We’ve missed it; the future of Africa’s reinsurance is in retail, not corporate

The managing director of Continental Reinsurance Femi Oyetunji. PHOTO | COURTESY 

By NJIRAINI MUCHIRA
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The managing director of Continental Reinsurance Femi Oyetunji spoke to Njiraini Muchira about how the local market can compete effectively with global players.

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What is the outlook for Africa’s reinsurance market in 2018?

We project that more global reinsurance companies will be coming into the African market. While this will enhance competition, the fact that major economies on the continent are turning around means established local reinsurance companies will be better placed to take advantage of the rebound.

Does this worry the local reinsurance companies?

We are not worried for two reasons. One is that Africa’s reinsurance companies have strong footprints on the continent. Second, these global players have always been in competition with us. They have always been in Africa. The difference is that they have now intensified their focus on the continent.

Businesses will get tougher for African players because global players come with bigger balance sheets and stronger technical capacity.

What makes Africa attractive for reinsurance business?

Africa has vast potential for growth of retail business because of its demographic dividend. About 60 per cent of Africa’s population is aged between 15 and 25 years, and the continent has a strong emerging middle class.

This makes Africa attractive. We need to create value to tap into this dividend by investing and developing the products the population requires.

Should governments maintain protectionism tendencies in favour of local companies?

Global players complain of protectionism yet they have protected their markets by placing emphasis on ratings.

Continental Re for example cannot do business on the London Stock Exchange because we are not ‘A’ rated. Why shouldn’t I have some sort of benefits in my own market where I pay taxes, employ people and invest in training? These things must count for something.

Even within Africa some governments have certain laws that affect us but they are necessary because countries, regions and even the continent wants to keep as much of the premiums generated within. Nobody should argue against that.

Some investors and multinationals are reluctant about signing up with local players, citing the lack of financial and technical capacity to underwrite complex businesses...

To some extent African players lack the technical capacity, which is a challenge companies must address. The shortage of skills can be addressed but we are not doing enough. In terms of financial capacity, it is hard to build a strong balance sheet when rating is used against us.

This is why 60 to 70 per cent of premiums in Africa are expatriated abroad. It thus becomes hard to build a strong balance sheet when everything is going out.

I support regulators increasing the required minimum capital which will mean that companies merge both within the country and across borders to build bigger balance sheets.

How is rating used against African companies?

The reinsurance business is dominated by corporate entities, the majority of which are multinationals that demand the company they are doing business with is backed by an ‘A’ rated reinsurance company. There is only one ‘A’ rated reinsurance company in Africa.

The reinsurance industry in Africa is worth only $6.8 billion, against the global value of $600 billion, which is just a drop in the ocean. How can this be turned around?

I agree and it is a reflection of the level of insurance penetration across Africa. But a drop in the ocean means the ocean is present so the potential exists.

The challenge is how to turn this potential around. We are pushing for two things — first creating awareness through collaborations, and secondly getting the regulators to understand how the industry can be stimulated to grow. We must aim at doing at least 10 per cent of the global business in 10 years.

Why has Continental Re chosen to focus on adaptation of technology for this year’s annual CEOs Summit?

The summit provides a platform where industry leaders can come and share thoughts and collectively look for solutions. This year the focus is on technology because virtually everything these days is governed by technology. Insurance is about information and data and for the industry to fully optimise, it needs technology.

In Africa we have not invested heavily in brick and mortar meaning we are best placed to leapfrog in technology. Adopting digital technology will help drive penetration. For example, by using the mobile phone to sell insurance products we can reach more people.

Does this mean the future of insurance is in retail?

There is no other option. If you look where insurance has succeeded it is not the corporates. I think that is where we have missed it in Africa.

Countries like Morroco, Kenya and Nigeria are already focusing on retail insurance driven by the large populations and a growing middle class. Only retail can turn around the industry.

As Continental Re what are your plans for the rest of Africa outside Nigeria where your business is concentrated?

Our business is no longer concentrated in Nigeria. Five years ago Nigeria accounted for 75 per cent of the continental business. At the end of last year, the country accounted for 40 per cent.

Our strategy has been diversification by region and by product. We are structured in terms of each region and the next stage is to build capacity.

Bio

Education:
Femi Oyetunji holds a doctorate in statistics from the University of Manchester in the UK, a Master of Science degree in statistics from Imperial College, London and a Bachelor of Science degree in statistics and operational research from the University of Manchester.

He is a Fellow of the Institute of Actuaries, UK, and has attended several management development programmes locally and overseas.

Experience:

Mr Oyetunji joined Continental Reinsurance as managing director in 2011.

He was previously the founding managing director/CEO of Alexander Forbes Consulting Actuaries Nigeria Ltd. As the chief actuary, he supervised many large insurance and pension schemes.

He continued to serve on the board of the company as a non-executive director until his resignation to join Continental Reinsurance.

He is a non-executive director of Crusader Sterling Pensions Ltd., a Nigerian pension fund administrator.