institutions Regulatory

Authority (NBFIRA) and joined Mutual & Federal in March.

“The continent is a core strategic focus for Mutual & Federal as we look to

strengthen our existing interests in Namibia, Botswana and Zimbabwe while

exploring opportunities in other countries,” said LeRoy Munetsi, executive of

Africa and new markets, Mutual & Federal. “We are delighted that Marcelina

has agreed to join us and fill this vital position. Namibia is a key business and

has consistently produced strong underwriting results. She brings the right

mix of experience, skill and focus to the position. She will also play a key

role in our broader strategy for the continent at large.”

Shortly after making the announcement, Mutual & Federal in South Africa

announced that it is considering entry into Nigeria. The South African

company currently has two wholly owned subsidiaries in Namibia and

Botswana, as well as stakes in insurers in Zimbabwe and Swaziland.

Munetsi added that Mutual & Federal could consider an acquisition or

start a greenfield project in Nigeria, alternatively it could leverage off the

distribution channel created by parent company Old Mutual’s entry to

Nigeria. Old Mutual is buying Oceanic Life from Oceanic Bank in Nigeria,

which itself has been acquired by Ecobank. In addition to Oceanic Life’s

distribution channels, Old Mutual will have access to over 600 of Ecobank’s

Nigerian outlets through which to sell insurance and investment products

for 10 years.

South Africa – Industry moves to cover car-jamming losses

Marsh Africa noted an almost industry-

wide shift toward insurers now covering

losses from vehicle break-ins due to

car-jamming. The practice of vehicle-

jamming involves perpetrators using a

handheld remote to block the signals

from the car’s remote while the owner

locks the car doors. Traditionally, insurers

could repudiate this based on the fact that

there is no evidence of forcible or violent

entry to the vehicle, but Andrew Panzera,

executive leader operations, commercial

practice at Marsh Africa notes that pressure

form consumers has forced insurers to

reconsider the exclusion.

While most insurers do not cover

property lost to jamming, “when this

practice first came to our attention in

early 2011, our insurer partners received

requests to provide automatic conditional

cover for theft of property from vehicles

unaccompanied by forcible and violent

entry”, said Panzera. “Our clients should

have some protection for property stolen

from vehicles irrespective of the manner

in which entry was gained – even if the

vehicle was not locked.”

While Marsh still encourages their clients to

take due care of their assets, negotiations

with most insurers were successful and, in

March 2011, Panzera and his team were

able to confirm the extension of cover

subject to insurers being allowed to apply

individual corrective action if necessary.

“This set an industry precedent and further

notifications followed as other insurers

recognised the market imperative to cover

loss through jamming.”

While Marsh Africa’s redCarpet cover

was the first to include loss arising from

jamming, Panzera noted that he knows

of a number of other insurers that have

followed suit and expects that, going

forward, covering loss from jamming will

become the norm, not the exception.

Reports are that incidents of vehicle

jamming is surging in Namibia, with

industry members relaying that at least

six occurrences took place since January

this year.

29riskAFRICA

Africa’s largest class action looms over SA gold mining

Last year a lawsuit saw a South African man lodge a civil claim

against his mining company employer after contracting the

lung-disease silicosis. This could have serious ramifications for

the South African mining industry. The man died before the

Constitutional Court reached its verdict in March, but judges

opened the flood-gates for similar claims when it ruled that

miners could, for the first time in South Africa, sue

employers for damages.

Since January this year, former mineworkers and widows

from South Africa and Lesotho have been pouring into the

town of Semongkong in Lesotho. They are there to add

their thumbprints to those of – so far 7 000 – lung-diseased

employees as part of what could well become the largest class

action the African continent has ever seen. The man behind

it all, lawyer Richard Spoor, is the same man who headed the

landmark case last year and is responsible for the current largest

settlement from the mining industry in 2003. “We’re signing up

500 people a week at the moment,” Spoor recently

told the media.

Silicosis is a disease contracted by constant exposure to silica

dust from rocks bearing gold. It causes coughing, chest pains and

shortness of breath. And though not fatal in itself, silicosis makes

the person highly susceptible to tuberculosis, which does kill.

The disease is recognised by the Miners’ Phthisis Act of 1911 as

one that is deserving of compensation.

Analysts believe that a suit of this magnitude will cost the mining

industry’s giants AngloGold Ashanti, Gold Fields, Harmony and

AngloAmerican billions of US Dollars.

Zimbabwe – Zim still unable to feed itself?

Zimbabwe is once again facing a food crisis as

Agriculture Minister Joseph Made recently told

the media that the state has halted sales from

strategic grain reserves. This is due to the loss of

some 500 000 hectares of the country’s staple

maize crop to prolonged drought. A nationwide

assessment showed that a third of the country’s

maize crop is a write-off. With farmers having

planted significantly less maize than in 2011,

harvests were already expected to fall short,

pointing toward what could be Zimbabwe’s worst

food crisis since it first became unable to feed itself

10 years ago.

The country’s Commercial Farmers Union (CFU),

however, said that the weather had nothing to

do with the harvest shortfall. “We can’t continue

to blame drought. It’s quite absurd that this is

still used as an excuse,” CFU’s president Charles

Taffs recently told a local radio station, adding that

the reason behind the deficits is that agriculture

continues to be undermined.

Taffs maintains that the country has been struggling

to feed itself since productive farms were seized

from commercial farmers and handed to ZANU

PF officials a decade ago. The land grab campaign

had been declared unlawful in 2008, but nothing

was done to correct the situation that has been

starving Zimbabweans.

“There is no funding for agriculture and no

security of tenure,” Taffs explained. “you know

we actually have no problem with who owns the

land. We have a problem with how the land is

used,” adding that the there is no reason anymore

why Zimbabwe should be relying on food aid or

imports to survive.

Rwanda – New insurance initiative to help mortgage applicants

Kenya Commercial Bank (KCB) in Rwanda signed an agreement with insurer,

Soras, that is touted to give low and middle income earners the ability to apply for

and obtain home loans much easier. Dubbed Collateral Replacement Indemnity,

the insurance product replaces the collateral so that the client does not have to

pay a deposit. The bank purchases the cover to the equivalent of the deposit it

would have required and, should the client default and the mortgage property be

legally sold at a loss, receives the collateral from the insurer.

"This is really a revolution in the housing industry in Rwanda and I think that

people in this country will take advantage of this product," said Marc Rugenera, the

managing director of Soras.

At the moment, getting a loan on a property in Rwanda requires the buyer to pay

up to 30 per cent of the purchase price upfront. This has been a huge burden for

many wishing to purchase or build their own homes.

KCB Rwanda last year introduced a long-term mortgage loan that was still not

attainable for much of the populous. “It required only a 10 per cent deposit,

but even that was still very difficult,” said Maurice Toroitich, the KCB Rwanda

managing director. “With this new product, our clients will no longer have to wait

for years to make the deposit.”

To get the mortgage loan, the value of the property should be below 45 000 000

Rwandan Francs and the prospective borrower should not earn more than FRw 1

800 000 per month.

30 riskAFRICA

The Santam Broker Awards was held at the Play House in Windhoek

on 7 March. Santam Namibia’s CEO, Franco Feris, detailed future

goals and prospects for Santam in 2012 and beyond. Top performing

brokers in different regions in Namibia were awarded diamond,

gold, silver and bronze awards for their performance.

Santam Namibia salutes the contribution of the intermediary to its

success and the important risk management role that the broker

fulfils. The company has made a commitment to supporting the

intermediary in Namibia and respects the invaluable role that the

intermediary plays in the short-term insurance solution. “It is only

fitting therefore that we should pay tribute to these partners and

reward those who have excelled in many ways through an ongoing

process of reinvention,” said Feris.

The criteria for determining the winners are driven by numerous

factors, including growth and profitability for the financial year, as

well as the performance over a period of three years.

“The grouping between the gold, silver and bronze awards is

determined by growth (40 per cent) and profitability (60 per cent).

A rating is then allocated to brokers,” explained Feris. “The regional

winner is selected based on all product offerings, collectively. The

criteria remains profit and growth; the focus is thus not per branch

but overall performance of a brokerage or agent.”

This year’s regional winner was Welwitschia Nammic Insurance Brokers.

Top left: National youth Choir of Namibia.

Top right: South African businessman and recently retired chief executive of

McCarthy Limited, guest speaker, Brand Pretorius.

Middle left: Franco Feris.

Middle right: Ken Robinson, head: commercial lines, Santam Namibia, with

Bennie Visser, COO at Marsh Africa (right). Marsh received the gold award for

Santam Windhoek.

Bottom left: The team from Welwitschia Nammic Insurance Brokers, winners of

the regional award.

Bottom right: Franco Feris with Riaan Vermeulen, chief executive officer of

Welwitschia Nammic Insurance Brokers.

SANtAM BROkER AwARDS

• Brokers

Santam Broker Award winners:

Keetmanshoop branchDiamond: J van Dyk Versekeringsmakelaars Gold: Welwitschia Nammic Insurance Brokers, Mariental Silver: Helene van Zyl Bronze: Welwitschia Nammic Insurance Brokers, Gobabis

Otjiwarongo branchDiamond: Welwitschia Nammic Insurance Brokers, Oshakati Gold: Welwitschia Nammic Insurance Brokers, Tsumeb Silver: Sackey Hekandjo Bronze: Ingo Halberstadt

Walvis Bay branchDiamond: Welwitschia Nammic Insurance Brokers, Walvis Bay Gold: Estelle Esterhuizen Silver: Marsh, Swakopmund Bronze: FNB Insurance Brokers

Windhoek branchDiamond: Welwitschia Nammic Insurance Brokers, WindhoekGold: Marsh, WindhoekSilver: FNB Insurance Brokers, Windhoek Bronze: Swanam EDMS BPKMerit: Kerrie Mostert Makelaars Merit: Andre la Cock Versekeringsmakelaars Merit: Prosure Short Term Insurance CCMerit: Namsure Insurance Brokers

Relationship manager for 2011 Marietjie Engelbrecht

Transport division, Namibia Diamond: Namibia Risk Solutions

Niche, Namibia Diamond: Marsh Namibia

Namibia brand ambassador Joko TjiurutueHanlie Kesslau

31riskAFRICA

Prudential may well turn into one of these footballs.

The London-based and LSE-listed insurer has

announced that it is considering moving its centre of

operation. This follows after news that EU Solvency II

regulations are set to be introduced in January 2013.

Politicians can crush things by accident. Destroying

whole industries is nothing to the political machine.

From the beginning of time political machines have

flattened companies, industries and even countries

on what – on reflection – is a whim.

This can be bad enough when it is just a national

government. When you add multinational political

organisations, things can get even worse. If Solvency

II leads to Prudential leaving London, the UK can say

goodbye to jobs and large amounts of tax.

It’s important to remember that Prudential’s main

business interests are not focused on the UK or

Europe, instead they are in Asia and a move would

therefore make sense. But a potential move to

offshore status has brought into doubt the firm’s

financial health. Solvency II will require firms to meet

stricter solvency ratios. A move to a jurisdiction

where less stringent ratios are required will cause

investors to ask whether they have resources to

meet the new requirements.

British bank RBS was bailed out by the taxpayer

following the sovereign debt crisis and is 83 per

cent owned by the State. This has given members

of parliament, the vast majority with no financial or

banking expertise, a lot of power over its future. This

power not only affects RBS itself, but companies it

works with and contracts services from – such as

credit card insurer CPP.

CPP has formerly been used by RBS to insure

against credit fraud and identity theft. Barclays, also

partly owned by the British State, and Santander

have chosen not to renew contracts with CPP for

2013, and MPs are not putting pressure on RBS to

do the same.

While already in a troubled state due to alleged

misselling, the case of CPP demonstrates how

elected MPs can interfere with the workings of

banks.

In all of these situations it is essential not to forget

the ticker. Prudential opened well in 2012 on the

LSE, closing February over 200 points higher than

in October at 720. While the company was down

on the three-year high achieved in May 2011,

Prudential is just 100 points lower than it was before

the sovereign debt crisis – and certainly much better

than the 210 low it reached in early 2009.

Solvency II has raised doubts about Prudential but, as

the LSE figures show, the market has not deserted

it. This is in the context of a positive start for the

markets in 2012, with the FTSE Non-life and Life

indexes at 1440 and 4440 as February closed. For

the Life index this marked a near return to its pre-

summer 2011 crash level, while the Non-life has

regained only half of its pre-crash value – the trend

has been steadily upwards even as the Greek crisis

rumbled on.

The market feels too high but it will quite likely go

higher. I couldn’t resist buying some Aviva; dividends

in the seven per cent area and a P/E around seven

is just too tempting to resist. If the market is off on

a long-term rally, which is a strong possibility, then

Aviva will get a double lift. The calming of the Greek

crisis has played a strong role in this, but this has

come about due only to politicians.

This is where the whole of economics is right

now; a playground for politicians. The further

away your investments are from the clashing titans

of politics, the better.

It’s said that when economics fails, it is the job of

politics to step in. After five years of governments’

trying to rectify the credit crunch we are left

wondering how things would have fared if no-one

had stepped in and all the banks of the West had

been left to go to blazes with the market being

allowed to pick up the pieces.

All EU insurers face the challenge of meeting

Solvency II, so Prudential may well be the first

of many London-based insurers weighing up a

possible move. As the regulations’ implementation

date approaches, market watchers will be paying

close attention to see which firms are ready and

which are not prepared for the new reality in

which politics has placed them.

It’s tempting to think that by now we would be

back in a boom like Asia and Russia were in the

1990s. Perhaps there is an end in sight to this

‘great recession’.

how politics can damage an industry I always advise people never to invest in stocks that are political footballs. Politicians are in an order of magnitude more powerful than any business leader because they can change the rules of the game as they see fit.

• Politics

“It’s important to remember that Prudential’s main business interests are not focused on the

UK or Europe, instead they are in Asia and a move would therefore

make sense.”

Clem Chambers | CEO of ADVFN

32 riskAFRICA

United Kingdom

Motorists can’t afford excess

Motor insurer, Axa, has warned

motorists not to push up their

levels of excess to reduce

insurance premiums. It has found

that many customers are unable to

authorise repairs to their damaged

cars due to the lack of cash to pay

for the excesses. Last year, the

number of people falling into this

category climbed by 61 per cent,

leaving people with potentially

unroadworthy cars or damage

that will deteriorate further due

to lack of repair. Around 29 per

cent of motorists don’t have

readily available savings to cover

their excesses if required. Many

motorists are pushing up excesses

to an unaffordable amount and the

average voluntary excesses have

risen by 10 per cent in two years.

“We appreciate that premiums

have risen a lot in the last couple

of years and we can understand

consumers looking at ways of

saving a bit of money. But if this

means that they cannot afford

their excess, it is a completely false

economy. Even if the money can

eventually be recovered from a

third party, motorists should be

careful to have the cash available

in order to get their repairs done

swiftly and get their cars back on

the road,” said Sarah Vaughan

from Axa.

Quit smoking and save on

life insurance

Comparison website,

Moneysupermarket.com, has

worked out that consumers could

save around £5 490 if they kicked

the habit of smoking on combined

illness cover (CIC) and life cover

or up to £1 788 on a single life

insurance policy. With the average

pack of 20 cigarettes costing £6.95,

smokers could save themselves an

additional £1 880 a year if they quit.

Emma Walker, head of protection

at MoneySupermarket said: “Not

only can smokers reap the medical

benefits of kicking the habit, but

they can avoid letting their hard-

earned cash go up in smoke, too.

With significant savings to be made,

those who make the decision to

quit should shop around for the

best insurance deal to suit their

circumstances. Insurers will insist

smokers have kicked the habit for a

full year in order to be classed as a

non-smoker and qualify for savings

on their life insurance premium.”

Teachers to be hit by PPI

misselling scandal

Teachers are the most likely to be

affected by payment protection

insurance (PPI) misselling on

credit cards, loans and mortgages,

according to PPI specialist financial

claims management company

Randall and Vickers. Other

professions that are likely to

be affected include nurses, civil

servants and police officers. “People

working full time on permanent

contracts in the public sector, such

as teachers, get their full salary

for up to six months while on

long-term sick leave. This would

significantly reduce their PPI cover

and is something that those selling

PPI insurance polices should have

checked,” said Michael Pilgrim,

founder and director of Randall

and Vickers.

Jobs fall but pay increases

Figures issued by the Reed job

index show that recruitment

levels in the general insurance

industry have fallen by 13.8 per

cent between February 2011

and February 2012. However,

advertised salaries have increased

by 6.2 per cent. The survey

reported that salaries have

increased as employee retention

has become more important.

The index looks at trends from

over 8 000 UK recruiters and

provides statistics on overall rises

in advertised job opportunities

and salaries in Britain over the

past year.

Parents underinsure their lives

Children’s financial futures are

being put at risk as four out of

five parents skimp on life cover

according to research from Aviva.

The survey of 1 500 recent

parents in the UK reveals that

while two out of five (40 per

cent) start a savings account

for their new arrival, fewer

(around 18 per cent) take out

life insurance. Only 25 per

cent stated they had chosen a

guardian for their child if they

were to die. Aviva’s data also

showed that two-thirds (60 per

cent) of families have no form

of protection in place and that

the average family has only

£938 in savings which would

last half a month. Louise Colley,

head of protection marketing

and sales for Aviva said: “Every

parent wants to splash out to

prepare for the exciting arrival

of a baby, so it’s no surprise

that the costs can stack up. But

within the checklist of essential

items, we would urge parents to

consider putting a small amount

aside each month to protect

their family ’s financial future,

if something unexpected were

to happen to either parent. It

should be considered just as

much an essential as a buggy

or a cot. We don’t think twice

about taking steps to protect

our children physically within

the home, but not enough

action is taken to safeguard the

financial wellbeing of our families.

While it’s understandable that

people want to save for their

children’s futures, parents need

to ask themselves whether they

would have enough money to

meet their monthly payment

commitments if they were to

suddenly lose an income.”

33riskAFRICA

Europe

Allianz could bid for Groupama unit

Allianz SE wants to buy Groupama

SA’s GAN Eurocourtage unit and

the price could be in the high

three-digit millions of Euros or

more according to Financial Times

Deutschland. Other potential

suitors include French insurance

group Covea and Aviva Plc. qBE

Insurance Group is now said to be

out of the running.

Australia

Insurer slashes 600 jobs

Sydney-based insurer, Insurance

Australia Group (IAG), has said it

will reduce headcount in its CGU

sales unit by 16 per cent by the end

of 2015 to boost profitability and

lower costs. This means that CGU’s

workforce will be cut by around 600

jobs to 3 100 positions according

to Bloomberg. The reductions will

provide the company with annual

cost savings of around A$65 million

by the end of the 2015 financial year.

“Since resetting its strategy in 2008,

CGU’s focus on remediation and

rebuilding has improved its underlying

performance by around $160 million

on an annualised basis. With the work

to improve the fundamentals of the

business well progressed, we believe

the time is right to accelerate the

actions we are taking. The changes

announced to CGU’s operating model

today are expected to generate initial

cost savings of $25 million pre-tax in

the 2013 financial year, increasing to an

annual pre-tax benefit of $65 million by

the end of the 2015 financial year. This

will continue the improving trend in

CGU’s financial performance,” said IAG

managing director Mike Wilkins.

United States

Unemployment insurance payments

on the rise

In early March, the number of

Americans filing for jobless benefits

rose to 362 000 and applications

increased by 8 000 in the week

ending 3 March according to

Bloomberg. But it’s not all doom and

gloom and figures show that job creation

has strengthened in recent months. In

February, employment increased by

216 000 after a 173 000 rise in January

according to ADP Employer Services.

“We don’t think twice about taking steps to protect our

children physically within the home, but not enough action is taken to safeguard the financial

wellbeing of our families.”

34 riskAFRICA

We have our wheels and we have

our team. We’re doing it. Put Foot

Rally is Southern Africa’s only social

rally and you can bet your bottom

dollar that this year’s event will be

awesome as Team RISKAFRICA

takes on the challenge. Put Foot

Rally 2012 is happening from 20

June to 6 July with great publicity

and major media coverage, and

we will be there to take part in

the wildest adventure this side of

the equator. Fifty crews, seven

countries, seven checkpoints, seven

parties, 7 000 kilometres in 17 days

… be part of the adventure!

Team RISKAFRICA is backed by Pro

Sano medical scheme. We have a

cameraman and are running a fully

interactive campaign online. Through

our website, you, our readers, will

be able to set us challenges and

decide our route, at the same time

helping us put shoes on needy kids

feet and creating awareness around

rhino poaching; because raising funds

for worthy causes is a huge part of

what Put Foot Rally is about.

For these great causesPut Foot Rally is all about fun,

adventure and coverage, but we

endeavour to do some really good

work along the way. We will be

actively raising funds for worthy

projects and creating awareness

around topical issues. We are

supporting a few great charities.

The Put Foot Foundation (official rally charity)We’ve chosen The Put Foot

Foundation as the official rally

charity, and they ’ve kindly agreed

to send a team of their Fun-atics

on this epic adventure. But what

is the organisation’s aim? What

are we raising funds for? To shoe

kids! No, no, not beat them or

chase them off. We mean they ’re

going to put a pair of brand new

school shoes onto the feet of

hundreds of African children

along the route as we cover

Southern Africa from Cape Town

to Namibia, through Botswana

and Zambia, then Malawi,

Mozambique, Swaziland and back

to South Africa again.

The Put Foot Foundation mission:

To raise enough money for a

minimum of 600 pairs of shoes to

donate to kids who walk to school

barefoot every day. Not only that,

but donors and rally participants will

also have the opportunity to see and

feel first-hand what a life-changing

experience it is to give a brand new

pair of school shoes to a young

underprivileged child.

“We want to build on the vision

started by the Bobs For Good

Foundation,” a spokesperson said,

“by committing our passion, energy

and shared vision of changing young

lives by giving them a single pair of

brand new school shoes.”

Founded by three aspiring young

men, Daryn Hillhouse, Mike

Sharman and Dan Nash, the Put Foot

Foundation is based in South Africa,

but proudly calls itself Southern

Africa’s newest adventure charity.

The Put Foot Foundation will act as

an umbrella organisation, teaming

with other charities; it will take

responsibility for the administration,

planning and delivery of social

development projects, as well as

accounting, collection and distribution

of donations.

Project Rhino (official cause)There has never been a more

pressing time to raise awareness

around the truly horrific plague of

rhino poaching. 2011 saw a record

number of 443 rhinos killed for

their horns in neighbouring South

Africa alone and, at the time of

writing, around 50 had already

been slaughtered in 2012. This is

a contained event though, two sub-

species of rhino are believed to have

gone extinct recently further north in

Africa. The point is that the plague

of rhino killing will spill over into our

borders if we do not take a stand

against the senseless killing. Project

Rhino, spearheaded by the African

Conservation Trust (ACT) is taking

the lead in the fight against rhino

poaching in Southern Africa, starting

in KwaZulu-Natal and then quickly

expanding through the rest of Africa.

Our goal is to raise enough funds

to sponsor two fully equipped

anti-poaching teams to help combat

the carnage. Team RISKAFRICA will

also endeavour to create awareness

around the issue on our epic journey.

Get involvedBe part of it all as Team RISKAFRICA

and other Put Footers attempt

to raise over R330 000 for these

worthy 2012 official rally charities and

causes. Whether you are signed up

or not, you can still make an impact

by supporting our campaign.

Go to our blog, www.riskafrica.com/

blog. Here you’ll be able to check

our progress, To donate money

• Put Foot for Africa

RISKAFRICA PUT FOOT RALLY 2012

to our causes, go to the Put Foot

site, www.putfootrally.com and

follow the Official Charities tab.

There’s a ‘DONATE’ button that

will take you to our GivenGain

page, where you can make a

contribution. Remember to add our

crew name (Team RISKAFRICA) and

be part of this great initiative.

Team RISKAFRICAMeet the crewAndy Mark

Blake Dyason

Michael Kaufmann

Our crew is made up of three

media-types you know very well,

all with a love of the bush and

their brand. Always looking for a

new mission, the RISKAFRICA

boys are up for (just about)

anything on their quest to meet

new people and experiences.

Don’t let Andy (the Toppie) fool

you – Blake and Mike will have

their hands full while on ‘Andy

duty’. Michael is a helicopter

rescue swimmer in his spare time

while Blake … well … let’s just

say that the girls should prepare

to have their hearts broken.

Disco dancingThe crew has selected their

vehicle for Put Foot Rally 2012

and she’s a beauty. Our ’95 Land

Rover Disco 1 will be on her

swansong trip through Southern

Africa before heading down

to the shop to have her roof

removed so she can retire on the

farm as a game-viewing vehicle.

This is a true African adventure.

We plan our route with your

input and set our budget. There

will be no support crews along

the way – this is Africa after all.

We are free to choose: we can

take dirt roads or stick to the tar.

It’s all up to us. So dirt roads it

will be!

36 riskAFRICA

offers opportunities, challenges

Ugandan insurance industry

The growth of the Ugandan economy, which

began in 2008, prompted a change in the

insurance sector with the rebranding of the

Insurance Regulatory Authority of Uganda

(IRA). The aim of the newly rebranded IRA

was to make doing business in insurance

easier and more efficient, while ensuring that

the policyholder is protected. The IRA aims

to increase public confidence in insurance.

Insurance penetration in Uganda currently

stands at 0.65 per cent. In comparison, the

worldwide rate is about 2.7 per cent and

Uganda’s neighbours Kenya and Tanzania

stand at just over two per cent and 0.8 per

cent respectively.

Opportunities abound in Uganda, but there is still a long road towards developing

the insurance industry in the country beyond current levels. According to the

Uganda Insurers Association (UIA), the insurance market has shown positive growth

trends over the past five years, thanks to a favourable investment climate that

has encouraged several foreign players to join the market. The industry currently

comprises 22 insurance companies, 28 insurance brokerage firms, one reinsurance

brokerage firm, 11 loss assessors/adjusters and 610 insurance agents.

• Insurance in Uganda

37riskAFRICA

In terms of South African involvement in the

sector in Uganda, the key players seems to be

Sanlam which expanded into Uganda in 2010,

and Liberty Life Assurance Uganda, which

entered the Ugandan marketplace in 2007.

At the time of the move into Uganda, Johan

van Zyl, group chief executive of Sanlam, said

that the decision to open a business in Uganda

was prompted by the scope for growth in the

country’s life insurance industry. “Currently life

insurance contributes less than one per cent to

GDP. However, a number of factors such as the

projected economic growth of three to five per

cent in 2009 and 2010, the recent discovery of

oil fields and Uganda’s developing democracy

mean that the need for a well-insured population

is increasing rapidly,” he said. Marguerite de Waal,

who had previously been involved in Sanlam

Developing Markets (SDM), was appointed

chief executive of the new company, Sanlam Life

Insurance (U) Limited.

Sanlam’s current Ugandan product portfolio

includes both individual production options

such as its Dream Builder product, which

offers a savings and life cover policy in one, and

corporate product options such as group life

assurance and health care.

When Liberty Life entered the Ugandan market,

there were five insurance companies offering

life insurance in Uganda; however, none were

specialised life assurance companies. Liberty

Life recognised the potential in the market and

moved in to fill the gap. The risk seemed to pay

off as just one year after launching in Uganda,

the company announced that it had written

premiums worth over USH2.5 billion ($1.42

million), just a couple of thousand less than top

life premiums writers, Insurance Company

of East Africa. Liberty Life Assurance Uganda

provides life assurance, credit-life business, funeral

policies, disability benefit and dread disease cover.

Alexander Forbes and Aon are also both

active in the Ugandan market. The regulatory

environment in Uganda, once seemingly at

a standstill, is developing. In October 2011,

the Insurance Regulatory Authority of Uganda

increased minimum capital requirements for

licensing insurance players. Under the new

regulations, insurance companies underwriting

life insurance business are required to have

minimum capital of USH3 billion while non-life

underwriters will need USH4 billion. Reinsurers

will require a minimum capital of USH10 billion.

According to IRA board chairman, Elias Kasozi, in the year ending 31 December 2010, the

Ugandan insurance sector recorded “a positive growth of 18.77 per cent in spite of the spill-over

effects of the credit crunch and the rising crude oil prices”. The 2010 Annual Insurance Market

Report published by the IRA stated that during the year 2010, the gross premium income written

in the insurance industry rose to 239.99 billion Ugandan Shillings, in comparison to 202.05

billion in 2009. Non-life insurance business accounted for USH216.34 billion while life insurance

accounted for USH23.63 billion of the gross premium income in the industry in 2010. According

to the report, the total number of employees in the insurance industry decreased from 1 734 in

2009 to 1 645 in 2010.

38 riskAFRICA

In late February this year, The Monitor newspaper

reported that the Insurance Institute of Uganda

has been reinstituted with a view to helping the

industry create a more favourable image amongst

the public and increase the relevance of insurance

to Ugandans.

According to the report, the institute’s operations

have for several years been minimally reduced

to co-ordinating short-term specialised courses

related to insurance and management with foreign

insurance institutions including the Nairobi

College of Insurance, the Chartered Insurance

Institute of the United Kingdom and the Australian

and New Zealand Institute of Insurance and

Financial Services.

Interim chairperson Geofrey Kihuguru was

quoted as saying that the institute had been

dormant as a result of a lack of laws governing the

sector, an obstacle that he said had left Uganda as

the country with the least trained insurers in East

Africa.

This has meant a continued reliance on foreign

trained professionals rather than local talent;

something he felt would change as a result of

the reinstatement of the institute and the 2011

Insurance (Amendment) Act which had recently

been passed.

The act aims to provide for the regulation of

health insurance, health membership insurance,

micro insurance and bancassurance to provide

for the membership of the Insurance Institute

of Uganda; to provide for the insurance training

levy; to provide for the protection of the authority

from liability; to rename the Uganda Insurance

Commission as the Insurance Regulatory

Authority of Uganda; to provide for arbitration as

an additional function of the authority; to provide

for the composition of the authority; to provide

additional grounds for winding up insurers; to

provide for the establishment of the Policyholders’

Compensation Fund; to establish the Insurance

Appeals Tribunal; and to provide for an increase in

the fines and for related matters.

The institute with a student population of about

300 is currently housed in Kololo, Kampala with a

co-ordination centre near Christ the King Church in

Kampala.

Ethics and professionalism in the sector remain

an area that requires development. During 2010,

the Uganda Insurers Association (UIA) circulated

a revised Code of Conduct to its members. The

revised code covered elements such as corporate

governance, accounting standards, insurers

best practice rules, marketing, undercutting,

reinsurance, claims, compliance with the law,

dispute resolution, etc.

The industry opinion seems to agree, though,

that the biggest obstacle for those in the insurance

industry in Uganda is lack of awareness of the need

for insurance among the general population. With a

penetration rate of less than one per cent, it is clear

that there is scope for expansion and growth, but

convincing Ugandans of the utility and relevance of

insurance remains a challenge.

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