Insurers see integration in W/Africa boosting capacity for effective competition
Removal of trade barriers and creating framework that would enable insurance companies and organisations in the West African sub-region cooperate and build capacity has been identified as critical for survival and growth of the region’s insurance market.
This would also enable countries in the region contribute significantly to their nation’s GDP as well as compete effectively with counterparts in other jurisdictions, particularly in London and European markets.
Stakeholders who made the observations at the just concluded West African Insurance Companies Association (WAICA) Conference held in Lagos noted that it was critical that the insurance industry like other sectors in the sub-region begin to build capacity in line with the Economic Community of West African States (ECOWAS) project of integration in West Africa.
Though everyone admitted there is huge growth potential in the region in terms of improvements in macroeconomic management as evidenced by the region’s 6.2 percent growth in real GDP, which was the highest among all African regional economies, it is believed that a lot can be done with proper integration.
Abiola Ekundayo, managing director, WAICA Re in his presentation titled “Insurance Growth in West Africa and the Benefits of Integration” quoting the International Monetary Fund said “at a time of rapid and positive economic change in Africa, financial integration has emerged as an increasingly important factor that can help lift the region to the next stage of development.”
Ekundayo noted that areas that must be concentrated upon to achieve integration includes collaboration among insurance regulators; expansion of the operations of WAICA Re to serve as a strong sub-regional reinsurance company; opening up of insurance markets in member nations such that regional insurance companies can be established to benefit from cost savings due to economies of scale as the case in the French speaking countries, and harmonisation of insurance regulation in West African States and the promotion of cross learning and knowledge codification.
Specifically, he explained that the way forward is that the insurance commissions/regulators should define the framework and harmonise the insurance laws and practice of the sub-region; promote a platform for following up and controlling the insurance industry in the sub-region as well as give counsel on all insurance projects in the sub region.
Abwaku Englama, director general, West African Monetary Institute, Accra, Ghana described regional financial integration as an important means of developing local financial markets, for instance, through peer pressure to strengthen institutions and upgrade local practices.
Englama stated that integrated financial markets including insurance are a key element in the transmission process and hence for the smooth conduct of monetary policy in the envisaged common central bank arrangement for the West African Monetary Zone (WAMZ).
“Enhanced co-operation among various stakeholders including regulatory authorities is also important for ensuring effective integration. As international experience suggests, integration of the insurance sector in a monetary union must be pursued consciously and conscientiously with clear time lines outlined for the various components of the integration efforts, he said.
Fola Daniel, commissioner for insurance, had earlier noted at the opening of a two-day educational conference with the theme “An Integrated and Harmonised Insurance Industry in West Africa,” that the West African financial markets are small and fragmented, and consolidating markets through integration and harmonisation could yield several benefits.
Daniel, represented by Barineka Thompson, director (inspectorate), National Insurance Commission (NAICOM), listed the benefits to include bringing together scarce savings, viable investment projects and financial infrastructure; increase the numbers and types of financial institutions and instruments; increase competition and innovation; increase underwriting capacity of insurance companies in the sub-region; enhance reinsurance capacity and thereby reduce capital flight; reduce inefficiencies in lending given a wider pool of bankable projects; and expand opportunities for risk diversification.
“It is therefore expected that the insurance industry in the West African sub-region would leverage and key into this opportunity by developing the needed products and services as well as build underwriting capacity that will accommodate big risks, and halt the capital flight currently being experienced, particularly in the oil and gas,” Daniel said.
By: Modestus Anaesoronye