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Naira devaluation discourages savings — Oyetunji

By on June 29, 2015

In this interview with NIKE POPOOLA, the Group Managing Director, Continental Reinsurance Plc, Dr. Femi Oyetunji, speaks on the development of insurance and reinsurance business in Africa

What are local insurers doing to curb capital flight via foreign reinsurance in Africa?

Insurance companies are looking out for security; that is why they talk about reinsuring with European reinsurance companies. This, we have been able to demonstrate because we have a B+ rating, which is a secure rating and one of the best on the continent of Africa. So, being present in those regions and by being close to the clients, they are able to trust us with their business instead of ceding most of the business to Europe and the United States. They now transact their business with us. That in some ways helps with our vision to retain as much premium as possible in Africa. We are getting there, and for us at the Continental Re, we shall continue to grow our balance sheet and grow our talents and skills so that we can provide international best practice and service to our clients.

Are African insurance companies being assisted to grow?

One of the greatest things people talk about is the training programmes we offer to insurance companies. When I met one of the chief executive officers of an insurance company recently, the first question he asked me was “Where is your training programme for this year?” We train a lot so that we can build capacity in Africa. We are also building on our skills set by introducing products, new ideas through partnership with people that we have relationship with in Europe. This is through joint training programmes. If those reinsurance companies that have the skills can train the insurance companies across Africa, it will lead to the introduction of new products so that we can do insurance better and deepen insurance penetration.

How often do you organise the chief executive officers’ summit for African companies?

We did the first chief executives’ seminar for insurance companies in 2014 in Mombasa, Kenya. The second one was in Limpopo, South Africa, this year. It is an annual event; definitely we will do one in 2016. For us at the Continental Re, it is a platform to exchange ideas, train on leadership and look for new ways of doing business with the insurance companies. The level of insurance penetration in Africa as a whole, excluding South Africa, is very low and we must do something about it. It is one of the reasons the business leaders in Africa should be able to sit back and just think of strategy. That was the why we created the CEOs’ summit and Continental Re was the first Reinsurance company in Africa to create such platform.

What kind of results are you getting on the training session?

From the kind of feedback that we get, it is already yielding results and it has created a platform for us to be able to think as an industry to look into the future on emerging risks, insurance trends for today and tomorrow and the mitigation plans. From the discussions we have had, we have received feedback that shows us that we are right in creating such a platform. What we are now doing beyond this is that instead of just meeting once a year, there are discussions we are initiating and we shall continue to be in dialogue throughout the year until the next summit on an online platform. One of the things that we are discussing right now is insurance/reinsurance across borders; how do we make it easy for people to do business across Africa? How do we sensitise our governments to remove all the travel blocks within Africa? It is very encouraging to see the level of discussion that is taking place on that platform.

Why do you think the Nigerian insurance industry has yet to get right?

I think it is our savings culture. We don’t have a good savings culture as a nation because of past experience. Inflation or devaluation of the naira makes savings unattractive to the citizens. And as you know, in insurance, apart from the non-life, life insurance is what drives the economy because it is long term. And if somebody contributes N100 premium regularly and is expecting N1,000 at the end of 10 years; when the period comes, the N1,000 that he is expecting is not even able to buy lunch, it thus becomes unattractive. The challenge we now have as an industry is to address such concerns; how we introduce products that will be resistant to inflation or devaluation. I think that is the way to go.

What are the challenges reinsurers are facing in Africa compared to their foreign counterparts?

The number one challenge is the emphasis on security rating when it comes to the placement of insurance or reinsurance. As you know, the rating agencies directly or indirectly limit your rating by a sovereign rating of where your head office is. In the whole of Africa, the only A rated country is Botswana. So when it comes to competition, most of us, except Africa Re, have no A rating and we are not able to participate in some risks. So you find that this situation is not providing a level playing field. I would like to add that being Triple A today doesn’t make you Triple A tomorrow. And even if you are Triple A tomorrow, it does not show willingness to pay a claim. So, there is the ability to pay claims and there is also the question of willingness to pay. I think for us as African reinsurers committed to this continent, the willingness to pay is there but we are restricted on the ability to participate in those risks because of our rating leading to premium flight.

In what areas do insurance companies need to be innovative?

Let’s separate life business from non-life. Life business really is the driver of several economies. The main problem we have with life business is the inflation/ devaluation, which in effect means that by the time the policy is maturing, the maturity value is no longer relevant to the initial purpose. We thus need to develop products that will be attractive to people. On non-life products, we need to develop products that people need, not products that we have copied over the years; something that is not easy. We need to spend time to carry out research and to develop the product. We need actuaries, we need engineers, and we need scientists. We need to attract all those skills into the industry, which for me is part of what the national policy on insurance should address. I think innovation of products is very key in deepening insurance in Nigeria and on the continent.

What was the performance of Continental Re in its last financial year?

It was a challenging year. It was a year when we completed putting the building blocks in place in terms of our strategy but overall, it turned out to be a satisfactory year. We anticipate exceptional growth in 2015.

What is the way forward for the African insurance industry?

The industry will thrive based on strong, highly capitalised, well skilled companies and I think we should as an industry concentrate on bringing skills into the industry that will assist the industry to grow. Hitherto we should always look inward. You can’t insure a building if you have no knowledge of engineering, you can’t make projections of a life policy if you don’t have an actuary. You can’t insure medical products if you are not a pharmacist or doctor. You need to attract those skills into the industry and we need to attract skills from outside of Africa because we have a lot of Africans in the US, in Europe that are doing great work in insurance to the benefit of Europe and the US, whom we must attract back to Africa so that we can develop the insurance industry in Africa.