10 October 2009

Namibia: Competition for Insurance Industry

Windhoek — Alexander Forbes Namibia Holdings this week officially launched an insurance subsidiary called Alexander Forbes Insurance Company. The company was established in July this year.

CEO of Alexander Forbes, Ingo Rix, said the group's strategy to establish a direct insurance company goes back to October 2003 when a company with the name of Guardrisk Insurance Company of Namibia Limited was capitalised by Alexander Forbes Namibia Holdings.

Guardrisk operated under a short-term insurance license regulated by Namfisa. Guardrisk Insurance company specializes in "Alternative Risk Transfer Solutions" offering customers the opportunity to own and utilize a "Rent-a-Captive" or "Cell Captive" structure.

In 2006, Alexander Forbes Group bought Optimum Vehicle Solutions from Barlow World Namibia, a niche insurance product provider to the Namibian motor vehicle market, supported by a unique administration platform.

"Over the last 20 years we have developed a very large book of personal lines business with over 3,000 customers all over Namibia. The business was managed on our own phoenix administration platform with an underwriting mandate from the insurance company. In effect we had become underwriting managers on behalf of the insurance company. Our mandate included both underwriting, premium collection and claims management," Rix said.

Alexander Forbes insurance company currently underwrites three product lines; the 5-Star personal lines product, Guardrisk "Alternative Risk Transfer Solutions"; Optimum Vehicle Solutions

"Initially Alexander Forbes Insurance will have a small impact on our group's revenue growth and profitability but we are positioning this investment to be a major contributor to our Group's growth strategy over the coming years.

Alexander Forbes Insurance will therefore add further value to our Group's diversified investment strategy in our chosen fields," he said. The Alexander Forbes Group has been operating in Namibia for 55 years.

From humble beginnings in 1954, with a small Insurance Broker office and a staff of two, the group has grown to one of the largest financial services providers in its field including insurance broking, asset management, pension fund administration and consulting, re-insurance broking and cell captive management and now Alexander Forbes Insurance.

Lily Brandt, Namfisa acting CEO said the short term insurance industry plays an important role in the economy.

The industry has currently 14 registered short term insurers; this include specialist and niche insurers and one re -insurer as well as a total of 415 intermediaries.

With an average solvency rate of 32% the industry is regarded as financially sound. Gross premium have doubled over the last five years and from 2007 to 2008 premium grew by 23%, and insurance business represents approximately 2% of GDP.

Brandt said the operating environment of short term insurers had most definitely become complex and challenging.

"The current expenditure on short term insurance in Namibia is approximately N$550 per capita which is high in relation to that of South Africa but when interpreting this statistic we have to remain cognisant of the incredibly high income disparities in our country which has a massive impact on uptake.

The disposable income of the average Namibian is closely linked to the prevailing inflation and interest rates.

The issues facing the industry are real; the volatility of the Namibia dollar/ US dollar exchange rate has had a negative impact on parts-pricing for motor vehicle repairs and will inevitably have an impact on the costs of motor accident repairs for example," Brandt said.

Brandt added that the financial institutions and markets bill which is to replace the current short-term insurance act as well as the other 12 pieces of legislation that we administer will see a more principled approach to regulation and supervision which will be greatly complemented by regulations and prudential standards.

Copyright © 2009 Namibia Economist. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.