Transcript Insurance in Africa

The African Connection
Organised by Kring Internationaal
Johan de Witthuis, Utrecht,
13 October 2016
Welkom
Welcome
Karibu
Witaj
Wilkommen
Bienvenida
Bienvenu
Bem-vindo
Velkommen
Benvenuto
Välkommen
Tervetuloa
Dobrodošli
Program
16.30
Doors open
16.45
Welcome and introduction of the guests by Caroline Tuin,
Chairperson Kring Internationaal
17.05
Insurance in Africa, by Mark-Anthony Macharia
17.45
Africa Rising, by Andrew Slater
18.25
Q&A
18.35
Closing drinks and networking opportunity
19.30
Doors close
Welcome
and introduction of the
speakers
Caroline Tuin
Agenda
•
Welcome
•
Introduction of our guests
Welcome
to the 5th meeting of the
Kring Internationaal
Introduction of our guests
• Mark-Anthony Macharia, FSA CERA:
Mark-Anthony currently works in the Enterprise Risk Management team at NN Group.
Originally from Kenya, Mark-Anthony has worked in both consulting and industry in the
United Kingdom and in the Netherlands primarily focused on the calculation and
reporting of Economic Capital.
Introduction of our guests
• Andrew Slater
:
-
Managing Director, RisCura UK
-
MA Mathematics, Fellow of the Institute of Actuaries, CFA Charterholder
-
Andrew is the Managing Director of RisCura’s UK operations, based in
London.
Africa: insurance and pensions
Andrew Slater
[email protected]
13 October 2016
Introduction: Andrew Slater
MA Mathematics, Fellow of the Institute of Actuaries, CFA Charterholder
Andrew is the Managing Director of RisCura’s UK operations, based in London. In
Andrew’s 20-plus year career in investment, he has worked with pension funds,
insurers and wealth management institutions around the world. During that time
Andrew deliberately sought out the areas that presented a challenge to the
orthodox. He started at Price Waterhouse where he qualified as an actuary. A
switch to asset management followed with multi-manager SEI Investments.
Immediately before joining RisCura in 2012, Andrew was with Dutch risk adviser
Ortec Finance.
At RisCura Andrew’s time is split between promoting RisCura’s expertise in African
investment to institutional investors in Europe, and participating in RisCura’s
expansion across the African continent working with local investors. Andrew has a
particular focus on establishing the RisCura business in Nigeria which he visits
regularly. Andrew is alumnus of Cambridge University (undergraduate MA in
mathematics and postgraduate MMath in theoretical physics) and London Business
School, a Fellow of the UK Institute and Faculty of Actuaries, an Affiliate of the
Actuarial Society of South Africa, a Fellow of the Zambian Actuarial Society and a
CFA Charterholder. Andrew was elected to Council in June 2016.
10
Introduction: RisCura
RisCura is a global, independent investment advisory and financial analytics firm that specialises in Africa.
RisCura provides investment solutions to institutions looking to prudently invest their assets to meet their
investment goals and create wealth in a sustainable and targeted, risk managed way for beneficiaries.
As Africa’s premier investment consultant, RisCura provides a wide range of services to the largest African
investor base in listed and unlisted African investments on the continent.
11
Agenda
Growth in Africa
Pension and
insurance
On the ground
12
Quiz
For employees in Nigeria, what is the compulsory
minimum joint contribution rate (employee and
employer) to a defined contribution pension plan,
expressed as a percentage of salaries?
Up to 5%
5%+ but less
than 10%
10%+ but less
than 15%
15%+ but less
than 20%
20% or more
13
Agenda
Growth in Africa
Pension and
insurance
On the ground
www.riscura.com/BrightAfrica
14
African GDP growth rates 2013 vs 2014
15
Continent can be divided into 9 meaningful markets
Central Africa
East Africa
Egypt & Sudan
Francophone West Africa
Maghreb region
Nigeria
Other West Africa
South Africa
Southern Africa excl. SA
Source: RisCura
16
EDFI investment in ACP region is increasing
EDFIs global distribution 2010 and 2013
Africa
Caribbean &
Pacific
Meditte
-ranean
Countrie
s
Source: EDFI Annual Reports, RisCura analysis
17
DFI into Maghreb equivalent to almost 3% of its GDP
African regional DFI vs. GDP
Francophone
W. Africa
Source: ODI (Kingombe, Massa and te Velde) 2011, RisCura analysis
18
How Africa’s regions compare
Sources: World Economic Outlook Oct2014 (GDP and population); Index of Economic Freedom (FDI Inflow); Trade Map
(Intraregional trade); IESE Business School (Ease and Attractiveness).
19
Domestic consumption is fairly well diversified
GDP (nominal GVA) output by region (2014)
Francophone
W. Africa
Source: BMI Research, RisCura analysis
20
Large reliance on extractive industries for exports
Breakdown of regional exports (2013)
Francophone
W. Africa
Source: Trade Map, RisCura analysis
21
Exports concentrated on mineral products
Value of exports by product (least to most diversified) (2013)
Francophone
W. Africa
Source: Trade Map, RisCura analysis
22
High concentration of trade with Western Europe
Africa’s major trade partners by exports and imports (2013)
Source: Trade Map, RisCura analysis
23
Agenda
Growth in Africa
Pension and
insurance
On the ground
24
A youthful continent
Median age of populations across regions
Francophone
W.
Africa
Africa Regions
Source: CIA World Factbook, RisCura analysis
25
Population of sub-Saharan Africa
2013
2050
Source: World Bank, RisCura analysis
26
Population of the world
2013
2050
Source: World Bank, RisCura analysis
27
Social security in Africa: pension fund assets
Source: Regulator annual reports and websites, other industry sources, EAC review of pension sector (Callund Consulting),
Towers Watson Global Pension Study 2015, RisCura analysis
28
African pension assets growing quickly
Annualised growth rates (local currency) vs. Asset as a % of GDP
Source: Regulator annual reports and websites, other industry sources, EAC review of pension sector (Callund Consulting),
Towers Watson Global Pension Study 2015, RisCura analysis
29
Significant allocation to fixed income in Nigeria and E. Africa
Asset allocation of pension funds across Africa
Source: Regulator annual reports and websites, other industry sources, EAC review of pension sector (Callund Consulting),
Towers Watson Global Pension Study 2015, RisCura analysis
30
Potential for insurance growth
Penetration and expected annual growth in AUM by region
Francophone
W.
Africa
Source: Swiss Re, UN Population Division, IMF, African Insurance Organisation, NKC Research, S&P Capital IQ, RisCura analysis
31
Insurance AUM in Africa
Source: Swiss Re, UN Population Division, IMF, African Insurance Organisation, NKC Research, S&P Capital IQ, RisCura analysis
32
Significant growth in insurance AUM expected
AUM by region in 2012 and 2018 (projected)
Francophone
W. Africa
Source: Swiss Re, UN Population Division, IMF, African Insurance Organisation, NKC Research, S&P Capital IQ, RisCura analysis
33
Agenda
Growth in Africa
Pension and
insurance
On the ground
34
Business languages in Africa
35
Two major social security providers in Nigeria!
36
Regulation
A “solvency 1” approach is the norm
East African common financial legislation
South Africa implementing Solvency
Assessment and Management (SAM)
37
Non-life dominates, but life growing fast
Source: African
Alliance Capital
Markets
38
Reinsurance
39
Industry consolidation
40
The challenge is culture
Insurers not trusted
Insurers not trusted
• Policy fraud
• Non-payment of claims
Rainy-day savings for life’s
adverse events
Assistance from family
network
41
Risk based supervision a long way off
42
Francophone Africa
Source: Renata De Leers, CEO ACB Consulting TOGO
43
Francophone Africa
Renata De Leers, CEO ACB Consulting TOGO
44
The informal sector
Micro
insurance
Micro pensions
Technology
Leapfrogging
Informal sector
financial
inclusion
New “micro”
legislation
“Reverse”
innovation?
45
Demography
46
Mortality
Source : United Nations, Department of Economic and Social Affairs, Population Division (2011) World Population Prospects: The 2010 Revision
47
Annuities
48
High-five for Africa
African Development
Bank President
Akinwumi Adesina
Africa's 'new oil' is
going to be the
wealth of its soil
49
Thank you
riscura.com/BrightAfrica
Q&A and discussion
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without warranty of any kind. The entire risk as to the result and performance of the
information supplied in this document is assumed by the user and in no event shall RisCura be
liable for any direct, consequential, or incidental damages suffered in the course of using the
information contained herein as a result of the use of, or the infringement of any copyright
laws. RisCura Solutions (Pty) Ltd and RisCura Invest (Pty) Ltd are authorised financial services
providers.
52
Insurance in Africa
Insurance in Africa
Agenda
Africa
Some Statistics
Current Situation
The Four Different Regions
Microinsurance
The Future in Conclusion
Insurance in Africa
Agenda
Africa
Some Statistics
Current Situation
The Four Different Regions
Microinsurance
The Future in Conclusion
Insurance in Africa
Africa Is Not A Country.........
Insurance in Africa
......It’s A Continent
Insurance in Africa
Agenda
Africa
Some Statistics
Current Situation
The Four Different Regions
Microinsurance
The Future in Conclusion
Insurance in Africa
Some Statistics (2012)
 Total Premium per Country
 Penetration Rate = Gross value of Insurance Premiums/GDP
 Premium per Capita
Region
Advanced Asia
North America
Western Europe
Oceania
South & Central America
Central & Eastern Europe
Middle East
Emerging Asia
Africa
World
TotalPremiums (US$billion)
936
1,393
1,463
97
169
73
41
369
72 (17)
4,613
Insurance in Africa
PenetrationRate (%)
12
8
8
6
3
2
1
3
4 (1.04)
7
PremiumsperCapita(US$)
4,388
3,996
2,716
2,660
282
223
124
102
66 (16.5)
656
Some Statistics (2012)
Insurance in Africa
Agenda
Africa
Some Statistics
Current Situation
The Four Different Regions
Microinsurance
The Future in Conclusion
Insurance in Africa
Current Situation
 Financial industry still has some modernising to do
 Access to money through a formal bank network can be difficult
 High interest rate and account charges by banks
Insurance in Africa
Current Situation
 Lack of trust in financial institutions
 Community comes to the aid of people in times of need
 Lack of reliable data on mortality and longevity and skilled insurance personnel
 Lack of big multi-national players
 Shallow financial markets make it difficult to raise enough money to capitalise insurance/reinsurance companies
 Non-life insurance is slightly more popular than Life
Insurance in Africa
Agenda
Africa
Some Statistics
Current Situation
The Four Different Regions
Microinsurance
The Future in Conclusion
Insurance in Africa
West Africa (Ghana)

89% of the population are uninsured

Lack of payment of premiums was an issue.

Sale of insurance on credit was common practice

No premiums no cover policy was introduced to end this

Huge issue as it stopped insurers from paying out claims and reinsurance (increased credit risk)

Compulsory fire and commercial building insurance introduced in 2006

Funeral cover – funerals are a social event in Ghana

High cost of funerals. On average cost is $7000-$8000 dollars however those in the business believe
that the “Average funeral should cost between US$15,000 and 20,000”

Insurers from South Africa, Morocco and the UK have entered the market
Insurance in Africa
North Africa (Morocco)

Conventional insurance forbidden in Islam

Takaful insurance industry on the rise

Second largest insurance market in Africa after South Africa

Huge growth seen between 2006 and 2014 (about 6% p.a.)

Mainly driven by non-life insurance premiums

Car insurance the largest portion of this

Physical injury (17%) and work-related injury (12%)

Life insurance segment still lagging behind

New Islamic law introduced which will foster growth
Insurance in Africa
East Africa (Kenya)

Industry dominated by non-life insurance (Over 60% of premiums)

41% of this insurance in car insurance

Medical Insurance just over 20%

Fire insurance 10%

Life insurance penetration is 0.94%

South African companies well represented.

Penetration rate higher than in most countries. Mainly due to innovation

Bancassurance also on the rise, less underwriting needed

Disadvantage – brokers lose out on jobs
Insurance in Africa
South Africa (South Africa)

Exception to the rest of the rest of the continent

Has a well developed life insurance industry

Life insurance accounts for 81% of all insurance premiums (rest of the continent only accounts for
29.5%)

High level of competition with the insurance market

A highly developed financial industry

High level of risk awareness

Market nearing saturation

Companies now venturing into the rest of Africa

Lots of new business coming from the rest of Africa
Insurance in Africa
Agenda
Africa
Some Statistics
Current Situation
The Four Different Regions
Microinsurance
The Future in Conclusion
Insurance in Africa
Micro Insurance
 Insurance targets the a small, wealthy, part of the population
 Leads to a situation where a large part of the population is left unprotected
 Gives a need and an opportunity for micro insurance
 Microinsurance is insurance with low premiums and low caps / coverage
 Mobile Phones and the start of mobile money transfers, proved to be a game changer
Insurance in Africa
M-Pesa
 M-Pesa is a money transfer service where users can use their mobile phones to store and
transfer money
 Developed in 2005 but launched in 2007 after the regulators had conducted the required due
diligence
Insurance in Africa
M-Pesa
 Central Bank of Kenya (CBK), Communication Authority of Kenya and Ministry of Finance then
assessed all associated risks before commissioning the project
 The CBK put in measures to ensure that minimum standards were met
 Loose regulatory structure which facilitated the development and success of the system
 Safaricom operates under a special license from CBK, whose conditions are more relaxed
compared to those of banks and other financial institutions
Insurance in Africa
Airtel Insurance (Kenya and Ghana)
•
•
•
•
Open to anyone between the ages of 18 and 75
Cover linked to recharging of airtime for pre-paid customers and usage for post-paid
customers
For prepaid customers, cover is based on monthly recharge not usage
Cover includes:
–
–
–
•
•
•
Death
Accidental Permanent Disability
Hospitalisation
Waiting period of one month for which only death by accident is covered. After first month
full cover is given
Payment made through company money transfer service for which registration is required
Hospitalisation has to be for at least 3 continuous nights
Insurance in Africa
MTN (Nigeria)
 Users can buy the insurance directly from their mobile phones
 No underwriting
 Agreed cash payment to a named beneficiary of a deceased subscriber, or to a subscriber in
the case of permanent disablement as a result of accident
 However, there is no cover for demise/total permanent disability resulting from natural
causes during the first 30 days of subscription
 Minimum age of entry 18years, maximum 60 years
Insurance in Africa
Kilimo Salama (Kenya)
 Offer farmers who plant on as little as one acre insurance policies to shield them from
significant financial losses when drought or excess rains are expected to wreak havoc on their
harvests
 Payout based on severity of weather conditions measures by specific weather stations
 To be insured one has to be within 20kms of the weather station
 Premium paid when inputs are being purchased. Suppliers register their insurance and the
farmer gets a notification on their phone
Insurance in Africa
Barclays Bank (Kenya)
 Current Account, which attracts a flat monthly single fee to cover your day to day banking
transactions and offers embedded retrenchment, funeral and hospital cash back insurance
 Funeral Insurance plan that Covers funeral expenses of up to 5 family members in addition to
the account holder – Spouse, Parents and parent In–Laws
 Accidental Hospital Cash Back cover
 Travel Insurance embedded on the International debit card – offering many benefits including
Medical & Repatriation Expense cover
 Retrenchment cover which pays 3X your monthly salary
Insurance in Africa
Agenda
Africa
Some Statistics
Current Situation
The Four Different Regions
Microinsurance
The Future in Conclusion
Insurance in Africa
The Future in Conclusion
Insurance in Africa
QUESTIONS??
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