TROPICAL Re is a registered reinsurance company that was registered on November 29, 2007 to transact facultative and treaty business. The core business is reinsurance solutions cover for property, casualty, life, and health risks that offer both facultative and treaty reinsurance protection. Recently, Tropical Re was awarded a credit rating AAA+ by GCR Ratings established as the African arm of the New York Stock Exchange-listed Duff & Phelps and has gone on to become the leading rating agency on the continent. The rating has led to Tropical Re business capabilities being certified as a reinsurance firm. Business reporter, Tatira Zwinoira (TZ) discusses with Tropical Re’s managing director Ushe Mungaraza (UM) on this award and what it means for the business:
TZ: Congratulations for getting your credit rating. Can you explain what this was about and what it can do for your business?
UM: With a credit rating you are inviting a third party on your financial capacity in terms of meeting your financial obligations. So, in insurance, what you are simply saying is a promise that I’ll be able to pay my obligations as and when they happen.
It enables our clients to be able to rely on the views of an expert who then looks at our processes, our numbers in terms of our financials, the income statement, and balance sheet and say that this is someone who can be able to meet their liabilities as and when they become due.
We believe and are already seeing that this will open new doors in terms of clients — you know in this environment there are issues of liquidity so this reassures our clients of our capacity to pay claims so we are already seeing new doors being opened by our clients. Even existing clients can now do more with us and new clients can do more with us for our business with them.
TZ: What did you do to achieve that credit rating?
UM: What they look at are issues of policies. You know running an insurance company is running a risk. So key issues for ourselves are the ability to resist that risk that you are assuming from your clients. So our policies, the resilience of our policies, the capital position, and the resilience of our income going forward is not just for now, but also for the future.
TZ: How do you marinate your strategy for this kind of volatile market of which risk is 10 times higher than it was before, because obviously, there is business volatility and businesses are not able to cope . . . so how do you navigate through that to implement an effective strategy?
UM: I think it basically goes to meeting what the client wants. If somebody buys a policy of insurance, what they are buying from you as the insurer or reinsurer is paying that
claim. So we have been quite consistent in paying our claims.
In this digital environment, we have been constantly paying on time. This has allowed us to grow our market. We are not just looking at Zimbabwe. We also have markets in the region and beyond in the rest of Africa, which helps us to diversify our books and in terms of our environment protect our balance sheet.
Within the provision of the regulator, we are also placing our assets in investments that can preserve the assets of our balance sheet that earns rental income. And, in the most unlikely event that we are called upon to pay claims, those properties can be a fallback position, but again, that will be a very unlikely event, where you would be forced to sell property.
TZ: But, are you capitalised enough to meet those obligations and still remain an operational business?
UM: We are. What we also do, mind you, the bottom line of insurance is the pulling and sharing of risk, right? We have also got reinsurance of our own that is based with other partners outside of the country, so that enables us to also fall on the backs of our partners should anything happen. Of course, we also pay for that and I am happy that we have been able to pay our obligations, in terms of reinsurance payments, that will allow us to recover and pay our local claims.
TZ: What strategies do you have in place to get foreign currency and how much do you earn per month from these strategies?
UM: I cannot go into specifics.
TZ: Okay, maybe not specifics, but do you have strategies geared towards earning foreign currency?
UM: I think that there are sectors that do well, even in this economy, in terms of generating foreign currency. Your mining industry is doing well and we got quite a big chunk of the mining business.
TZ: So you got clients within the mining industry?
UM: Yes. Then agriculture as well.
TZ: Are you talking about foreign currency earners like tobacco?
UM: Yes. I can safely say to you that we are the largest reinsurance firm in Zimbabwe. We do quite big things in tobacco that enable us to generate foreign currency. There are also pockets, even outside those I have already mentioned, of clients that do earn forex.
Also, you would notice around the time Covid-19 started in March the Ministry of Finance allowed clients to pay their premium or goods and services in forex where they can. So, we have also gone out and marketed our products to people that have the capacity to pay for their insurance in forex, but within the confines of the law of course.
TZ: The question then becomes have you developed a magic wand or secret that allows you to keep operational with the currency volatility. How are you able to deal with that volatility?
UM: I think it’s basically trying to grow your business in the more stable currency, which is, the United States dollar. Not just in Zimbabwe, but in Zambia and Mozambique.
TZ: Because I read from your company profile that you operate in a lot of markets, 54 countries in Africa.
UM: Yes. We are a wholly-owned Zimbabwean company, but as a reinsurer, we can trade with anyone from all over the world.
TZ: Does that include outside Africa?
UM: No. We are limiting ourselves to Africa for now.
TZ: Where would you say your business is stronger in Africa outside Zimbabwe?
UM: Zambia, Mozambique and Botswana but we are also quite active in east Africa where we have got quite a bit of business.
TZ: And you offer the same products that you offer here?
UM: Yes. I think that some products, like agriculture, we have realised some markets are not quite developed in terms of agriculture reinsurance. So, we transfer skills in terms of trying to help those markets and we are also getting business from them.
TZ: The International Monetary Fund and other international organizations say some of the economic pressure will ease next year. There are already signs of a little bit of stability concerning the Zimbabwe dollar, so what are your plans going forward into next year.
UM: I think one of our plans is to really be aggressive not just to look at Zimbabwe. I think perhaps that 10% of our business is outside Zimbabwe, but we want to do more to grow it to about 40% outside Zimbabwe. That could mean opening offices out there in the region maybe, we start with Zambia and we are already making those plans so that growth is going to come from maybe locally, but from the region as well.
TZ: You’re capitalised to the tune of how much and do they meet the regulatory minimums?
UM: We do meet the regulatory requirement. Now, the regulatory requirement is ZW$75 million (USW$926 000) and we are at ZW$190 million (US$2,346 million). But, what we are doing with the capital is developing some inter-capital models. You know what banks have done? To say that your capital is X amount in (US) dollars then whatever happens to the rate you know that you are fine. Because we are doing a lot of our business in US dollars, in the other markets, you also have to look at your capital in US dollar terms.