THE AFRICAN REINSURER A PUBLICATION OF THE AFRICAN REINSURANCE CORPORATION Volume 022, June 2008 The African Reinsurer AFRICAN REINSURANCE CORPORATION SOCIETE AFRICAINE DE REASSURANCE Headquarters/Siège: Plot 679, Karimu Kotun St., Victoria Island, P.M.B. 2765, Lagos, NIGERIA Tel: (234-) 2663323, 2626660-2, 68820 Telefax: (234-) 2663282/2626664 E-mail: [email protected] - Web site: http://www.africa-re.com - Your Reinsurer - Votre Réassureur - An ally within your reach - Un Interlocuteur de Proximité - A Partner You can trust - Un partenaire de confiance - A Strong Security - Une Sécurité renforcée with (S & P) BBB+ and A.M. Best A- Ratings avec les cotes BBB+ de S & P et A- de A.M. Best - An African Professional that stands by you - Un Professionnel Africain à vos côtés REGIONAL OFFICES Casablanca Nairobi Abidjan 33 Boulevard Moulay Youssef, Africa Re Centre, Hospital Road, Rue Viviane A24 - Cocody Ambassades Upper Hill, Nairobi. 20 BP 623 Abidjan 20. P. O. Box 7556 P.O. Box 62328 - 00200, Nairobi Tel : (225) 224 - 2240448 Casablanca, Morocco Tel: (254-20) 2730660 - 3 Fax : (225) 22404482 Tel: (22) 22 43 77 00 Fax: (254-20) 2724896, 2730608 E-mail: [email protected] Fax: (22) 22 43 77 29 E-mail: [email protected] E-mail: [email protected] SUBSIDIARY Mauritius Cairo African Reinsurance Corp. (South Africa) 38c Mansour Street Abdeen Downtown Ltd One Cathedral Square, Postal Code 46 Mezannine level, 2nd Floor (West Wing) Cairo, Egypt Pope Henessy Street Oakhurst Building -3, St Andrews Road, Tel: (20-2) 2792-4020 Port Louis Parktown 293, Houghton 204, Fax: (20-2) 2792-4030 Mauritius Johannesburg E-mail: [email protected] Tel: (230) 20-0795 Tel: (27-) 484-3764/970/606 Fax: (230) 20-2496 Fax: (27-) 484 - 00 E-mail: [email protected] E-mail: [email protected] 2 The African Reinsurer Volume 022, June 2008 CONTENTS 22nd Edition, June 2008 Established in 1987 Page 4 EDITORIAL THE AFRICAN 5 INSURANCE & REINSURANCE REINSURER 5 Takaful Concepts and Practice PUBLISHER By Zainal Abidin Mohd. KASSIM, Managing Director African Reinsurance Corporation Mercer Zainal Consulting, Malaysia Plot 679, Karimu Kotun St. Victoria Island 13 Keeping Abreast of Developments in the (Re) insurance P.M.B.2765, Lagos, Nigeria Industry Tel: 2663323, 2626660-2, 68820 By Elizabeth AMADIUME, Regional Director, Africa Re, Mauritius Telefax: 2663282/2626664 E-mail: [email protected] 20 The Importance of Regional Reinsurance Markets to the Energy Industry EDITORIAL BOARD By Ken AGHOGHOVBIA, Director of West Africa and Special Editor-in-Chief Risks, Africa Re, Lagos Bakary Kamara 26 MANAGEMENT & FINANCE MEMBERS Alain Ravoaja 26 The Role and Importance of Rating Agencies in Ken Aghoghovbia Insurance Mamadou Diallo By Ibrahim IBISOMI, Assistant Director of Finance & Accounts, Sunday J. Udoh Africa Re, Nairobi TRANSLATORS 33 MARKET PRESENTATION Mamadou Diallo Sunday J. Udoh 33 The Regional Re/Insurance Market Roger Bong Bekondo By George OTIENO, Regional Director, Africa Re, Nairobi Ekereobong Ekpenyong Alexandre Noé Penda 48 New Developments in the Ivorian Insurance Market and Post-crisis Prospects TYPING & TYPESETTING By Jean-Baptiste KOUAME, Managing Director, CICA - RE, Togo Patricia Amouzou (Née Beguy) 63 NEWS FROM THE REGIONS All rights reserved. No part of this publication may be reproduced without the Publisher’s permission Volume 022, June 2008 The African Reinsurer 3 EDITORIAL CHANGING SEASONS, DIFFERING FORTUNES Bakary H. KAMARA Editor-in-Chief After the events of September material, justifies experts’ prediction 2001 and the financial crisis of that the region would experience 2002, the insurance industry in sustainable development within the general and the reinsurance sub- century. While the continent might sector in particular experienced an be further weakened by inflation exceptionally long hard cycle (2002 which has affected every aspect of – 2007), unlike the preceding years the world economy, it is expected when rates, conditions and terms that the envisaged positive remained soft over a long period prospects would be confirmed, thus (995 – 200). opening up vistas of substantial growth to the African insurance Whereas in the past, insurance industry, the only one in the world practitioners learnt no lessons to have attained 2.5% growth in from the serious threat that lack 2006. of underwriting discipline posed to their operations, they now seem Islamic insurance (takaful) also falls to have opted for prudence even in moments of stiff within the scope of these new developments. Indeed, competition. with a contribution of about US$ 5 billion, that sub-sector is bound to grow and to triple or quadruple (US$5 - 20 Thus, one of the contributing authors to this twenty billion) its current turnover, thus the need and relevance second edition of the « African Reinsurer » sought of interactive rating. to recall the various developments in the world insurance industry, laying special emphasis on Africa Financial analysts, conscious of the business prospect and the improvement in underwriters’ discipline and that the niche sector represents, have opted to create professionalism. rating tools for takaful and retakaful operators. The role of regional insurers in the Energy sector would Therefore, Africa Re like the mega reinsurers has decided certainly be of interest at a moment that the price of to properly position itself so as to offer better services the black gold is surging to unprecedented heights to Islamic insurers in Africa and beyond, while hoping and our continent is becoming a pole of attraction that the ethical values prescribed for market players in to oil companies from the developed world and even the sub-sector will protect it against the ills and errors those from the emerging economies (China, India and of conventional insurance, which include among others, Malaysia). unbridled competition, inappropriate rates as well as exorbitant terms and conditions. Africa’s economic performance in 2007 (5.7% GDP growth), triggered by the increase in the prices of raw Have a rewarding reading! 4 The African Reinsurer Volume 022, June 2008 INSURANCE AND REINSURANCE TAKAFUL – CONCEPTS AND PRACTICE By Zainal Abidin Mohd. KASSIM, BSc., FIA, ASA Managing Director of Mercer Zainal Consulting Kuala Lumpur, Malaysia Risk and Conventional puts his capital at risk in case the Insurance premiums are inadequate and can either make a financial gain or a Risk is a word defined in the Oxford financial loss when the insurance dictionary as exposure to danger contract expires. One of the issues or loss. This means that every that Fiqh has with conventional individual or property is subject to insurance is this presence of Risk. However, Risk can be further speculative risk in the insurance subdivided into two kinds of risks, process. speculative risk and pure risk. Insurance is also one of the few Speculative risk is attributable to a businesses where the “fee” (i.e. situation where there is a possibility premium) is paid before the service of either making a gain or incurring (settlement of claims) is provided. a loss on the occurrence of an Investment income derived from event. Gambling is an example of investing premiums before they are speculative risk, where at the throw of a dice, a gambler required to pay claims usually constitutes a significant can either win or lose some money. On the other hand, percentage of the insurer’s income. Such investment pure risk is very different, in that the occurrence of income can form part of the amount used to pay claims. the event can only result in a loss. Theft of a car is an Premiums are normally invested in banks and interest example of pure risk, as the event can only result in a bearing bonds. These sources of riba income also loss to the owner. Insurance from the perspective of present a significant issue with conventional insurance the insured is therefore a contract of indemnity. The from the Fiqh perspective. insurer would indemnify the insured on the occurrence of a loss by settling the monetary equivalent of the Takaful loss. The insured does not gain from that loss as the insured amount only brings him back to his financial All Sharia compliant commercial transactions have to position prior to the loss. Therefore, from the insured’s comply with certain basic restrictions. They should be perspective, insurance is not gambling. For the Muslim, devoid of: this is not the reason why conventional insurance is not in accordance with Fiqh (Muslim jurisprudence). (i) ‘Riba’ (interest) (ii) ‘Gharar’ (uncertainty) However, the insured represents only one side of the (iii) ‘Maysir’ (gambling) and equation. What makes insurance work is the existence (iv) Other investments which are ‘haram’ (prohibited) of the insured and the insurer. The insurer puts up in Islam e.g. gambling, alcohol and tobacco his capital and sets his premiums. The insurer is also production. underwriting risk in that he underwrites the book of business for a profit. From the insurer’s perspective The insurance contract is no exception. then he is not dealing with pure risk but with speculative risk. With the meticulous use of statistics and through While reasons for avoiding Riba, Maysir and all Sharia reinsurance (which facilitates the spreading of risks) the prohibited investments are clear for most Muslims, element of speculative risk is reduced in line with the the issue of Gharar needs some explanation. Gharar capital available. The investor in the insurance company can be translated as uncertainty and by extension as Volume 022, June 2008 The African Reinsurer 5 INSURANCE AND REINSURANCE the transfer of risk. Muslim jurisprudence is clear that alternative, conventional insurance is acceptable to business dealings must be transparent where the parties Muslims, as it brings more good than harm and thus to the transaction are clear as to what the consideration is of benefit to society.