West African Insurers eye operational integration

From left: Director Inspectorate National Insurance Commission (NAICOM), Thompson Barineka; Deputy Chairman Nigerian Insurers Association (NIA) and Secretary General West African Insurance Companies Association (WAICA) William Coker at the event in Lagos.

 

 

 

 

Chuks Udo Okonta

 

Underwriters across the West African have considered operational integration and harmonisation as panacea for insurance growth and development in the region.

Speaking at the on-going, West African Insurance Companies Association (WAICA) Educational Conference in Lagos, the underwriters advocated the need for a common interest among operators in the region.

Nigeria’s Commissioner for Insurance, Fola Daniel, who was represented by the Director Inspectorate NAICOM Thompson Barineka, said the need for integration and harmonisation of the insurance industry in the WAICA member states is no longer an option but an imperative.

He noted that aachieving an integrated and harmonised insurance industry in West Africa would help to broaden and deepen insurance financial links within the sub-region, whether through market-driven or institutionalised processes.

Daniel said integration requires the elimination of barriers to cross-border investments and differential treatment of foreign investors within the region, adding that it also extend to harmonising legislations, policies and institutions, which over time can lead to national financial markets effectively functioning as one.

He said the West African financial markets are small and fragmented, and consolidating markets through integration and harmonisation could yield several benefits such as bring together scarce savings, viable investment projects and financial infrastructure; increase the numbers and types of financial institutions and instruments; increase competition and innovation; increase underwriting capacity of insurance companies in the sub-region; enhance reinsurance capacity and thereby reduce capital flight; reduce inefficiencies in lending given a wider pool of bankable projects and expand opportunities for risk diversification. 

He said: “In addition, integration and harmonisation of the insurance industry in West Africa could help improve regulatory and supervisory bodies, insulate insurance institutions from domestic excesses, harmonise regional laws and institutions, and create additional opportunities for learning by doing.

“To achieve an integrated and harmonised insurance industry in West Africa, a number of issues pose some challenges, but there are also huge opportunities. The key challenges include: inadequate and poor regional infrastructure network, weak institutions and human capacity, and insecurity and political instability. Other challenges are diversity across the economies and divergent country attitudes towards regional integration.

“The availability of abundant natural resources and a growing population of the middle and upper class of the society, offers opportunities for insurance business. Likewise, the political commitment at the highest government level also holds the prospect for heightened infrastructure development and trade expansion efforts in the sub-region. Furthermore, enabling the flow of capital, management know-how and technologies within the sub-region, and between the sub-region and the rest of the continent is a priority outcome of the sub-regional integration process.

“In this respect, the pattern of intra-regional investment, led by Nigerian private insurance companies operating across the sub-regional and East African market, of the emerging footprint of pan-African financial institutions and increasing presence and interest of investors particularly from other African countries in the Nigerian Insurance Industry are a positive development, which should be further encouraged.

“Suffice it to say that Insurance remains the key driver in the economies of countries, and the industry has remain a 3rd-level player in the financial services sector of West African States. While the other components of the financial services sector in the sub-region have all moved on and firmed up processes for their integration and harmonisation, it is regrettable that same cannot be said about the insurance sector. Similar efforts to integrate both the banking and stock market sectors in the sub-region were successful and it is expected that WAICA and the WAMI, will drive this course in the insurance sector.”

He said some of the challenges facing the regional insurance market include; low level of financial literacy, lack of adequate awareness of insurance mechanism and poor perception of the industry. Stressing that in terms of harmonisation, some of the areas of challenge that must be addressed during this education conference include regulation, supervision and enforcement, market conduct, self-regulation and pricing among others.

He called on operators to kick-start the process of integrating the WAMZ insurance sector particularly, development a roadmap to drive integration in the insurance sector in the zone and streamlining insurance integration efforts in the sub-region.

He said the operators are also expected to propose the constitution of a council to drive the integration of insurance in the sub-region and propose the establishment of a technical committee to serve as an advisory body to the council on insurance integration in the zone.

Daniel urged insurance industries the sub-region to leverage and key into the opportunities to be provided by working together to develop the needed products and services as well as build underwriting capacity that will accommodate big risks, and halt the capital flight currently being experienced, particularly in the oil and gas business.

Director General West African Monetary Institute Accra, Ghana, Abwaku Englama, said integrated financial markets including insurance are a key element in the transmission process and hence for the smooth conduct of monetary policy in the envisaged common central bank arrangement for the WAMZ.

He noted that financial integration also leads to better diversification of risks and makes a positive contribution to financial stability by improving the capacity of economies to absorb shocks.

“On the other hand, fully integrated financial markets also pave the way for shocks to propagate more quickly among market participants and across countries, which could necessitate appropriate safeguards. To mitigate the risks and maximize benefits from financial integration, it is imperative that the financial markets are developed and integrated further in the Zone,” he said.

Managing Director WAICA Reinsurance Corporation Plc, Ezekiel Ekundayo, said to move the industry forward and achieve further integration, the stakeholders should work towards the following: insurance Commissions/Regulators to define the framework and harmonise the insurance laws and practice of the sub region; promote a platform for following up and controlling the insurance industry in the sub region; give counsel on all insurance projects in the sub region; insurance practitioners to create more awareness; prompt payment of genuine claims; image improvement/public image.

Others are development of customized/ suitable products acceptable to the public; adequate capitalisation – mergers and acquisition pooling of resources together; member companies to invest in WAICA Re to make it strong like the other regional reinsurance companies; collation of adequate and reliable statistical data; review of the Insurance terms and conditions in line with our culture and terms and clauses to be clearly written to avoid any ambiguity and effective communication – improved communication network.