SOUTHERN Africa Reinsurance Company (Sare), a 100% subsidiary of FBC Holdings limited has been granted a BBB+ on their claims paying ability, by the Global Credit Rating Agency (GCR), which is based in South Africa.
which carries out the business of short-term reinsurance, providing support to the local and regional direct insurance and reinsurance companies, is rated the second largest reinsurer in Zimbabwe, with a market share of about 15%.
According to GCR,”Southern Africa Reinsu-rance Company, Limited’s established track record as a credible player in the Zimbabwean reinsurance market has been positively viewed. With a turnaround on claims of just five days, the company has a highly liquid investment portfolio, reporting cash to claims coverage of 16,2 months in the financial year 2003. Sare’s strength and buoyancy is further enhanced by the fact that 42% of their cash holdings are in hard currency and offshore.”
Sare managing director, Chris Gomwe noted that his company’s performance was measured against a difficult operating environment, characterised by hyperinflation, the volatile equity market, and negative real interest rates amongst others.
Established in 1994 and listed on the Zimbabwe stock exchange in December 1999, Sare’s capital base has increased by a compound rate of 103% between listing in 1999 and 2002. This success is largely attributable to the experienced team of experts in the Reinsurance sector, at the helm of the reinsurance company. A fellow of both the Chartered Insurance Institute of London (FCII) and the Chartered Insurance Institute of South Africa (FCIISA), Gomwe has a wealth of experience in the insurance and reinsurance industry. With over 33 years in wide ranging experience at senior level, Gomwe is confident of his company’s growth prospects in the market.
Gomwe keeps an eye on developments within the reinsurance industry, through high level participation in the sector in key positions such as secretary general of the Organisation of Eastern and Southern Africa Insurers as well as chairman of the Zimbabwe Association of Reinsurance Offices.
Tichaona Mabeza, the general manager, finance, corporate services and company secretary, holds a bachelor of business studies degree and is an associate of the Chartered Institute of Secretaries and Administrators. With over fifteen years of experience in the reinsurance sector, he is a founder member of the establishment.
With new developments and the growth of the FBC Holdings Group, Mabeza now assumes the role of group company secretary, with responsibilities for all company secretarial functions of the group with emphasis on good corporate governance.
Kleto Chiketsani holds a bachelor of business studies degree and is an associate of the Insurance Institute of South Africa. With 14 years of experience in the insurance sector, he is a founder member of Sare. As general manager (technical) he is in charge of underwriting (both treaty and facultative) and claims.
Sare has set the target of writing more business within the region, whilst increasing market share in the country. With an augmented capital base through a $10 billion capital injection, from the parent company FBC Holdings limited in August last year, Sare is certainly set to achieve its intended targets. Prior to its acquisition by FBC Holdings Limited, Sare had been on the growth path in financial terms, with its financial base ratio rising from 67% to 90% in 2003 on the back of a 16 fold increase in insurance funds to $6,5 billion.
The $10 billion capital injection by FBC Holdings Ltd has resulted in an international solvency ratio increase to 54%, which is more than double the minimum legal requirement of 25%, for Zimbabwean insurance and reinsurance companies.
Sare is in the business of providing reinsurance solutions to clients in Zimbabwe and the region. The business includes the provision of reinsurance and retrocession to writers of fire, marine, motor, engineering, accident, aviation, credit and miscellaneous classes.
“At Sare it is our aim to maximise client value by bringing together our world-class knowledge of the reinsurance market and expertise as well as our risk-assessment capabilities to create reliable solutions for our clients. We continuously endeavour to establish close links with our clients in order to develop and deliver sophisticated, reinsurance-based solutions to their needs” said Gomwe. The company has made significant inroads into Africa, covering neighbouring countries such as Zambia, Botswana and Malawi going as far afield as Uganda and Morocco.
Locally written business currently contributes 90% of the revenue with the remaining 10% being external, mainly from other countries in Africa. “We intend to grow the external business to about 30% of our book, given the increased capital base”, said Gomwe.
Products and services
Sare provides short-term reinsurance services under both proportional and non-proportional treaty and facultative business for all classes of general insurance. The major lines of business for Sare are treaties and facultative reinsurance, with the latter contributing more than treaties on gross premium written. The company’s key revenue drivers are fire and motor classes with miscellaneous accident and engineering also contributing significantly to the revenue.
Facultative business has generally dominated the book, comprising 67% of gross premiums, whilst treaty business contributes the balance. Fire business premium comprises 34% of gross premium written while motor accounts for 33%.
“Given the general decline in demand for motor insurance, we anticipate that the motor class will account for a lower proportion of the business in 2005,” said Gomwe, adding that the success of his business has been largely due to the support received from business associates within the industry.
“In addition, to our success in the mainstream business, we owe a lot of our success to support on our investment portfolio,” Gomwe said. The company’s investment criteria largely revolve around maintaining adequate liquidity for operating requirements, the security of capital, and profitability.
Sare’s capital base has historically been supported by the company’s investment income. “Given the risk profile, our equity portfolio is relatively small, comprising mainly blue chip counter shares across the various sectors,” he said, adding that his company has also maintained a small property portfolio, which provides a hedge against inflation. Sare’s retrocession programme is led by Ascot, a syndicate of Lloyds of London, and rated a single A internationally by Standards & Poor, which takes a 20% share of the XOL (excess of loss, which is a type of treaty; it means the same thing as a non-proportional treaty) programme.
“A further 50% of the XOL programme is placed with various other Lloyds syndicates, while 25% share of the surplus treaty is taken by the General Insurance Company of India, GIC of India,” said Gomwe, adding that the rest of the programme is placed with reputable international reinsurers.
“The Credit Rating from GCR is a great achievement in the history of the organisation but this was made possible by the support from all our business partners which is greatly appreciated” said Gomwe.