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:
Introduction
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.
London advise
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.
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