SADC - Committee of Insurance, Securities and Non-Banking financial Authorities of SADC (“CISNA”)

Source: http://www.sadc.int/english/key-documents/protocols/protocol-on-finance-and-investment/#annex10 

Extracted from the SADC Protocol on Finance and Investment.

ANNEX 10

CO-OPERATION ON NON-BANKING FINANCIAL INSTITUTIONS AND SERVICES

PREAMBLE

The High Contracting Parties:

RECALLING that the Committee of Insurance, Securities and Non-Banking financial Authorities of SADC (“CISNA”) was established in June 1998 by the Insurance, Securities and Non-Banking Financial Authorities in the SADC Region (“the Authorities”);

NOTING that a strategy was developed to give direction to the activities Of CISNA and to contribute to the sound regulation, effective supervision and rapid development of the financial services industries;

REALISING that financial institutions supervised by the Authorities are critical for mobilising savings which are important for the expansion of productive capacity and that such institutions require a supporting regulatory framework:

(a) which will attract the investments required for creating economic development within the Region;

(b) for managing the financial risks faced by the financial institutions and users of financial products and services in the Region; and

(c) which must not only be efficient but also properly enforced;

AWARE that there should be close co-operation between the Authorities for the purpose of carrying out CISNA’s objectives in the pursuit of complementary goals to achieve an integrated and credible SADC capital market;

NOTING the increasing need for internationalization, and harmonisation of financial institutions and the interdependence of the activities of financial institutions due to the use of modern technology and closer co-operation between financial institutions;

RECOGNISING the need to mobilise savings that can be used to expand SADC’s productive capacity;

FURTHER NOTING that broad objectives have been set in the CISNA Strategic Plan to achieve the successful regulation and supervision of non- banking financial institutions and the need to share information.

CONSCIOUS that the achievement of the objectives referred to in the CISNA Strategic Plan will be accomplished at different times and in different phases;

NOTING the establishment of CISNA, the adoption of the CISNA MOU and 100 the obligations imposed on the Authorities in the said MOU HEREBY AGREE as follows:

ARTICLE 1
DEFINITIONS

1. In this Annex, terms and expressions defined in Article 1 of the Treaty shall bear the same meaning unless the context otherwise requires.

2. In this Annex, unless the context otherwise requires:

“Authority” means any organ or entity responsible for the regulation and supervision of non- banking financial institutions in their respective jurisdictions within SADC or any designated representative of such authority;

“CISNA” means the Committee of Insurance, Securities and Non-banking Financial Authorities of SADC and the Authorities;

“CISNA Strategic Plan” means the CISNA Strategic Plan set out in Addendum A to this Annex;

“non- banking financial institutions” means any provider of financial advisory and intermediary services, collective investment schemes, insurance institutions and retirement funds regulated or supervised by their respective Authorities;

“financial products and services” means long-term and short-term insurance contracts or policies, benefits provided by retirement funds, financial advisory and intermediary services, shares, debentures, bonds and other forms of securitised debt, futures and derivative products including commodity derivatives, participatory interests in collective investment schemes, and other securities traded in the respective jurisdictions of the Authorities;

“financial services industry” means the supply of financial products and services by financial institutions throughout the Region;

“jurisdiction” means the country, state or any other territory, as the case may be, in which an Authority can exercise its powers;

“IAIS” means the International Association of Insurance Supervisors;

“IOPS” means the International Organisation of Pension Regulators and Supervisors;

“IOSCO” means the International Organisation of Securities Commissions;

“Requested Authority” means the Authority to whom a request is made in terms of this Annex ;

“Requesting Authority” means the Authority making a request pursuant in terms of this Annex;

“securities” means bonds, shares, stock, debentures, securitised debt instruments, equity instruments, debt instruments, futures and derivative instruments (including commodity derivatives), participatory interests in collective investment schemes, and any similar securities to, or combination of, the aforementioned.

ARTICLE 2
ESTABLISHMENT OF THE COMMITTEE OF INSURANCE SECURITIES AND NON-BANKING FINANCIAL AUTHORITIES

There is hereby established a Committee of Insurance, Securities and Non- Banking Authorities of the Southern African Development Community.

ARTICLE 3
COMMUNICATION AND EXCHANGE OF INFORMATION

1. There should be high-level contact between the Authorities in order to inform each other of any significant changes in their respective regulatory environments with a view to harmonizing each Authority’s approach on the subject covered by the shared information.

2. The Authorities shall put one another on their mailing lists for the receipt of periodicals and other important communications.

3. The Authorities will encourage and enhance contact amongst the staff of the Authorities

ARTICLE 4
INFORMATION SHARING

1. The Requested Authority should use its best efforts to obtain information from its own records or from institutions within its jurisdiction in order to provide a Requesting Authority with information that will allow such authority to fulfil its regulatory and supervisory responsibilities.

2. If any Authority comes into possession of information that would be likely to assist another Authority in administering or enforcing the laws or regulations for which it is responsible, the first-mentioned Authority will endeavour to notify the other Authority of the existence of that information.

ARTICLE 5
REQUEST FOR INFORMATION AND ASSISTANCE

1. The provisions of the Annex on the Exchange of Information and Surveillance of Securities, Insurance and Retirement Activities will, with the necessary changes, apply to: (a) requests for information and assistance; (b) the execution of such requests; (c) the permissible uses of information; (d) the rights of Requested Authorities; (e) confidentiality; and (f) the costs of investigations.

ARTICLE 6
COMPLIANCE WITH INTERNATIONAL STANDARDS (DIAGNOSTIC EXERCISE)

1. In order to assist the legislature with the drafting or amending of legislation that is compliant with international standards, the Authorities shall:

(a) undertake in their respective jurisdictions a diagnostic study, analysis or assessment that focuses primarily on assessing the regulatory framework and supervisory practices in terms of the objectives and principles of the IOSCO, the IAIS and the IOPS;

(b) before submission of the assessments verify such assessments through Authority peer or third party review; and

(c) adopt and develop the required structures in line with the objectives and principles recommended by IOSCO, IAIS and IOPS, if the assessment demonstrates that is what is required.

ARTICLE 7
RELATIONSHIP WITH INTERNATIONAL BODIES

1. The Authorities should:

(a) become members of and liaise with IOSCO, IAIS and IOPS; and

(b) disseminate to other Authorities, who are not members of IOSCO, IAIS and IOPS, information derived from those institutions.

ARTICLE 8
DEVELOPMENT PROGRAMME

1. State Parties agree that, the Authorities should, in order to develop focused programmes for their respective financial services industries, assess the level of development of their non- banking financial institutions with regard to, inter alia:

(a) the supply and use of financial products and services;

(b) level of competition; and

(c) any barriers to development.

ARTICLE 9
HARMONISED FINANCIAL REGULATORY REGIME

The Authorities shall work towards the harmonisation of their respective laws and regulations and regulatory and supervisory practices with the aim of preventing or reducing regulatory arbitrage.

ARTICLE 10
TRAINING AND EDUCATION OF STAFF

The Authorities shall:

(a) ensure that both local and foreign training opportunities are developed, expanded and hosted throughout the Region, and made available to the staff of all Authorities;

(b) identify their training needs;

(c) explore the development programme(s) suitable for their needs;

(d) assist as much as possible with the presentation of such training programmes;

(e) organise and encourage attachments throughout the Region or abroad to provide on-the-job training;

(f) organise attachments and shall mutually agree on the duration thereof.

ARTICLE 11
CROSS-BORDER CO-OPERATION AMONG AUTHORITIES

1. The Authorities:

(a) shall identify cross-border activities that could form the subject of cross-border co-operation amongst Authorities, and between Authorities and foreign counterparts (i.e. the prevention of unscrupulous operations, increased access to information, dual listings, the introduction of legislation to prevent money laundering, including the financing of terrorism); and

(b) are committed to facilitate mutual exchange of information and assistance.

ARTICLE 12
CONSUMER AWARENESS CAMPAIGNS

1. The Authorities shall:

(a) assist each other with the introduction of suitable consumer awareness campaigns for their respective jurisdictions;

(b) share with one another problems identified and methodologies used to promote their respective awareness campaigns;

(c) identify the consumer awareness campaigns and initiatives already introduced in their respective jurisdictions to inform and educate consumers of financial products and services; and

(d) assess whether adequate programmes have been introduced and implement initiatives that will enhance consumer awareness.

ARTICLE 13
MEETINGS AND SUBCOMMITTEES

1. The Authorities shall meet as often as deemed necessary but at least twice each year; and shall by consensus, appoint a Chairperson and Vice-Chairperson for a period of not more than two years.

2. The Chairperson and the Vice-Chairperson so appointed will represent CISNA at meetings of the Senior Treasury Officials.

3. The Authorities shall determine the rules and procedures of all meetings.

4. The Authorities may, by consensus, set up such sub-committees as may be deemed necessary to carry out any specific assignment or duty of CISNA.

ARTICLE 14
REFERRALS

If any Authority believes that a matter falls more appropriately within the jurisdiction of another Authority, or that some joint action is required in dealing with the matter, such matter should be referred to the other Authority as soon as is reasonably practicable.

ARTICLE 15
CESSION AND ASSIGNMENT

An Authority or designated representative of such Authority may not cede, assign or transfer any right or obligation granted under this Annex without the prior written consent of all the Authorities, which consent shall not be unreasonably withheld.

ARTICLE 16
CONSULTATIONS

The Authorities shall assist one another to develop approaches for strengthening the regulation, supervision and the efficiency of the financial institutions in the Authorities’ respective jurisdictions while avoiding, where possible, conflicts that may arise from the application of differing regulatory and supervisory practices.

Africa Insurance review magazine

http://viewer.zmags.com/publication/157b01e6

Page 11 tackles my views on where African Insurance is headed.

New Insurance Law introduced in Tanzania

FARAJA MGWABATI, Dodoma, 25th April 2009 @ 11:30.
THE DAILY NEWS (TANZANIA)

New insurance law to benefit public
Tanzanians stand to benefit from the new Insurance law that has been passed by the National Assembly this week whereby Insurance Companies (Insurers) will be forced to pay their customers’ claims within 45 days of occurrence of an accident.

The new law, Insurance Act 2009, has come at the moment when there are many cases of accidents happening in the country while victims are left without compensation, otherwise the compensation process takes years.

The Deputy Minister for Finance and Economic Affairs, Omary Yusuf Mzee told the National Assembly on Friday that the new law is meant to protect the users of insurance services who for long have been complaining about how they were treated by Insurers.

“This law gives teeth to the Commissioner of Insurance (CI) to make sure that the insured get their claims within 45 days...We have done calculations and found that 45 days are enough to process payments,” he said.

Mr Mzee said if the Insurers fail to pay claims within the stipulated period the CI has power to assess the reasons, if proved genuine, the CI is entitled to add a few days (not exceeding 45) or if the reasons are not genuine, the Insurance company will be fined not more than 5m/- on top of the claim.

He said under the new law, the Insurance Appeal Tribunal and Tanzania Insurance Regulatory Authority would be established to enable Insurers, brokers and customers to file their appeals when they are not satisfied by CI’s decisions and customers submit their complains.

To give Tanzanians a chance to participate in the insurance business, he said the law requires Tanzanians to have at least 33 per cent of the stake in those companies. “Insurance is a business, if we (Tanzanians) can not invest in it, the whole industry will be dominated by foreign investors that is why we are giving at least one third of companies ownership to Tanzanians,” he said.

He said Insurance companies would be forced to declare to the public their financial accounts to enhance accountability and good governance within the industry. “Another good thing about this law is that it provides wide ranges of insurance cover including the marriage cover…We are used to seeking help from colleagues for donations when you want to get married, but with marriage insurance when you are 18 you start saving,” he said.

The Deputy Minister said the government would finalize reforms to stabilize the National Insurance Corporation (NIC) to enable it to compete efficiently in the market and provide better services to the public. Debating the Bill, some Members of Parliament advised the Minister to provide education to Tanzanians on the importance of insurance services in life and attract them to participate as investors.

Responding to the comments, he said it was true many Tanzanians including MPs did not give greater importance to insurance services and those who cared about their health or properties only took third party insurance which does not help them much. “Its true we need to educate our people...I hope MPs you will help the government to sensitize the public on that,” he said, adding that people should take a comprehensive insurance covers. The new law if endorsed by President Kikwete would replace the Insurance Act of 1996 chapter 394.

STAFF WRITER, 5th May 2009 @ 00:00, (Excerpts).

After a decade since its liberalisation, the insurance industry is now poised for robust and sustainable growth following changes on the law to boost efficiency and accountability.The National Assembly recently pass the Bill for the Insurance Act 2009, which among other things, provides for settlement of claims after 45 days and establishment of the appeals tribunals.Tanzania's insurance industry had for three decades since 1967, been under the hegemony of the state, where there were only two players in the market.

The market in Tanzania mainland was the monopoly of the National Insurance Corporation (NIC), while in the the Isles, the Zanzibar Insurance Corporation (ZIC) was the sole operator. Tanzania’s Insurance Industry was liberalized in 1996 with the objective of making it a sound and competitive agent for national saving mobilization and development of investment channeling.

Other reasons included promoting insurance sector as an effective catalyst for enhanced economic growth, strengthening and promoting the industry health and orderly growth through establishment of operating performance standards and prescriptions.There are now about 18 insurers, a reisurance company, dozens of brokerage firms and over 500 agents and loss adjusters in the domestic market.

Some of the insurance companies and brokerage firms operating in the country have connections with world-class houses that provide a myriad of products."We are in a situation where you are covered for various risks. You have life and health assurance, motor and property coverage. There is now more security," said Salum Hussein a Dar es Salaam agent.

Some analysts say the proposed law comes at a moment when there are many road, fire and other kinds of accidents happening in the country, while victims are left for long without compensation.

“This law gives teeth to the Commissioner of Insurance (CI) to make sure that the insured get their claims within 45 days...We have done calculations and found that 45 days are enough to process payments,” Deputy Finance and Economic Affairs Minister Omar Yusuf Mzee told Parliament in Dodoma while moving the bill for its second reading.

Mr Mzee said the proposed law empowers the commissioner to extend the period for settling a claim upon being furnished with genuine reasons, as well as punishing defaulters.

An insurer, for example, may end up coughing 5m/- on top of the claim for non-compliance.The proposed law has adopted the principle of the industry's ombudsman, under which stakeholders with complaints against the commissioner could be handled.

It provides for establishment of the Insurance Appeal Tribunal and Tanzania Insurance Regulatory Authority to enable Insurers, brokers and customers file appeals when they are not satisfied by commissioner's decisions.

The law requires firm's to allocate at least one-third mandatory stake to Tanzanians for it to secure registration. "This is a deliberate move to empower Tanzanians take part in the lucrative industry," Mr Mzee noted.

Analysts say the proposed law consolidates the regulatory framework enshrined in the Insurance Act 1996 and Insurance Regulations 1998. The law had set strict prudential guidelines to ensure that the nascent insurance industry was established on strong foundations.

This strictness manifests itself in rules that govern the operation of insurance firms: Insurance firms must meet paid-up share capital and solvency margin requirements and must hold certain percentage holdings of various investments.


The insurance business faces a number of challenges including failure by some firms to maintain minimum solvency margin which impedes their ability to meet their financial obligations. Other challenges include lack of training facilities for professionals within the country especially actuarial science and other related risk management studies.

The insurance industry at end of 2007 employed 2,530 staff, out of whom 982 (39 per cent) were working in insurance firms, while 1,548 (61 per cent) were engaged by insurance agencies, broking houses and loss assessors and adjusters.

Treasury Agrees To Aid US Insurers

Treasury Agrees To Aid Insurers, Six Firms Gain Access to Funds- Washington Post.

By David S. Hilzenrath and David Cho, Washington Post Staff Writers
Friday, May 15, 2009

The Treasury yesterday granted preliminary approval for some of the nation's largest insurance companies to receive capital infusions under the government's Troubled Assets Relief Program, Treasury spokesman Andrew Williams said.

Recipients are Hartford, Prudential, Allstate, Ameriprise, Lincoln National and Principal Financial Group, he said. The insurers notified yesterday are among hundreds of financial institutions in the pipeline "that are being reviewed and funded as appropriate on a rolling basis," Williams said.

The money could shore up the life insurance industry, which plays a major role in the economy and has been weakened by the financial crisis. In addition to paying death benefits, life insurers deliver retirement income in the form of annuities. They are big investors in corporate bonds and commercial real estate.

However, the erosion of their investments -- and the possibility of further declines in the value of stocks, bonds and mortgages -- raised concern in some quarters about the outlook for the industry.

"These funds would further fortify our capital resources and provide us with additional financial flexibility during one of the most volatile market climates in our nation's history," Hartford chief executive Ramani Ayer said in a statement.

Hartford said it received preliminary approval for an infusion of $3.4 billion, the full amount it estimated last year that it might obtain.

Until now, the government had used the capital purchase program to support the struggling banking industry. With the recent completion of stress tests assessing the continued needs of the banking system, the government was in a clearer position to address insurers.

Insurers applied for the federal support last year and had been in suspense for months as to whether they would get it. The Treasury had been evaluating their applications in consultation with state regulators.

Though the legislation creating TARP suggested that insurers could participate, the Treasury said that to qualify they had to be bank or thrift holding companies, which would put them under federal supervision.

The federal money has strings attached. If they take it, insurers would have to submit to restrictions on executive pay and other matters.

Spokesmen for Lincoln and Prudential declined to comment. A spokeswoman for Principal Financial, Susan Houser, said by e-mail yesterday afternoon that Principal had received no response from the Treasury to its application.

AIG reports record $61.7bn loss

Insurance giant AIG has reported a loss of $61.7bn (£43bn) in the final three months of 2008 - the largest quarterly loss in corporate history.

And the firm will receive an extra $30bn from the US government as part of a revamped rescue package.

AIG has already received $150bn in financial support - the biggest bail-out by far of any US company.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3763258

http://news.bbc.co.uk/1/hi/business/7918643.stm

The Demand for Private Health Insurance in Malawi

The Demand for Private Health Insurance in Malawi

Source: http://ideas.repec.org/p/pra/mprapa/4974.html
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Author Info
Makoka, Donald
Kaluwa, Ben
Kambewa, Patrick

Additional information is available for the following registered author(s):

* Donald Makoka

Abstract

This study investigates the determinants of demand for private health insurance among formal sector employees in Malawi, a poor country with heavy pressure on under-funded free government health services. The study is based on membership in the Medical Aid Society of Malawi’s (MASM), three schemes, namely: the VIP, the best; the Executive, the intermediate; and the Econoplan, the minimum. The results indicate that formal sector employees prefer to receive medical treatment from private fee-charging health facilities, where health insurance would be relevant. The study finds that the probability of enrolling in any of MASM’s schemes increases with income and with age for the top and minimum schemes. More children and good health status reduce the probability of enrolling into the two lower schemes. The results suggest the potentially important roles that can be played by information and interventions that address the affordability factor such as through employer contributions that take into consideration income and family size.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4974.

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Consequential Damage- Term of the day.

Term of the Day

For Monday, January 19, 2009

consequential damage

Definition

Damage or injury that does not directly and immediately result from a wrongful act, but instead indirectly and/or after elapse of some time. Consequential damage usually cannot be foreseen and is often unrecoverable through litigation, unless the offending party was notified in advance that the aggrieved party would suffer such damage. Also called indirect damage or special damage. See also consequential loss.

consequential damage is in the Corporate, Commercial, & General Law and General, Marine, & Life Insurance subjects.

consequential damage appears in the definitions of the following terms: special damage and indirect damage.

This content can be found on the following page:

http://www.businessdictionary.com/definition/consequential-damage.html

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BRITISH INSURANCE PREMIUMS TO SKY-ROCKET IN 2009

Leading Lloyd's of London Insurer Amlin in tonight's (12.01.2009) Evening Standard's Business section, page 28, as authored by Simon English have claimed the UK insurance market will see a 'cut-throat' approach to writing premiums with insurers no longer chasing market share at the expense of profits. Insurers are said to be taking a cautious approach to managing risk in the wake of the Global financial crisis, predicting an increase of close to 20% for motor vehicle insurance.

"The impact of last years hurricane activity and the recent dislocation in capital markets has started to drive firmer reinsurance rates, reversing last years falling trends..........
We are through the bottom of the insurance cycle with strong prospects for hardening rates across our business.......It has dawned on the sector that they need to be disciplined. The fallout of the banking crisis has reminded people that they need to price things properly"

Amlin took premiums of £1.02 billion in 2008, 2% down on 2007.

2008: Insurance year in review - Daily Times

While I agree with Lester's Malawi insurance year review pasted below I would like to add especially on the aspect of market saturation that buying/selling of insurance in Malawi is practically impossible to increase markedly when we have the lowest per capita GDP earning (purchasing power parity: 2007 est.) compared for instance to Zambia, Tanzania and Uganda economies; now I opine this is an area that needs revitalised government policy involvement, to purposefully create an environment that would allow for innovation in wealth creation, in deliberate creation of a viable middle class and an innovative banking sector [and private sector] that is willing to take risks in growing wealth and creating wealth that the insurers would in turn insure..., put simply insurance is about people who have disposable and discretionary incomes, those that are able to afford to amass property and value in themselves and are further able to afford to insure these insurable interests so created; the marked absence of growth of a real middle class particularly means there is very little in savings or wealth created within the Malawi economy; with prohibitive bank interest rates, the population and the small to medium scale business community is hesitant to borrow to grow or further invest in insurable ventures, the absence thereof creating a stagnant investment scenario that has very little to be insured, I applaud NICO's strategies by acknowledging that they had grown faster than the economy and the economy was no longer creating ample new business hence the investment in other growing economies such as Tanzania Uganda and Zambia. Check below some sobering statistics on Malawi:

• Our Industrial production growth rate: (2007 est.) was 4.4%, Tanzania- 8.2%;
• Our Labor force - by occupation: (2003 est.) is 90% agriculture based [mostly using hoes];
• Our budget for 2007 est was rev: $1.128 billion exp: $1.185 billion while that of Tanzania was rev: $3.561 billion exp: $3.594 billion;
• Our Exports: (2007 est.)were $604 million [note!! million] f.o.b. while TZ had $2.227 billion [note!! Billion]and the list goes on where we do not fare well, tavula pagulutu apa, pepani.

In a nutshell there is a lot of multi-sectoral work to be done to just be at par with the other three quoted countries let alone globally. We in reality need to ditch all egoistic politics, build the country then and only then bring in politics again.

Another way is for the insurance regulator to deliberately curb the flow of reinsurance premiums outside of Malawi by encouraging a sharing of the risks that local companies cannot hold; those risks and commensurate premium that they end up exporting to other foreign economies [good thing by the way], these excess risks if shared with other willing insurers within the Malawi market would grow the industry capacity, reduce capital flight and benefit the country as a whole....So you will note all my above suggestions require enactment of legislation or delegated authority by government, the Insurance Association should seek an audience with the government and strategise on the way forward.... easy for me to say [Monday Coach etc :-) ] this would also a pretty strong cure for undercutting, why would you undercut on a risk you are participating in? your interest would be in increasing the premium receivable from the risk not acquiring the risk by waging price wars. The Insurance Association of Malawi in this set-up can be more than what is, it could for instance have a role of receiving excess risks from local insurers before these are exported to foreign re insurers and instead offering these to other insurers within Malawi before exportation....

Undercutting of rates will continue as a survival strategy for those hoping to use the law of large numbers to survive, unfortunately in the long-term this is an unsustainable growth strategy for especially firms with low capital reserves and legal liabilities asides from increasing expense ratios to uphold which will inevitably result in a number of insurance companies going under or overexposing their re insurers. Great piece though I thoroughly enjoyed it, the research was (I assume) not easy to do. Enjoy....

2008: Insurance year in review BY LESTER CHINYANG’ANYA, Daily Times Malawi.
15:14:35 - 07 January 2009

http://www.dailytimes.bppmw.com/article.asp?ArticleID=11759

2008. What a year it was for the insurance sector. It was a year of mixed fortunes as far as insurance issues are concerned. The Southern and Central regions, as part of the Malawi insurance market, can largely be classified as saturated as opposed to emerging. Saturated markets are those where sales of insurance products are almost at saturation point. Most people have all the traditional insurance covers they are ever going to buy. The most viable way for insurance companies in saturated markets to grow is to venture further afield into new geographical territories. Whereas the Southern and Central regions have become saturated markets, the Northern Region is still in its infancy, insofar as insurance consumption is concerned.

The first quarter of 2008 will be remembered as the period in which insurance competition came to people of the Northern Region as an emerging market. In the quarter, the industry witnessed a trek of insurance companies and broking firms to Mzuzu and surrounding areas, which of late has also seen banks, motor dealers and other non-financial institutions establishing branches there. This is in search for ‘greener pasture’ through what economists call economies of scale.The Northern Region has now two resident life insurance companies sharing a market of approximately K100 million. We also witnessed the first broking firm establishing its office in the heart of Mzuzu. Previously, there was no insurance broker in the region. The region became a home to four more non-life insurance companies, bringing the total number of resident non-life insurance companies to seven, fighting for supremacy in a K80 million market. There are eight non-life insurance companies in Malawi. In May, NICO General Insurance Company in conjunction with Opportunity International Bank of Malawi (OIBM) became the first insurance company and bank to co-offer bancassurance product to the public through an insurance policy called Mthunzi. Bancassurance is the provision of insurance and banking products through a common distribution channel. Mthunzi is an insurance policy specially designed and written by NICO General to protect OIBM’s loan clients against theft and accidental damage to property bought using the bank’s loans.

The Malawi insurance marketplace will remember 2008 for rate cutting in many insurance lines as competition for market share among market participants continued to soar in both premium and terms. The number of fraudulent claims in personal lines also multiplied. Despite these pressures, profitability remained strong, underscored by a relatively moderate claim cycle, which allowed insurers to concentrate on curbing fraudulent claims triggered by deadly syndicates, comprising of some lawyers, medical personnel and traffic police officers. In the second quarter, Malawi Union of Savings and Credit Cooperatives (Muscco), the country’s leading micro-financial institution, announced that it was introducing cooperative insurance for its members. The market is yet to see this coming to fruition.The 2008/09 national budget was delivered on May 23 at New State House in Lilongwe by Finance Minister Goodall Gondwe. The inclusion of crop and weather insurance for maize in the national budget attracted the fraternity’s interest. The arrangement is that companies buy maize with an undertaking that in case of maize shortage, government buys the maize at a price that the company in question purchased it. If by an agreed month, the government decides not to purchase the maize, the company is free to export it.Besides crop insurance, the government agreed to pilot World Bank weather index-based insurance under which an insurance pool, provided by the Insurance Association of Malawi, would pay policyholders if it is found that weather conditions have impaired crop production. One thing that came out clearly from the finance minister’s presentation is that the two schemes act as a tool of alleviating effects of bad weather on crop production, notably the country’s staple food crop, maize. This is a move in the right direction.

A much discussed policy issue during the 2008 Insurance Institute of Malawi’s (IIM) conference that took place on September 26 in Blantyre was access to insurance products by financially and socially disadvantaged individuals in Malawian communities. This remains a key policy issue and a challenge for the entire fraternity and the government. The Deputy Governor of the Reserve Bank of Malawi Mary Nkosi, who was the guest of honour at the IIM’s conference, bemoaned the country’s poor insurance penetration levels in spite of the economy’s excellent economic growth rates. Insurance penetration is the ratio of gross written insurance premium to Gross Domestic Product.Malawi’s insurance penetration stands at a miserable 2.6 percent against world average of 7.5 percent. The top three countries are United Kingdom at an enviable 16.5 percentage point, South Africa at 16 percent and Taiwan at 14.5 percent. The lower the rate, the less developed the market is. Many people in Malawi cannot afford insurance. Financial impetus is required to reach untapped markets. There is need for the fraternity to consider providing new and innovative products at the lower end of the insurance market spectrum.The conference observed that this must be pursued from a marketing perspective. The fraternity must forge partnerships with other key stakeholders, such as banks, farmer organisations and other non-governmental organisations to develop insurance literacy module aimed at delivering education and awareness about insurance benefits. This involves the insurance industry developing and providing compatible and simplified insurance products that meet the needs of specific rural market niches.The year 2008 was also weighed down with heavy road traffic accidents. The fraternity picked a number of road traffic accident claims in both material damage and third party liabilities.

According to the 2008 National Road Safety Council of Malawi’s first biannual road accident statistics, which were released in October, there were 3,555 reported road accidents, of which 462 culminated into deaths. Of the said 462 deaths, 193 involved persons in the age group of 25-44. Lilongwe had most deaths, followed by Blantyre and Ntcheu, in that order. The worst severe case occurred in Mzimba, where 24 people belonging to Last Church perished at Mapangira on their way to prayers at Euthini.

For the first time ever, the industry saw claim paying ability rating of two general insurance companies, with NICO General Insurance Company being the first and highest rated with AA- (Double A minus).Claim paying ability rating is an actuarial-based opinion of the rating agency of an insurance company’s financial capacity to meet obligations of its policies in accordance with its terms and available funds. The rating measures an insurance company’s ability to pay claims in the short to medium term under different stressful underwriting and economic regimes. The other highlight of the year was the introduction of funeral bancassurance product called Mthandizi by OIBM. The launch took place in September in Mchinji.2008 was a turbulent year for fire insurers. The industry witnessed a spate of severe fires that gutted down the country’s major markets of Nkhata Bay, Mangochi, Madisi, Matabwa in Mzuzu, Lilongwe, Zomba, Ndirande, Nthukwa in Chilomoni, Mponela, Dyeratu in Chikwawa, Karonga. The list is endless. Private dwelling houses and commercial buildings were not spared; on the morning of October 5, Rab Processors’ warehouses in Lilongwe were razed down. Church houses belonging to CCAP in Blantyre and SDA in Lilongwe, respectively, fell victim to the flurry as well. The island district of Likoma had its share, where two houses were mysteriously burnt down. In September, the RBM released a press statement informing the general public about insurance and reinsurance companies and intermediaries that are authorised to conduct insurance business in the country. The fact that this important announcement was made after renewing the players’ licenses (after the month of April) underpins the value of the professional working relationship that exists between the fraternity, the insuring public and the regulator. Yes, I can envision the fraternity continue working closely with the regulator and insuring public to ensure implementation of this important piece of announcement commences smoothly and in a timely manner. The message needs to cascade down to all insurance buyers in the market.

A large number of significant and extreme weather events during 2008 impacted heavily upon the industry, which in turn culminated into insurance claims. In November, a fierce windstorm blew off roofs of 19 Malawi Housing Corporation’s newly constructed houses in the medium densely populated township of Area 49 in Lilongwe. Twenty-three other houses, belonging to two different non-governmental organisations, were also affected by the same event. In the second week of the same month of November, another hailstorm hit Neno, destroying schools, churches and dwelling houses. In the third week, Chief Chimaliro’s area in Thyolo was hit, prompting government through the Department of Disaster Preparedness to respond with food and other material support. Following on these events, the Insurance Association of Malawi issued a statement of benevolence to ensure that the public had necessary information at hand on many aspects relating to risk management during the just ended festive season and in times of crisis and recovery.As alluded to, 2008 marked a year of refinement. The Insurance Institute of Malawi, which is the sole professional organ of the industry, coined its mission statement, vision and values with a view of ethically and expertly promoting its image in a dynamic business and economic environment. It was also a year of stabilisation. Big claims were down. Premiums by policyholders were affordable.

All in all, 2009 is here. To you dear reader, I wish you a Happy and Prosperous New Year. To my fellow insurance practitioners, all we can hope for is a fraud-free 2009.