Insurers mull terrorism, political risk pool to enhance investor confidence

BusinessDay

As investor confidence in Africa swells with increasing potential for economic growth amidst terrorism and political violence in many parts of the continent, insurers are looking at developing pools for risk management.

The terrorism and political risks pools, analysts believe would be necessary to enhance investor confidence that though these risks exist in Africa, investments could be protected with adequate insurance.

Analysts, who spoke at the sideline of the ongoing African Insurance Organisation conference and general assembly taking place in Tunis, Tunisia, said insurance must rise up to protect growing investments in the continent to achieve projected growth plans.

Africa’s economic growth will gain momentum this year and next, said three prominent organisations in a joint report.

According to the annual African Economic Outlook report by the Organisation for Economic Cooperation and Development, the African Development Bank and the United Nations Development Programme, the continent’s economies would grow 4.5 percent in 2015 and 5 percent in 2016 on average.
While the trend indicates that African economies will return to closely tracking emerging Asian ones as the world’s fastest-growing region, progress is patchy and precarious, the report noted.

Mohammed Kotb, regional managing director, Middle East UIB London, said UK Re Pool was established with backing of the government to provide investor confidence.

He said this could be replicated in Africa to sustain the growing investment interest in the continent. “I do not think it should be country by country, but it could be region by region for easy management.”

Kotb stated that the significance of the UK Re Pool which had paid about $600 million claims is the confidence level it had offered investors and businesses operation in those places.

Edwin Igbiti, managing director, AIICO Insurance plc, said it would be a good development to begin to think of it now, but for the long term, “because we do not have the technical capacity for managing such risks.

“For us in Nigeria, I think we will need to depend on reinsurance capacities overseas at the moment because we do not have the technical competence, and forming a pool is an uphill task for our market.”

Pools have not succeeded in Nigeria. “Except for liability in insurance pool, we have not recorded any other success of any pool, because we have not had support and cooperation of operating companies,” Igbiti stated.

Larry Ademeso, managing director, Custodian and Allied Insurance plc, said for now forming a pool for kidnapping and terrorism risks was still premature. He reasoned that most Nigerians and businesses are still not conscious of these risks despite their growing size in the North East area of the country.

“We are not going to form terrorism and kidnapping pool for forming sake. There have to be businesses for it. Don’t forget that Egypt that made success of it during the recent political crisis in that country had long built the culture of insuring similar risks like terrorism,” Ademeso stated