NamibRe to increase local reinsurance share

•BRIGITTE WEIDLICHTHE Namibia National Reinsurance Corporation (NamibRe) will expand its share of the reinsurance market to complement government’s efforts to reduce capital outflow through reinsurance.

The capital outflow currently stands at over N$600 million per annum, and insurance not taken up by local insurers stands at over N$200 million per annum.

This was revealed by the new managing director of NamibRe, Patty Karuaihe-Martin, in an interview with The Namibian.

Karuaihe-Martin was appointed in October 2014 to lead the State-owned enterprise.

“The current initiative will go a long way in ensuring that NamibRe meets its mandate of curbing capital outflows, thereby assisting the government to retain some of the funds in the domestic market for developmental purposes,” she said.

“Prior to NamibRe’s establishment, the insurance industry in Namibia witnessed a lack of reinsurance capacity. Most insurance companies had to buy reinsurance business from abroad. This also meant that a large volume of capital left the country,” she outlined.

“This is undesirable as the country is left with limited funds to utilise for national developmental purposes,” Karuaihe-Martin said.

Against this background, NamibRe was established in 2001 by an Act of Parliament, the Namibian National Reinsurance Corporation Act, which was passed in 1998. According to the Act, all insurers that offer reinsurance are required to first offer such reinsurance to NamibRe.

Following consultations with finance minister Saara Kuugongelwa-Amadhila, it was concluded that the compulsory cession percentage to NamibRe should be increased. This proposal, which was approved by Cabinet was subsequently gazetted on 13 February 2015 and will become effective on the same date, Karuaihe-Martin said.

“From the date the Gazette becomes effective, the proportion of reinsurance business ceded by all registered short-term insurers and reinsurers to NamibRe where there is no stand-alone reinsurance contract issued in Namibia, will increase from the current 7,5% to 10% of net premium,” Karuaihe-Martin said.

However, she said the compulsory cession on stand-alone reinsurance contracts issued in Namibia will remain at 20% of gross premium as gazetted back in 2006.

Furthermore, the compulsory cession of business by all registered long-term insurers and reinsurers is implemented for the first time by said gazette entry at the same percentages as for short-term insurance, she said.

Since inception, NamibRe’s business strategy was mainly focused on the short-term insurance industry and consequently the compulsory cession of long-term insurance has not been implemented to date, although it is contained in the Act.

Although NamibRe was established to assist government in reducing capital outflow, the company plays an important part in risk mitigation within the insurance industry, she said. This is based on the fact that reinsurance shares the risk between an insurer and reinsurer.

“For example, insurance companies in the short-term insurance sector underwrite risk, among others, against events like fire, riot, and vehicle, aeroplane and ship damage or loss. Therefore, in order to mitigate the risk taken on, an insurer will transfer some of that risk by the purchase of reinsurance and effectively pass some of the risk on to the reinsurer.”

In addition to contributing towards the decrease in capital outflow, NamibRe is further mandated to contribute to the development of the insurance industry in Namibia through the development of insurance skills.

Asked about future plans for NamibRe, Karuaihe-Martin said after being in existence for nearly 15 years and concentrating on the short-term reinsurance sector, NamibRe wants to venture into the long-term reinsurance industry.

“It is envisaged that the increase in cessions and venturing into the long term reinsurance industry will increase NamibRe’s market share of the short-term reinsurance market which stood at N$156 million or 19% of the N$833 million short-term reinsurance market in 2014.”

She said the company has decided to move into the long-term sector.

“More highly skilled staff like actuaries will be required. We will receive support in this regard from our international partners like Munich-Re, the largest reinsurance company in the world as well as from Africa-Re.”

Total liabilities for the short-term industry in Namibia stood at N$2,6 billion at the end of 2013, an increase of 14% compared to the previous year, according to the latest annual report of NamibRe.

The total value of assets amounted to N$3,4 billion at the end of 2013, an increase of 15% from 2012.

* Brigitte Weidlich is a freelance journalist

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