London re-insurance policy shocks African experts, dismiss gloomy prediction
The reinsurance sector in London has warned its counterpart in Africa to prepare for the worse due to a new law in London – Insurance Act 2015 – which will be effective from August 12 2016. This warning is due to the supposed historic dependence of African reinsurance sector on foreign reinsurance to survive. But its counterpart in Nigeria says there is growth in African reinsurance sector, because the time that the individual local companies had to export money abroad has stopped. Odimegwu Onwumere reports:
The reinsurance sector is under reported in the African media. Most people think that insurance covers its entire sector.
Giving definition to what reinsurance means, a former managing director of a life assurance brokerage firm, Mr. Luke Igunbor, at a public presentation in Lagos State, told newsmen that reinsurance is the insurance insurer.
Not many people also know that reinsurance makes insurance to be formidable and to reach policyholders, who are protected at a lower cost. Besides a premium today, the possibility of paying future claims are there with reinsurance; re insurers put a high risk management avenues to maintain their promise, specialists have stated.
In all of that, the reinsurance business in Africa will take a u-turn by August 12 2016, a United Kingdom law firm, Michelmores, Garbhan Shanks has advised. By then, a new legislation known as Insurance Act 2015 will take effect in the London insurance market.
Shanks reportedly made it clear that the advise was necessary in the sense that the African insurance market’s vitality is reliance on foreign reinsurance.
Investigation has revealed that the Insurance Act 2015 will be the most significant change to English insurance law for over 100 years. Hence, operators of the industry in the African continent are warned to prepare for the adjustments the Act will launch.
“In light of the ‘fronting’ arrangements in place for many African risks, it will be in the interests of all parties in the risk transfer chain, including policyholders whose policies contain cut-through provisions to London re insurers, to prepare and plan for the arrival of the Act,” Garbhan Shanks told African Business Law.
Africa raising hope for growth
However, the African continent is achieving the needed economic co-operation and developments that will raise the standards of living of the people and assist in achieving a cordial relationship among member states with reinsurance, experts have alerted.
“The formation of Nigerian and African based reinsurance companies which can be considered regional and local reinsurers have curbed this outflow of cash, so that the reinsurance premiums are retained and invested in the region and in doing so, helping to drive and support local economies,” a professional reinsurer and Managing Director of Purple Consult, (a risk bearing and brokerage firm based in Lagos), Mr. Joseph Ifidon told newsmen in Lagos State.
Ifidon told National Mirror in September 2014, saying, “With the establishment of indigenous reinsurance companies like the Nigeria Reinsurance Corporation and Continental Reinsurance Plc that conducting insurance or reinsurance business with international corporations which meant at the time that the individual local companies had to export money abroad has stopped.”
The specialists stimulated that there are formations of continental and regional insurance and reinsurance organizations in the continent for decades, not minding the major risk and capital management in reinsurance, which remain key tools for insurance companies to thrive.
They whispered that the abnormal economic circumstance in Africa makes the latent of insurance and reinsurance barely known outer-surface of the insurance sector. For-that-reason, practitioners in the insurance and reinsurance sector in Nigeria have buckled-up, proffering solutions on how to diversify the economy and forego the hypothetically over dependence of the sector on foreign help in the name of grant or aid.
“Reinsurance companies have therefore created capacity which has enabled acceptance and retention of larger risks and larger businesses and opportunities. This has its benefits in that our growing economies with their peculiar African characteristics have had local grown support/solutions,” Ifidon added.
They suggested that the reinsurance industry is one area that when properly tapped into, will give the oriented economic dividends that the continent is seriously in need of. Reinsurance professional, Mr. Basil Osita told newsmen that there are records that show that there is a serious move by leaders in the continent to explore economic and political self-help feats to actualize social and political teamwork amid countries in the continent by any means positively possible.
Keywords to growth
As a global business, according to the experts, it is necessary that the sector does not cut boundaries in the deployment of capital. The experts said they are putting up consolidated efforts to institute a trustworthy legal system.
They added that this will help to honour contract in order to have a regulatory framework, paving ways for the actualization of market access to provide their services.
Odimegwu Onwumere is a Media Consultant; he writes from Rivers State.