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Insurance in the countries of Africa

The market of insurance services of Africa started developing long before obtaining political independence by them.  Since then it overcame the long evolutionary way caused by dynamics of a political policy, features of formation of a real sector of economy and the state social policy.  So far the national insurance markets in Africa developed sufficiently to protect property interests of the population and the enterprises, though not without the aid of the foreign reinsurance companies.  Nevertheless in comparison with other regions of the world insurance in Africa is developed poorly.  The reasons for that should be looked for not so much in the sector of insurance services, how many in features of economic development of the countries of the African continent:  as it is known, economic basis of insurance is, first of all, the real sector of economy.  Meanwhile the industry, agricultural production and infrastructure are the most backward spheres in the majority of the countries of Africa.

The insurance markets of the countries of Africa owing to different social economic and political reasons are at different stages of development. In the best way insurance is developed in the Republic of South Africa of which in 2011 82% of all insurance premium collected on the continent were the share. Moreover, in the Republic of South Africa a share of insurance premiums in gross domestic product - 18,78% - the greatest in a pattern. It is explained by that social insurance of workers in the country generally is made by employers at private insurers.

Rather developed against the remaining African countries it is possible to read the insurance markets of Morocco of 4%, Egypt of 1,8%, Zimbabwe of 1,5% and Nigeria of 1,3%. Indexes quite good for the continent on voluntary medical insurance are shown by Namibia and Zimbabwe though in Zimbabwe while only 8% of the population have policies of voluntary medical insurance.

In 2011 insurers of Africa collected in total 31 billion dollars, or a little more than 1% of the world volume of insurance premiums. The most part of insurance premiums is collected on life insurance of 71%, or 22 billion dollars while other types are developed much more feeblly.

The main premises of the modern situation originate in the colonial period. Till 1960th years in the insurance market of Africa the leading role was played by branches of the European companies which insured the loads sent to the mother countries, "against all risks". Insurers offered local population and the European immigrants only insurance of motor transport and commercial risks, their head offices in Europe were engaged in reinsurance only.

With finding by colonies of political independence many African branches of the European insurance companies were nationalized, and their technical reserves are nested in local assets. The governments of the African countries headed for formation of the national insurance markets, aiming to mobilize internal investment resources and to avoid outflow of currency means abroad in the form of an insurance and reinsurance premium. This course was favored by an UN line item: in the 1960th years of UNCTAD officially I recognized importance of insurance in the freed countries for an acceleration of their economic development and the free trade, I promoted acceptance by parliaments of the African countries of a row of the bills formalizing insurance legal relationship.

In the 1960th years the favorable economic climate and some liberalization of the legislation of the African countries led to fast formation of the national insurance markets in which joint stock companies with involvement of the state and in certain cases foreign insurers prevailed. Risks were transferred to reinsurance, generally to large German and Swiss overcautious persons. During the same period the first reinsurance organizations, completely belonging to the state were created also: Egypt Re - Egypt, 1958, Société Centrale de Réassurance-Morocco, 1961, Caisse Nationale de Réassurance - Cameroon, 1961, Kenya Re - Kenya, 1970. Overcautious persons had no freedom of action as were obliged to accept in reinsurance strictly certain shares of risks from local insurers.

Since the beginning of the 1970th years in Africa certain "bifurcation" of a policy in the insurance sphere, corresponding to political tendencies of that time was watched. Part of the states mainly, to some extent "socialist oriented" monopolized insurance business, having completely transferred it to hands of the state companies. Others saved the competitive environment in direct insurance, but thus cultivated the strong player in the market in the person of the state insurer. The state monopoly was entered by 22 countries: Angola, Mozambique, Swaziland, Rwanda, Burundi, Ethiopia, Uganda, Tanzania, Zambia, Seychelles, Madagascar, Benin, Burkina Faso, Guinea, Chad, NR Congo, Nigeria, Zaire, Algeria, Libya, Mauritania, Ghana. Example some "softer" policy can be Morocco, where after carried out in 1973. nationalization of branch in which 265 foreign insurers worked, remained only 22.

The purposes of nationalization became outflow preventing abroad foreign currency on channels of reinsurance a way of increase in own holding under contracts of direct insurance, a share in the insured sum or at a loss, compensated by insurance company independently, without the aid of overcautious persons; support of investment of technical reserves within the country. During existence of the monopolized insurance market in Africa five state reinsurance companies in Ghana, Algeria, Tunisia, Sudan and Nigeria were created also.

Single-digit to evaluate indexes of activities of the state insurers and overcautious persons during this period it isn't possible as they strongly varied from the country to the country and from the company to the company. However, despite a lack of the administrative experience, strongly limited own means and political interference of the authorities, the state insurance and reinsurance companies, undoubtedly, made a noticeable contribution to development of insurance branch.

At the end of 1980 - the beginning of the 1990th years in economy of Africa the opposite tendency started being shown: under pressure of the World bank which has appeared with the program of structural conversions of economy, the markets began to move towards liberalization, and form of ownership to transfer from state to private. These changes didn't avoid the markets of direct insurance and reinsurance which also underwent procedures of liberalization, privatizations and deregulations. Until recently Swaziland and Madagascar saved the state monopoly for insurance business, but also these countries eventually refused it.

Contrary to good intentions of authors of programs of structural conversions, their implementation as Albert Nduna claims, one of principals of ZIMRE Zimbabwe insurance company, undermined rather effective activities of the African overcautious persons. They lost critical mass of the risks arriving on contracts of mandatory cession from local insurers which from the beginning of reforms were reoriented on the international market of reinsurance. Some of overcautious persons didn't withstand the competition and eliminations, for example, the reinsurance companies of Mauritius - Reinsurance company of Mauritius and Cameroon - underwent Caisse Nationale de Réassurance.

By 1998 in Africa there was an insurance market with rather liberal state regulation and with dominance of non-state forms of ownership. In total by this time on the continent 580 insurance companies, including 157 in Nigeria, 120 in the Republic of South Africa, 41 in Kenya were. In 2004 total number of the African insurers made 550.

The essential contribution to development of the insurance market in Africa was made by FAIR (FAIR) - Federation of Afro-Asian insurers and the overcautious persons, founded in 1964 for solidifying of business cooperation between Afro-Asian insurers and overcautious persons. Now in FAIR consists 188 insurance and reinsurance companies. Under the auspices of FAIR some insurance pools, including the Aviation insurance pool of FAIR integrating insurers of aircrafts with headquarters in Kasablank work.

As a result of the next measures for liberalization of the local markets the large number of new insurance companies was founded in the countries of East Africa - Zambia, Tanzania, Mozambique and Ethiopia.

Liberalization of the insurance markets shouldn't be understood as a state failure from regulation. It means only the relative simplification of procedure of entrance on the market and pluralism of forms of ownership. Thus monitoring over activities of insurers and sanctions of supervisory authorities can be rather rigid. So, in the Republic of South Africa the Committee on financial services strictly controls the maximum share of different types of assets in which investment of reserves on life insurance is allowed, and also forbids within the first five years of payment under contracts of life insurance for survival. In Zimbabwe the Commission on insurance questions in case of the Ministry of Finance periodically changes the extent of minimum admissible value of the capital of the foreign insurer, strictly controls the risks transferred to reinsurance abroad, and limits of own holding of risks accepted on insurance. Besides, existence is required from insurance company of the high rating confirming level of its development within the country, and receiving the appropriate permission before an output on a foreign market. Therefore, liberalization of the African insurance markets is very relative. For comparing: in the Russian insurance market there are no restrictions neither on ratings, nor on transmission of risks to reinsurance abroad.

However, in other former British colonies regulation of the market was absolutely other: in the Insurance act of Nigeria of 1976 generally there were no normative requirements to solvency of insurers and to placement of technical reserves by them. However the situation changes: since 2003 in the country the new Insurance act works, and by the beginning of 2007 all insurers and overcautious persons were obliged to increase authorized capitals to the new, raised standards, and in payment of authorized capital the local regulator - the National insurance commission (NAICOM) - more doesn't accept borrowed funds from banks and real estate.

Thus, the following factors had impact on formation of the insurance market in Africa: "colonial heritage" in the form of branches of the European insurance companies. They brought standards, standards and a certain practice of insurance activities on the continent that, certainly, served local insurers as good pulse and an example for imitating, and also became somewhat "a smithy of frames". The European branches initially connected the African insurance market to the world market of reinsurance that repeatedly increased the capacity of domestic market and put essential reserves of its growth. At the same time the foreign companies objectively hindered with origin and activities of the local competitors claiming for the same market niches; voluntary self-isolation. In the countries adhering after obtaining independence of "socialist orientation", the insurance market was narrowed to several insurers, lost ability to self-regulation through the competition, as well as through professional associations, came to a status of absolute or relative insulation from the outside world as a whole and from foreign overcautious persons in particular that didn't promote implementation of new insurance products and technologies; liberalization of the insurance market.

The first two tendencies, being multidirectional, the first towards integration with the outside world, the second towards insulation, paradoxical image added each other, promoting the same phenomenon, suppression of a private enterprise initiative on places that resulted in inability of the majority of the African countries to create the strong and rather independent of foreign investments the national insurance market. Under such circumstances liberalization not everywhere was timely and not always promoted improvement of the insurance market.
Category: Insurance history in the different countries of the world | Added by: Chance23 (26.04.2014)
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