How would you describe the corporate insurance market in Mozambique?
The reason everybody is talking about corporate insurance is because of the hype around the extractive industry, specifically oil and gas in the north. It is similar to the atmosphere we saw 20 years ago with major manufacturing and processing projects being negotiated and established in Maputo. Insurance, as part of financial services, is concerned with sourcing financial indemnity in the event of an insured loss, as such it could be said that we restore capital in the event of a covered event. However, the insurance sector in Mozambique is in the early stages of development and the reality is that the local market has limited technical and financial underwriting capacity. As a result of this situation, the market depends significantly on reinsurance capacity. Insurance is essentially an international game, whereby you see risks being placed in international financial markets with global operators such as Munich Re and Swiss Re. Given this situation of dependence on reinsurance, you will note that there is a low level of risk retention of less than 5% of values at risk on corporate risk and mega-projects. It is on this basis that while there may be much excitement about corporate risks, in reality local insurers play a more critical role in peripheral cover such as motor and workmen's compensation insurance, rather than the key policies on assets that require significant reinsurance.
How would you describe Hollard's relationship with the competition?
There is growing cooperation among insurance companies through the Insurance Association (IA). This is vital in order to avoid a chaotic market situation and to ensure that appropriate standards are maintained in all key areas. And while we have to compete for the proverbial slice of cake, which has limited opportunities, it is also vital for operators to collaborate in order to ensure the appropriate development of the market and support for operators that have invested in this country. Without such safeguards, the market could be exposed to capital flight through entities not invested in Mozambique and only interested in extracting profits.
What role is the government playing within the insurance market in Mozambique?
Sometimes in these environments it is up to the government to negotiate and attract large investors, and the results will depend on the concessions they give. They can and should create a kind of win-win scenario for the country. The jury is still out in terms of what is going to happen in the north with regards to the emerging oil and gas industry. We, as the insurance industry, received an urgent letter from the Ministry of Finance through the insurance association requesting our comments on the possible concession that the government was considering for the exploration area of oil and gas in the Rovuma basin. There was a proposal for these operators to be exempted from having to comply with local insurance legislation like all other companies that are locally domiciled. Naturally, the IA was concerned about this trend and what it could trigger in other economic sectors. Furthermore, such a policy would be in contradiction to the official government policy of supporting local retention, and in alignment with the policies of other countries with major extractive industries. While the policy-maker may see the advantages of creating an attractive incentive for new investors by permitting such exemptions, such policies can also amount to virtually “throwing the baby away with the bathwater" for investors in other sectors that have set up on the assumption that there would be the right conditions for local development.
How do the general public, especially in rural areas, feel about the need for insurance?
The emerging economy and the ability to create wealth are bound to change perceptions on insurance. As soon as you create an enabling environment that allows individuals to work, enjoy a regular salary that not only pays for food, but also starts to pay for a home, car, and education, there will naturally be a developed awareness of the value of possessions and risk. At some point in the development of an economy, the realization dawns that should catastrophe strike going back to square one is simply unacceptable. Insurance becomes a useful mechanism for risk mitigation. Then with growing buying power and interest in protecting their welfare, people will start thinking about insurance types such as life and health, which at the moment are not top priority in their lives. The process of insurance purchase is connected to an awareness of risk and of a need to find ways to control it. This is also part of a process known as risk management. There is a need for awareness campaigns in order for people to understand risk and how an unexpected event can set an individual as well as an economy back many years. Insurance is just one important tool that forms a component of risk management. It allows the insured persons to transfer risk and as such purchase capital that may be accessed if you are unfortunate to suffer unforeseen covered events. It is a new, very challenging and exciting environment to be a part of at the moment.
What role do banks play as partner of Hollard?
Hollard Moçambique, as part of the greater Hollard Group, which is known for its vast experiences in partnering with the banks across Africa, currently has bank assurance partnerships with a few selected and important Mozambican banks as well as some micro-lenders. Bancassurance, as this distribution pillar is known, is still a fairly new concept in the market, but growing. More and more, Mozambican banks are focusing on retail banking and associating themselves with insurance companies as embedded retail partners. In my opinion this is a sure sign of a developing economy and market. These partnerships are of vital importance for Hollard Moçambique.
© The Business Year - March 2015