Nigeria Stock Exchange(NSE)-listed Continental Reinsurance, which underwrites business in Zimbabwe through proxies, says the recent rise in minimum capital requirements in the insurance sector would help create consolidation and efficiency in the market.
Continental Reinsurance CE Femi Oyetunji said Zimbabwe was an important market for the company and was the third largest market in Africa in terms of premium income.
“We expect companies to consolidate after the increase in capital requirements which will lead to better efficiencies in the market,” Oyetunji said on the sidelines of a media workshop training in Botswana last week.
Government last month announced that minimum capital requirements for short term insurance firms would increase to US$2,5 million from US$1,5 million next year.
Capital thresholds for Life assurance firms was raised to US$5 million from US$2 million while capital requirements for funeral assurance firms were raised to US$2,5 million from US$1,5 million.
Continental Reinsurance is Africa’s largest private reinsurer with a growing presence in Southern Africa. Zimbabwe Stock Exchange-listed TA Holdings is a shareholder in continental Reinsurance’s Botswana unit.
TA has interests in the hospitality, agro-industrial and insurance sector through Minerva Zimbabwe, formerly AON Zimbabwe Reinsurance occurs when multiple insurance companies share risk by purchasing insurance policies from other insurers to limit the total loss the original insurer would experience in case of disaster.
While the depreciation of currencies has slowed down business in Mozambique, Zambia and South Africa, Oyetunji said the use of the US dollar in Zimbabwe had stabilised the firm’s operations.
“In terms of using the US dollar for us, we convey our premiums and when we aggregate the average, we report in Naira.
The issue of currency losing traction affects us in other markets.
Premiums paid in US dollar boost us when translated into the group rate,” he said.
He said although the current focus was on consolidating the firm’s position in Botswana, there were concerted efforts to deal with regulatory challenges so as to operate directly from Zimbabwe in the near future.
“We have specific focus in penetrating Zimbabwe. In 2016 we will be visiting Zimbabwe. There are regulatory challenges for us to expand directly in Zimbabwe,” he said.
Despite having a stable currency, executive director of the firm Lawrence Nazare said Sub-Saharan Africa (SSA) faces headwinds as commodity prices remain low and capital flows out of the emerging markets.
Nazare said a decline in capacity utilisation in Zimbabwe had crippled companies’ performance.
He said non-life premium growth increased to 4,5% in 2015 after having been suppressed in previous years by the increased enforcement of the cash-and-carry principle.
Demand for non-life insurance is likely to remain solid in SSA in 2016 and 2017, with premium growth of 4,5% to 5%.
Life premium growth is estimated to have slowed to 4,2% this year from 5% in 2014 and will likely slow down further to about 2,5% in 2016 and 2017.
Established in 1985 and listed on the NSE in 2007, Continental Reinsurance provides support to over 200 insurance companies in Africa.
It operates in 44 African countries, with its headquarters in Nigeria and branches in Kenya, Cameroon, Ivory Coast and Tunisia.