SOME three years ago, the historical town of Bagamoyo, located about 60 kilometres north of Dar es Salaam, was hit by twin disasters as fire razed two luxurious hotels on the Indian Ocean beach.
In the mid-morning of March 23, 2009, the Paradise Holiday Resort and the neighbouring Oceanic Bay Hotel, horribly went ablaze and the properties worth billions of shillings were totally gutted down, following what was said to be an electrical fault.
The situation at the Paradise Holiday Resort was back to normal after a relatively short period, thanks to the country's insurance and reinsurance firms that effectively played their part.
The Tanzania National Reinsurance Corporation (TAN-RE), Acting Managing Director and Finance Manager, Mr Rajab Kakusa, says the Bagamoyo fire accidents are among incidents that demonstrated the importance of insurance and reinsurance.
"We managed to settle the claims swiftly," he said in a recent interview with the 'Business Standard.' He added that apart from the hotel fire, TAN-RE was also involved in handling multi-million losses caused by fire at Bakhresa Food Products and Aluminium Africa (ALAF) around the same period.
TAN-RE was established by the government in line with provisions of the Insurance Act of 1996 and incorporated in November 2001. The firm started operations in January 2004, writing all classes of reinsurance business.
A reinsurance contract is a contract of indemnity, meaning that it becomes effective only when the insurance company has made a payment to the original policyholder.
Reinsurance provides a way for the insurance company to protect itself from financial disaster and ruin by passing on the risk to other companies.
Reinsurance redistributes or diversifies the risk or threat associated with the business of issuing policies by allowing the reinsured to show more assets by reducing its reserve requirements.
The reinsurance industry has become more popular in most parts of the world over the last decade, because natural disasters and mass tort litigation have resulted in large payouts by insurance companies.
There are reports which have it that due to large size of the payments, some insurance companies have become insolvent. In Tanzania none of the insurer registered after the liberalisation of the industry in 1998 has become insolvent, save for the state-owned National Insurance Corporation (NIC) and Zanzibar Insurance (ZIC) which were in existence since 1967.
However, despite the fact that the two state-owned firms had huge liabilities due to unsettled claims, they enjoy ministerial exemption as provided for in the Insurance Act, according to informed industry sources.
Mr Kakusa said that TAN-RE vision was to be the most successful reinsurer in Africa, with a mission of creating and developing business partnerships on a mutually beneficial basis.
The firm underwrites all non-life insurance business including marine and aviation and all life assurance including pension business. TAN-RE functions include accepting local mandatory and commercial reinsurance business, accepting inward reinsurance, training of industry insurance and reinsurance personnel and provision of technical assistance.
Over the last six years, TAN-RE had been registering steep growth in gross premium from 1.68bn/- in 2004, up to 12.3bn/- in 2006, reaching 29.5bn/- in 2008 and 42.7bn/- last year. Its pre-tax profit has been growing as well, from 1.2bn/- loss recorded in 2004, turning around to a profit of 121.9m/- in 2006, up to 4.2bn/- in 2008 and up again to 6.33bn/- last year.
The profitability trend had been sustained despite huge claims that were settled during the last five years. The settled claims include ZIMASCO Limited 390,443 US dollars in 2006, Hotel Sea Cliff 1.84 million US dollars (2007), Bakhresa Food Products 1.46 million US dollars (2008), Aluminium Africa 3.48 million US dollars (2008) and Paradise Holiday Resort 1.46 million US dollars (2009).
TAN-RE enjoys a reputable credit rating of A+ (Single A Plus) for domestic currency paying ability and BB- (Double B Minus) for international currency claims paying ability, as reaffirmed in August, last year, by the Global Credit Rating (GCR) of South Africa.
A+ rating is one of the highest rating awarded in the African insurance market, while BB- reflects the firm's good stability in doing insurance business.
GCR was established in 1996, as the African Arm of the New York Stock Exchange-listed Duff & Phelps Credit Rating and after a short period the company had established itself as the market leader, employing the largest team of rating analysts in Africa and accounting for over 60 per cent of all ratings accorded on the African continent.
Its African regional headquarters are based in Johannesburg, with its main SADC, Central, West and East African regional offices established in Harare, Lusaka, Lagos and Nairobi respectively.
GCR rates the full spectrum of security classes and its core competitive advantage is based on the principle of "analytical excellence."
It accords both local currency National Scale ratings (which are tiered against an assumed "best possible" rating of AAA and enable appropriate differentiation of credit quality within each country), as well as International Scale ratings (which are tiered against US government risk, incorporate all sovereign risk and currency conversion issues and are thus directly comparable across all countries).
TAN-RE authorised share capital is 20bn/- divided into 20 million shares of 1,000/- each and as of April 2011, the paid up capital stood at 14.9bn/-.
Government institutions have 45 per cent stake in TAN-RE, insurance companies have 25 per cent of the shares and corporate bodies 10 per cent, while 10 per cent is owned by foreign investor (PTA-RE).
Insurance brokers have five per cent stake and individual persons have five per cent shares. Government institutions holding TAN-RE shares are Public Service Pensions Fund (PSPF), National Social Security Fund (NSSF), Parastatal Pensions Fund (PPF), Zanzibar Social Security Fund (ZSSF) and Local Authority Provident Fund (LAPF).
TAN-RE last week organised a three-day workshop during which it conducted training for 47 participants drawn from local insurance firms. TAN-RE Underwriter Ms Hilda Shenyagwa-Noor, said the workshop was successful since the response was overwhelming. "Many insurance firms wanted to send more than two representatives," she said.
Ms Shenyagwa-Noor said the firm's strength was based on speedy settlement of claims, qualified and experienced staff and the support by the government and its shareholders.
She said the company underwrites reinsurance business with firms in Angola, Algeria, Cameroon, Burundi, Botswana, Djibouti, Ethiopia, Eritrea, Gambia, Ghana, Ivory Coast, Kenya, Mauritius, Mozambique, Morocco, Namibia, Nigeria, Seychelles, Senegal, Rwanda, Sudan, Tunisia, Togo, Uganda, Zambia, Zimbabwe and Tanzania.
The workshop was organised in collaboration with FMRE (Property & Casualty) and FMRE (Life and Health) of Zimbabwe. FMRE (Property and Casualty) was established in 2003 as First Mutual Reinsurance.
The company is a dominant player in the Zimbabwean reinsurance industry and underwrites significant business from the African continent. The company offers short-term reinsurance services to its clients in all classes of general insurance.
Traditional reinsurance products are backed by a comprehensive range of risk management services and technical support. FMRE (Property and Casualty is a wholly owned subsidiary of Africa First Renaissance Corporation (AFRE), an investment holding entity with interests in life assurance, short term insurance, reinsurance, property holding entity and actuarial services.
The AFRE group is listed on the Zimbabwe Stock Exchange FMRE (Life & Health) was established in October 2007 following a demerger of First Mutual Reinsurance Company in order to comply with Zimbabwe's recent legislation which prohibits composite licences.
FMRE Life & Health's entry into the market significantly increased the underwriting capacity of the local insurance in Zimbabwe. Opening the workshop on August 1, the Commissioner of Insurance, Mr Israel Kamuzora, said Tanzanian insurers have a lot to learn from the two Zimbabwean firms which managed to survive in a highly volatile economy.
"The firms are an example of resilience and professionalism in risk management. The firms survived all the odds in Zimbabwe and opened subsidiaries in South Africa and Botswana," Mr Kamuzora said.
He said that insurance training should be treated as one of the top priorities of insurance management and be given its due place in insurance industry in Tanzania.
Mr Kakusa said in the recent interview that TAN-RE and the two firm have jointly organised a workshop that would be held in Gaborone, Botswana, later this year. "We are keen on consolidating business locally and widen our footprint in Africa," he added.