We are committed to developing the African insurance market – Continental Re MD

Why did you organise the Chief Executive Officers’ Summit in Kenya?

It is important for us at Continental Reinsurance to provide a platform for African insurance leaders to come together to brainstorm and discuss ideas that will move the insurance industry forward in Africa.

The summit, which we hope to organise on an annual basis, is an opportunity for intellectual discourse amongst business leaders and it is our expectation that these deep discussions on current issues will propel our industry into the forefront of the financial services industry in Africa.

What are your expectations from the summit?

This summit was the first we have organised and it was very successful. We had over 60 participants from eight different countries, all key decision makers and I am very excited by the feedback we have received so far.

Amongst others, we discussed issues on consolidation, the role of modern regulation on the continent and our shared belief that Africa deserves strong, large and solvent insurance institutions with adequate capital. Strong insurance companies should not just sit in one country but should transact business across many countries and grow business across Africa.

We have achieved what we set out to do, creating the platform, and this positive feedback encourages us to start planning for next year’s summit and make it even more effective. The level of discussions was deeply intellectual and we are happy that Continental Re has come up with another first development initiative.

What has fostered Continental Re’s growth and expansion in Africa?

When I took over as the Chief Executive Officer of Continental Reinsurance in January 2011, I inherited the leadership of the largest privately owned African reinsurance company excluding South Africa. The capital injection of $66m in 2007 and the solid foundation I met showed that we had a great opportunity of building a privately owned world class Pan-African reinsurance Company.

My mission for Continental Reinsurance right from the first day was that of transforming the Company into a world class Pan-African reinsurance Company. That meant we needed a new strategy and a new approach.

We were perceived as a local Nigeria reinsurer when in fact we were already at that time transacting business out of Lagos, Douala and Nairobi with clients in some 30 countries across Africa. So, the first step for me was to fashion a vision for the Company. I shared my thoughts with my colleagues, and collectively we adopted the vision for Continental Reinsurance to become the premier Pan African Reinsurer.

With Nigeria being our largest market, we took the decision to go into other parts of Africa to carry out that vision. This means providing reinsurance support and services across Africa, going outside Nigeria to deepen ties with the market across Africa and this is how we have been able to achieve the good growth we have seen in the last few years.

What is Continental Re’s contribution to capacity development in the industry?

At Continental Re, we have, in the last two years doubled our spending on training. We have sent some of our staff to India, to South Africa and to Europe for training to increase and enhance their skills. We also conduct training for the various markets where we are operating. It is our responsibility to train the market and we believe that in insurance, our most valuable assets are our people.

Does low premium charged by underwriters have an effect on the cover you provide for them?

Of course it does, and that is why we invest in training to bring underwriters up to date with the latest underwriting procedures. As you are aware, a lot of these businesses go through treaties and as such we don’t get to dictate the rates.

However, we are progressively putting in place structures whereby we can see the rates applied and adjust the level of reinsurance support. Ultimately, we want to know the risks and we are not going to provide cover if rates are too low.

What do you feel about some sectors’ intrusion in insurance business?

This development is not welcome by the insurance industry in Nigeria. The Industry, in conjunction with the National Insurance Commission, is putting together a paper to the effect that those activities are best served by specialists, which happen to be insurance companies.

How easy has it been doing reinsurance business in Africa?

Each country has its own peculiarities but insurance principles are the same everywhere. For us to succeed, in each region where we have ground presence, we have brought in local people to run those companies because there is nothing as important as local knowledge. This has helped us in terms of managing risks in different locations.

When we set out for expansion, we came up with a five-year strategy to achieve that vision, premised on proximity to our clients, providing world class service and much needed value add services to our clients.

First, we obtained a license to open a branch office in Abidjan in March 2012 and appointed a regional director. Then we were faced with an opportunity to convert our Nairobi branch to a subsidiary company. We considered all aspects of converting to a subsidiary and one of the most important motivations for incorporating in Kenya was that it would make us local in Kenya and East Africa.

We put together a business plan which was approved by our board. We applied to the insurance regulatory authority of Kenya and got our license. We became local in Kenya and the transformation has been awesome.

In September 2013, we received our license to operate in Tunisia and next month, we will be inaugurating our company in Tunis to handle our North African business. In December 2013, we obtained our license in Botswana and in May, we will be opening our Gaborone office to handle our Southern African business.

We shall be trading across Africa through well capitalised subsidiaries staffed by highly skilled professionals, providing world class services based on international best practice.

What support should the government render to the insurance sector?

During our discussions at the Chief Executive Officers’ summit, the consensus was that there are too many insurance companies in every country across Africa and we would like to see large and highly capitalised insurance companies. Whether it is through consolidation or through mergers and acquisitions, there is a need to reduce the number.

In the long run, instead of allowing the small ones to die, what we are hoping is that the regulator will assist in ‘arranged marriages’, according to some ideas that came up in the session at the summit. They can come together and form more formidable institutions.

Otherwise, the small capital bases most of the companies have will not be sufficient to allow them to compete effectively in the long run. So first, the regulator should create a platform where the number of insurance and reinsurance companies can be reduced to achieve critical mass.

Second, it should support the enforcement of compulsory insurances. In every location across Africa, there are compulsory insurance but within our system, the enforcement is lacking.

What is the relevance of insurance to an individual’s management planning?

Insurance is part of your financial management planning for the future. Insurance helps you to protect against unforeseen circumstances, whether in your life or asset. Insurance should be the number one thing you should consider after paying your taxes.

What are Continental Re’s expansion plans in Africa?

As you know, the Nigerian economy is projected to be the largest in Africa over the next few years, hence Nigeria will remain dominant in our business. We have moved from a branch network to a subsidiary network, each company having its own board, its own chief executive officer with specific charge to develop our business in their region of responsibility.

In carving these out, we have been careful not to have any country overlap in two subsidiaries. The next stage of our strategy is to raise additional capital. The board and the shareholders of Continental Re have approved the increase of our capital and we are well ahead in raising a substantial amount of capital to enable us pursue some of the opportunities that we see across Africa.

We see opportunities in organic growth and we see opportunities in acquisitions. As I speak, we have entered into discussions with reinsurance companies in West Africa, East Africa and in Southern Africa. We believe that Africa must have strong and large insurance institutions so that we can keep African premiums in Africa.

I spoke to a number of insurance companies at West African Insurance Companies Association (WAICA) conference last year and I challenged them on this issue. Over 100 insurance companies in the 5 WAICA countries wrote $2bn of premium in 2012 while one company, Santam of South Africa wrote $2.2bn in the same period.

Yet we are competing in a world where AIG, Prudential, Allianz and the rest also operate. What we have all agreed upon at Continental Re is that we cannot achieve our vision and our goal by doing things the same way or by marginal incremental growth.

It was obvious that we had to stir up the market, be innovative and think outside the box. For example, we are developing our engineering services capabilities, our actuarial analytics services capabilities, and other specialist skills. This is what we are bringing to our clients.