Low frequency claims, high profitability making African insurance market attractive – IGI boss

African insurance market has been identified to have a very strong potential for growth, given its low penetration rate; a young population and strong economic growth, hence, it has become investment heaven for foreign investors. Youssef Alaoui, CEO, International General Insurance (IGI) Co. Ltd. Casablanca, in this interview with Modestus Anaesoronye at the sideline of the recently held African Insurance Organisation Conference in Morocco, explains IGI’s interest in the continent and expansion plans, among other issues. Excerpts:

Tell us about the International General Insurance Company Limited, and your operation in the reinsurance market?

IGI is a leading specialist insurer and reinsurer based in the Middle East, with its holding company registered in the Dubai International Financial Centre and with operations in Jordan, the United Kingdom, Bermuda, Morocco and Malaysia. IGI underwrites a diversified portfolio of specialist facultative risks relating to the energy, property, financial institutions, ports and terminals, engineering, general aviation, political violence, casualty and forestry sectors in addition to reinsurance treaty business with a main focus on the MENA Region, Africa and Asia.

You are strongly establishing your presence in the African market, what is your attraction?

Through its London and Dubai offices, IGI has been writing business in Africa for many years. Opening our Casablanca office in 2014 marks an important cornerstone in our growth and ongoing expansion. This office will initially serve as a platform for creating business opportunities for the Group and developing the Group’s relationship with its existing and potential new clients in the African continent. For IGI, this ambition represents the opportunity to diversify and develop its written premium by marketing its expertise while there is good control on the quality of ceded and accepted business.

Given the challenges in the African market, including shortage of skills and lack of capacity, what do you think IGI can do to add value to the market?

IGI follows a careful and disciplined underwriting strategy. With an emphasis on specialty lines, the company is driven by the profitability of the policies that it underwrites rather than on the volume of business, relying on a team of experienced underwriters with strong, long-standing relationships with brokers and reinsurers. IGI is focused on innovation and service. In addition to our financial capacity, we bring to our clients a complete set of services including pricing, actuarial and technical added value analysis, development of new products, as well as training.

IGI operates from a number of platforms worldwide, allowing its access to a broad spread of risks while providing appropriate jurisdictions to accept a wide range of policy types (including Middle Eastern regional business, London market risks, African business, Takaful policies etc.). Underwriting is carried out across the platforms, with individual team members physically based in the relevant geographies.

Many foreign investors are eyeing opportunities in the African insurance market, being that you have been here for some time, what would be your justification for this growing interest?

African insurance and reinsurance markets offer an exciting growth and investment opportunity. Despite political instability in a small number of countries, underlying fundamentals are strong. Premium growth in sub-Saharan Africa has seen a sustainable growth over a number of years, although the performance of the direct insurance market varies from one country to another.

African markets remain highly dependent on reinsurers, given the limited local underwriting capacity and expertise.

The interest of insurers and reinsurers for Africa is growing since the frequency of large claims is low and most markets are very profitable. Indeed, many International firms that seem to have a special appetite for this market deemed to be promising and characterised by a low penetration rate; a young population and strong economic growth have recently targeted the continent.

Issues bothering on climate change, terrorism, piracy, kidnapping and political violence is becoming popular in the African insurance market, what is your readiness to play in this segment?

There is indeed a growing demand for acts of terrorism and political violence after the events that affected Kenya, Nigeria, Egypt, Tunisia and Sudan. This demand is expected to further increase in the future due to the confused political situation in much of the continent. Local markets have very limited capacity for SRCC and war risks. Today, IGI is an important player offering big capacity in PV, SRCC and war risks where it has demonstrated its leadership capabilities in many African countries.

Review the performance of your company in 2015, and what is your projection for the next five years?

In this continually competitive environment coupled with excess capacity, International General Insurance Holdings (IGIH) managed to achieve an increase of 2 percent in net earnings at $35 million for 2015, although its gross written premiums declined from $252 million in 2014 to $242 million in 2015.

The company also posted an increased net underwriting profit last year at $53 million, compared with $50 million in the previous year. Its combined ratio improved to 84.31 percent in 2015, compared with 86.94 percent in 2014. IGI’s underwriting teams maintained their focus on profitable business while keeping the discipline needed to navigate through these very challenging times.

Modestus Anaesoronye