This article war first published by The Africa Report.
Coenraad Vrolijk, The CEO of Allianz Africa talks about the need for targeted regulations in Africa’s insurance markets and the markets the company wants to invest in.
Ethiopia is among the most attractive untapped insurance markets and the opening of the sector to foreign investment is just a matter of time, Allianz Africa CEO Coenraad Vrolijk tells The Africa Report. Foreign direct investment in insurance is not allowed in Ethiopia.
But there are very few countries that persist in excluding foreign capital in the long term, he says. Vrolijk hopes to oversee Allianz’s entry into Ethiopia within the next three years: “It’s a question of when.”
Signs of market opening remain at this point “discussions”, but they are “positive discussions which are picking up in frequency”.
African insurance has shown average annual organic growth of 10% in dollar terms since the mid-1990s, and Vrolijk sees no sign of that slowing. Markets with substantial growth potential include Morocco, Nigeria, Kenya and Ghana, he says. Allianz has a wide range of possible new African markets.
About half of the continent’s 54 countries are “interesting”, yet Allianz is present in only 13. Vrolijk says he is “slightly more optimistic” for the company’s prospects in 2020 than he was at the start of 2019. This is due to internal organisational improvements, such as IT system upgrades.
The growth story in Africa faces a possible hurdle in the form of claims ratios, which push up costs for insurers when they increase. François Jurd de Girancourt, head of the McKinsey Africa financial institutions practice, says they could derail the industry’s growth.
Claims-to-premiums ratios
In auto insurance, the largest line of business in many countries, have deteriorated in the past three years in maturer markets such as South Africa and Morocco, he says: “This is not just a short-term effect, but a trend which requires insurers to revisit their business model.”
Capturing and using data, combating fraud, reviewing claims processes and reinventing the relationship with agents are all areas insurers must look with regard to these markets, says De Girancourt.
Insurance yo-yo
Vrolijk “strongly disagrees” with McKinsey’s worries. Africa, he says, has “the lowest claims ratios of any continent in the world and will remain so for the next five years”. Kenyan experience supports his argument.
According to Deloitte’s Insurance Outlook for 2019-2020 in East Africa, expense and claims ratios in Kenya, one of Africa’s more mature insurance markets, showed a slight upward trend from 2012 to 2017, before declining to jut over 40% in 2018. As markets mature, Vrolijk says, claims ratios tend to go up.
When that happens, he argues, premiums will rise and claims will fall again. He says that claims ratios that are too low show that little is being given back to the customer. Manaers reporting claims ratios of less than 40% have to provide him with explanations.
Vrolijk sits on the board of the Africa Reinsurance Corporation, which gives him access to insurance regulators who are also board members. He is encouraged by the conversations he has had, which leave him with no reason to slow down investment. There is a continent-wide trend towards improving capital and solvency rules, he says. “African regulators are making the journey.”
Large-risk and industrial insurance in Africa are problems, as very little experience has been accumulated on quantifying losses in those fields, he says. Some African insurers also fail to reinsure their risks, he says. “It keeps regulators awake at night.”
Nigerian penetration has been held back by a lack of insurance agents. There are fewer agents in the whole of Nigeria than at the largest Kenyan insurer, Vrolijk says. Likewise, bancassurance in Nigeria has so far been “ineffective” and remains a tiny market. “There have to be people selling insurance.” Still, the Nigerian insurance market is “professionalising very quickly” after years of being “extremely fragmented.”
Compulsory insurance offers one way forward, he says. The first job is to get governments comfortable with why an insurance industry is needed in their country. The role of insurers in developing a pool of collective savings means that they can be the biggest buyers of bonds issued by African governments, he says. “When governments issue bonds, we jump on them.”
Third-party insurance for cars and accidents at work should be compulsory too, he says. Whereas third-party liability in Morocco is unlimited, such cover for Nigerian road accidents results in meaninglessly small payouts, he says.
Need for a strong judiciary
Kenya’s much higher levels of insurance penetration, by contrast, have been achieved because of “relatively liberal” regulatory rules that have allowed insurance companies to start innovating, says Vrolijk.
The main obstacle to compulsory insurance, he says, is that it takes time to develop and is complicated to enforce. A crucial ingredient, he says, is an “effective, fast and predictable” judiciary system, essential to adjudicating third-party claims. The strength and independence of a judiciary and the extent of insurance penetration have a “very strong” correlation, he adds.
African free trade, Vrolijk says, is “not yet really happening on the ground.” It remains impossible for Allianz to draw on shared supplier services – such as in the back office – across jurisdictions because “the taxman won’t accept it”.
This hurts smaller African countries in particular, as its means it is not viable to run operations there. Allianz has pulled out of some smaller markets such as Mali, Central African Republic (CAR), Togo and Burkina Faso.
These, he says, are too small to justify meeting regulatory requirements on capital. Even 100% market dominance in CAR, he says, would not justify the funding injection demanded. “Capital requirements need to be scaled to the size of the market,” he says. “One size fits all doesn’t make sense.”
For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.
Sources: [1], [2]. Image sources: [1], Rohan Reddy [2].
Opinion: For African Markets, One Size Fits All Doesn’t Make Sense
This article war first published by The Africa Report.
Coenraad Vrolijk, The CEO of Allianz Africa talks about the need for targeted regulations in Africa’s insurance markets and the markets the company wants to invest in.
Ethiopia is among the most attractive untapped insurance markets and the opening of the sector to foreign investment is just a matter of time, Allianz Africa CEO Coenraad Vrolijk tells The Africa Report. Foreign direct investment in insurance is not allowed in Ethiopia.
But there are very few countries that persist in excluding foreign capital in the long term, he says. Vrolijk hopes to oversee Allianz’s entry into Ethiopia within the next three years: “It’s a question of when.”
Signs of market opening remain at this point “discussions”, but they are “positive discussions which are picking up in frequency”.
African insurance has shown average annual organic growth of 10% in dollar terms since the mid-1990s, and Vrolijk sees no sign of that slowing. Markets with substantial growth potential include Morocco, Nigeria, Kenya and Ghana, he says. Allianz has a wide range of possible new African markets.
About half of the continent’s 54 countries are “interesting”, yet Allianz is present in only 13. Vrolijk says he is “slightly more optimistic” for the company’s prospects in 2020 than he was at the start of 2019. This is due to internal organisational improvements, such as IT system upgrades.
The growth story in Africa faces a possible hurdle in the form of claims ratios, which push up costs for insurers when they increase. François Jurd de Girancourt, head of the McKinsey Africa financial institutions practice, says they could derail the industry’s growth.
Claims-to-premiums ratios
In auto insurance, the largest line of business in many countries, have deteriorated in the past three years in maturer markets such as South Africa and Morocco, he says: “This is not just a short-term effect, but a trend which requires insurers to revisit their business model.”
Capturing and using data, combating fraud, reviewing claims processes and reinventing the relationship with agents are all areas insurers must look with regard to these markets, says De Girancourt.
Insurance yo-yo
Vrolijk “strongly disagrees” with McKinsey’s worries. Africa, he says, has “the lowest claims ratios of any continent in the world and will remain so for the next five years”. Kenyan experience supports his argument.
According to Deloitte’s Insurance Outlook for 2019-2020 in East Africa, expense and claims ratios in Kenya, one of Africa’s more mature insurance markets, showed a slight upward trend from 2012 to 2017, before declining to jut over 40% in 2018. As markets mature, Vrolijk says, claims ratios tend to go up.
When that happens, he argues, premiums will rise and claims will fall again. He says that claims ratios that are too low show that little is being given back to the customer. Manaers reporting claims ratios of less than 40% have to provide him with explanations.
Vrolijk sits on the board of the Africa Reinsurance Corporation, which gives him access to insurance regulators who are also board members. He is encouraged by the conversations he has had, which leave him with no reason to slow down investment. There is a continent-wide trend towards improving capital and solvency rules, he says. “African regulators are making the journey.”
Large-risk and industrial insurance in Africa are problems, as very little experience has been accumulated on quantifying losses in those fields, he says. Some African insurers also fail to reinsure their risks, he says. “It keeps regulators awake at night.”
Nigerian penetration has been held back by a lack of insurance agents. There are fewer agents in the whole of Nigeria than at the largest Kenyan insurer, Vrolijk says. Likewise, bancassurance in Nigeria has so far been “ineffective” and remains a tiny market. “There have to be people selling insurance.” Still, the Nigerian insurance market is “professionalising very quickly” after years of being “extremely fragmented.”
Compulsory insurance offers one way forward, he says. The first job is to get governments comfortable with why an insurance industry is needed in their country. The role of insurers in developing a pool of collective savings means that they can be the biggest buyers of bonds issued by African governments, he says. “When governments issue bonds, we jump on them.”
Third-party insurance for cars and accidents at work should be compulsory too, he says. Whereas third-party liability in Morocco is unlimited, such cover for Nigerian road accidents results in meaninglessly small payouts, he says.
Need for a strong judiciary
Kenya’s much higher levels of insurance penetration, by contrast, have been achieved because of “relatively liberal” regulatory rules that have allowed insurance companies to start innovating, says Vrolijk.
The main obstacle to compulsory insurance, he says, is that it takes time to develop and is complicated to enforce. A crucial ingredient, he says, is an “effective, fast and predictable” judiciary system, essential to adjudicating third-party claims. The strength and independence of a judiciary and the extent of insurance penetration have a “very strong” correlation, he adds.
African free trade, Vrolijk says, is “not yet really happening on the ground.” It remains impossible for Allianz to draw on shared supplier services – such as in the back office – across jurisdictions because “the taxman won’t accept it”.
This hurts smaller African countries in particular, as its means it is not viable to run operations there. Allianz has pulled out of some smaller markets such as Mali, Central African Republic (CAR), Togo and Burkina Faso.
These, he says, are too small to justify meeting regulatory requirements on capital. Even 100% market dominance in CAR, he says, would not justify the funding injection demanded. “Capital requirements need to be scaled to the size of the market,” he says. “One size fits all doesn’t make sense.”
For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.
Sources: [1], [2]. Image sources: [1], Rohan Reddy [2].
South African Company Ready to Roll Out Low-cost Ventilators for the African Market
South African company EPCM Holdings has reacted quickly to the heightened demand for ventilators due to the Covid-19 outbreak. It has recently started producing its first low-cost ventilator (see prototype in the above video) units for delivery to several African countries.
EPCM is an engineering, procurement and construction company specialising in oil and gas projects in Africa and beyond.
EPCM’s co-founder and CEO, Tom Cowan, came up with the idea for the ventilator following a visit to his sister, a medical doctor, just before South Africa went into lockdown. She voiced her concern regarding the shortage of ventilators, both in South Africa and the rest of the continent.
“At that stage I wasn’t even 100% sure what a ventilator does. We talked about it and she explained it to me, and it sounded like something very similar to a gas system that we usually design,” he says.
After some internet research, Cowan came to the conclusion that designing a ventilator wasn’t “too complex”.
“About two hours after that, the first concept of a ventilator was born, and maybe two hours after that we started with some more detailed design … And it took about two, three days for us to completely understand what we wanted to build and do a few prototypes.”
The company deliberately kept the design very basic to reduce costs and ensure that it can be made from materials and machines currently available in most African countries. “The whole ventilator can be cut from a perspex plate … and then you basically have to add the electronic component to that and then it will work,” he says.
“We’ve specifically designed it to be easy to manufacture … Our design can be made from perspex, it can be made from stainless steel. If you have nothing else, you can even make it from wood.”
“The whole idea behind this was to get it rapidly manufactured. We’ve partnered with a laser cutting company in South Africa which is able to cut many of the sheets in a day, and we can just assemble,” Cowan adds.
A ventilator is a machine that provides mechanical ventilation by moving breathable air into and out of the lungs, to deliver breaths to a patient who is physically unable to breathe, or breathing insufficiently. Modern ventilators are computerised microprocessor-controlled machines.
Cowan says the Covid-19 outbreak has prompted many people to design simple mechanical ventilators, but these often lack the ability to precisely control the flow of gas. “Our system is designed so that you can physically set the breaths per minute, volume per breath, maximum pressure and flow for the machine,” he explains.
Whereas modern ventilators used in top hospitals cost anything from $20,000 and upwards, EPCM’s model will go for less than $2,000.
The company started with the production of 50 units for delivery to Zimbabwe, Mozambique and Ghana. Cowan says these countries have less stringent regulations around the approval of medical devices than South Africa, where EPCM is yet to receive the go-ahead for its ventilator.
“If you want to get a ventilator approved in South Africa, you need European Union approval … The regulations and the hurdles that you have to jump over to get these ventilators certified is actually the biggest concern and probably the reason why there is not a lot of innovation or new companies starting to focus on the ventilator industry.”
According to Cowan, the South African authorities are however relaxing some of their regulations in response to the Coronavirus crisis. “They have to. It is either, relax some of the regulations or have a lot of people die.”
Commenting on the effects of Covid-19 on EPCM’s core business, Cowan said while most of the company’s construction projects are currently standing still, its consulting, engineering and procurement work continues.
The company is, however, seeing an impact from the dramatic weakening of the South African rand against major currencies. The currency has weakened from R14.76/$1 on 5 February to R19.05/$1 today. “Once you have a crisis, emerging [market] currencies are all going down. I think it is important that you have US dollar-based income, which we do have. But we also have procurement with fixed-price contracts in the European, Asian and American markets, which definitely provides challenges when you have our currency fluctuating like it is now,” he explains.
For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.
Sources: [1], [2]. Image sources: [1], [2].
Our Interview with EuRA on Adapting to COVID-19 in South Africa
The European Relocation Association (EuRA) recently interviewed our MD, Rene Stegmann, remotely, to find out how we’re adapting as a business, and as individuals, to the COVID-19 situation in South Africa.
We thank EuRA for the opportunity to engage, and hope our community finds the interview informative. Feel free to view the video below.
For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.
Sources: [1], [2]. Image sources: [1], [2].
SA Home Affairs Outlines Measures to Deal With Immigration
The Department of Home Affairs has outlined temporary measures that have been put in place to address immigration matters during the lock-down period.
The temporary measures were introduced after President Cyril Ramaphosa declared a National State of Disaster on 15 March and subsequently a national lockdown from 27 March, extended until the end of April 2020, to contain the spread of COVID-19.
These temporary measures will remain valid until 31 July 2020, unless extended officially by the department. They apply only to foreign nationals, who have been legally admitted into the country.
The visa concessions are contained in the Directions, which have been issued by the department in terms of the Disaster Management Act, 2002.
“Visa concessions listed below apply to those with visas that expired from 15 February 2020, unless a person has proof that he/she had already submitted an application for a visa extension prior to 15 February 2020 and the outcome is pending,” the department said.
Expiry of visas
Holders of temporary residence visas, which expired from mid-February 2020, who did not renew their visas before the lockdown, will not be declared illegal or prohibited persons.
“Any person whose visa expired before or during the lockdown will not be arrested or detained for holding an expired visa. Those who opt to return to their countries of origin or residence after the lockdown, instead of renewing their visas, will not be declared undesirable upon departure,” the department said.
During the lockdown, the department is not receiving or adjudicating applications for visas and for permanent residence permits.
“Foreign nationals, whose visas expired after 15 February 2020, may reapply for their respective visas or relevant visa exemption while in the Republic, immediately after the lockdown has been lifted. They will not be required to apply for authorisation to remain in the country (Good Cause/Form 20),” the department said.
Foreign nationals, whose visas expired after 15 February 2020, who had scheduled appointments on dates which fall within the lockdown period, should reschedule their appointments to an available date after the lockdown has been lifted.
Work, study and business
People whose visas expired during the lockdown and those who have submitted their applications before the lockdown but their applications are still pending will be allowed to work, study or conduct business after the lockdown while waiting for the outcome of their applications.
“Visas issued to nationals of high risk countries, who were outside the Republic on 15 March 2020, were revoked – as per the Directions issued by the department in terms of the Disaster Management Act, 2002. These visas remain revoked,” the department said.
During the lockdown, except for cases relating to expatriation initiated by another State, all foreign nationals, who are currently in South Africa, may not depart.
Holders of the Lesotho Special Permit have up to 15 June 2020 to submit their applications for the Lesotho Exemption Permit.
The Lesotho Special Permits, which expired on 31 December 2019, remain valid until 15 June 2020. No new applications will be taken.
“Any asylum seeker, whose visa expired from 16 March 2020 to the end of the lockdown period, will not be penalised or arrested, provided that they legalise their visa within 30 calendar days of the lockdown being lifted,” the department said.
For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.
Sources: [1], [2]. Image sources: [1], [2].