‘Insurers must embrace harmonisation if Africa market is to reach its potential’
By Liz Booth of Africa Ahead
African insurers must change their attitude to open borders if the market is to reach its true potential, warned a leading reinsurer.
Speaking at the annual conference of the West African Insurance Companies Association in Banjul recently, Ogadi Onwuaduegbo, regional director for anglophone west Africa at Continental Reinsurance, said he was disappointed by the general reaction to harmonisation initiatives.
“The first question people ask is: ‘what’s in it for me?’ The question really should be ‘what benefits can we have by integrating and harmonising our efforts?’,” said Onwuaduegbo. The sector needs to think beyond its own immediate interests and then it might reap far greater rewards, he suggested.
He was speaking after Professor Sam Omale outlined the state of the insurance market and the benefits of harmonisation.
However, in his white paper on the subject presented to the conference, the professor said there are some major regulatory challenges to address. “Unlike in other financial sectors, Africa’s insurance markets are characterised by a high level of fragmentation and diversity, resulting in a regulatory climate that remains unwieldy at both national and regional levels,” said Onwuaduegbo.
“This is a major impediment to doing business and will make it difficult for insurance executives to meet the various reporting and capital requirements.”
He also pointed to the “multiplicity of regional integration arrangements within the same region that has caused conflicting goals and much confusion.”
He also pointed to the anglophone and francophone dichotomy in the Economic Community of West African States (Ecowas) region as something “to contend with, something which ought to be a strength but has rather constituted a divide”.
Another challenge to harmonisation will be the differing approaches to enforcement, with the professor pointing to Ghana as an example of a country where it has been hard to enforce the rules against those failing to meet industry standards.
Other challenges highlighted by the professor included the costs of harmonisation; market volatility; the shortage of technical human capacity; slow information exchange; a lack of policy-implementing machinery and grassroots involvement; as well as a possible backlash against the changes.
But harmonisation was firmly at the centre of discussions throughout the two-day event, with the Gambian government spokesman pointing to the way in which insurance operates as an international business and suggesting that greater harmonisation would enable the industry to interact across borders and ultimately become more profitable, benefiting the local economies and populations. However, he admitted there are challenges to overcome.
The governor of the Bank of Gambia, Buah Saidy, added that there needed to be a better understanding of the insurance industry among governments before harmonisation can be truly successful.
As the professor concluded: “The insurance industry is one of the pillars of any financial system and its contribution to the GDP and overall financial system stability has been established. The insurance industry is the bedrock of most economic development in the industrialised world and yet this remains untapped in Africa. We have the numbers. We have the resources and we have the market. What is holding us back is a lack of synergy; collaboration and integration that create a common large and more profitable market for the good of the whole region.”
“Each state is craving for individual idiosyncratic relevance and autonomy that will only keep us out of the game in the scheme of the insurance world,” he concluded.
Professor Omale called for the harmonisation exercise to “move from rhetoric to definitive actionable and time-bound plans to actualise it”.
“An integrated insurance regulation framework will provide a critical benchmark for regulators and market players in designing appropriate structures for business conduct rules and risk-based capital adequacy requirements across the region.
He suggested WAICA should “as a matter of urgency, produce a common insurance legal and regulatory framework for the zone and set a date for the adoption of that framework.”
The WAICA event also saw the Association become the latest signatory of the Nairobi Declaration on Sustainable Insurance (NDSI), joining 153 companies and associations in becoming Signatories to the Declaration. WAICA president Eddie Efekoha signed the Declaration in a ceremony during the WAICA annual general meeting and education conference in Banjul, the Gambia, on 22nd April.
