A new approach to insuring Africa

Expanding a global programme to cover operations in Africa is no easy job. Flexibility and an ability to innovate are essential in making such programmes work, according to Laurent Barbagli, a board member of French risk association AMRAE, speaking recently at AIG’s Forum on ‘Doing Business in Africa: Myth v Reality’. Barbagli encouraged those with African investments not to let standards slide but to spend the time developing the right approach to risk management and insurance.

Barbagli believes flexibility is the key. When dealing with Africa much of the insurable risk is around operational risks, he said. But that does not lessen his responsibility in mitigating those risks. It is important, he argued, that standards of risk management are maintained, regardless of territory.

He admitted, “To provide insurance coverage, as we do in other countries, can be very difficult.”

One of the challenges, Barbagli explained, is in matching the needs of the global operation and its local partners. While valuing local partners for many other reasons, Barbagli said it can be hard to match their insurance needs and expectations.

“You can have a challenge regarding the deductible, for example, which is not matching the requirements of the minority shareholders, the level of the premium etc. So the problem for us, as a risk manager, is firstly the decision process,” he said.

The insurance programme poses its own risk, he says, and must be considered in the overall risk management assessment of any operation, particularly in Africa. Barbagli said that, too often, an insurer will say no to covering one country and then no to a second. His business, however, wants to be able to insure all its operations globally with confidence.

“So the key issue for us,” he said, “is to try to have our local insurance matching the best, mirroring the best, with global insurance coverage. And to be honest, I would say the main risk for us is not to achieve that. It’s not easy, it takes many years. But it’s worthwhile to invest the time to have the local insurance matching the global group programme.”

As David Halperin, deputy general counsel Global Commercial Insurance at AIG, pointed out, “There is no one right way to structure a [global] programme. Rather, each programme should reflect a particular multinational’s preferences, goal and situation and be adaptable, year to year, as the organisation’s needs change and the global business climate invariably evolves.”

All the speakers agreed that doing business in Africa can be challenging and needs to be properly supported and structured. Delegates from across the world heard Oliver August, Africa Editor of The Economist, sum up the way in which Africa has changed as a continent in the past decade, with the numbers of wars reducing dramatically, economies evolving and opening up to foreign investment and now increasing regulation.

His message included a warning, however, that Africa cannot be considered as a whole. Each of the 50-plus countries has its own rules and systems and, although some regional links are developing, each must be assessed individually in terms of risk.