The Council of Ministers has approved the country’s draft unified insurance law in Egypt, the much awaited draft legislation closer to enactment.
The Cabinet decision states that the new draft law sets out specific and comprehensive rules for the insurance industry in Egypt, and organising the rules for supervision and control over them.
This will be for the Egyptian insurance market the first time a unified and comprehensive law that regulates supervision and control mechanisms over the practices of insurance activity in Egypt.
The draft stipulates that the Financial Regulatory Authority, exclusively, shall have jurisdiction over the establishment, licensing, and control of entities engaged in insurance, reinsurance, and associated services, professions and related activities.
New areas covered by the draft legislation include microinsurance, private insurance funds and litigation in economic courts. The draft also introduces new compulsory classes of insurance.
Previous media reports said that the minimum capital requirement for insurance companies will be increased.
The draft Bill consolidates four separate laws passed over the years. The first draft of the proposed insurance law was announced at the end of 2018.
Saudi Enaya Cooperative Insurance Company inked a non-binding Memorandum of Understanding (MoU) with Amana Cooperative Company to evaluate a potential merger between the two companies.
Both companies will conduct technical, financial, legal, and actuarial due diligence and engage in non-binding discussions on the terms and conditions of the potential merger.
Last month, the insurers started initial discussions to study the merger of the two companies.
Under the 12-month MoU, the parties agreed to implement the merger, in case it occurred, by way of share swap where Amana Cooperative will issue new shares to Saudi Enaya shareholders in exchange for all issued shares of Saudi Enaya.
The methodology used for valuation will be based on equity book value and the swap ratio between Amana Cooperative and Saudi Enaya shareholders shall be calculated using the respective adjusted equity book value per share as at a mutually agreed Cut-Off Date.
In a separate statement, Saudi Enaya said it appointed BMG as the financial advisor for the proposed merger.
Reinsurers are hopeful that the strengthening of their terms and conditions will follow through just as it started with 2019 renewals to continue in 2021
With the appearance of the coronavirus, they have additional arguments to convince cedants of the merits of rate increase in their favor.
Even before the health crisis, headwinds began to have an impact on the industry, with the list of factors affecting reinsurers’ finances only getting longer and longer. Back then, the concerns were numerous:u -uncertain development of natural catastrophe reserves;; inncreasingcost of claims,n and unfavorableevolution of the legislative, judicial, social and economic framework.
Moreover, nothing seems to be getting low interest rates off the ground for several years. The Covid-19 outbreak has exacerbated this situation while the reinsurance supply remains vigorous.
This apparently catastrophic situation conceals, however, factors which counterbalance these disastrous effects. After some hesitation, the market players quickly adapted to the virtual work environment. They are developing efficient risk transfer platforms in a sector connected to new technologies.
It is therefore in an unusual environment that treaty negotiations will take place on 1 January 2021, with just one unknown factor dominating this renewal: what impact will the health storm and economic difficulties have on reinsurers?
Reinsurance market’s capital
Since 2013/2014, the capital allocated to the market by traditional reinsurers has increased significantly. Estimated at 320 billion USD in 2013, it skyrocketed in 2019 reaching 394 billion USD. This increase is particularly noticeable between 2018 and 2019 with a 15% increase in traditional capital.
However, the strong growth in capacity is taking place in a market where many stakeholders who underwrite business beyond the break-even point are struggling to make profits. However, the financial market downturn at the end of 2018 and throughout 2019 has improved the investment prospects of reinsurers impacted by the multiple financial crises.
The estimated reinsurance capital for 2020 is down by nearly 2.3% at 385 million USD. The latter was already down by nearly 2% as at June 30 of the current year. Between 2016 and 2018, a series of natural disasters eroded the reinsurance capital. The adequacy between capital and risk regressed after each major event without, however, affecting the profession’s solvency ratios, which remain very comfortable.
Alternative reinsurance’s capital
Estimates show a regression of alternative capital (from 88 billion USD in 2018 to 86 billion USD in 2019) similar to that of traditional capital, even if on 30 June 2020 the observed decline is more significant.
This decline in alternative capacity is accounted for by the loss of certain assets backed by reinsurance commitments following the occurrence of the so-called secondary natural catastrophe claims: severe storms, bush fires, floods, etc.
The year 2020 has witnessed an upsurge in terms of frequency for this category of events whose severity is often moderate, particularly in the United States. The United States alone sustained ten of these disasters by 31 August 2020. This increasing trend can be observed in several regions of the world.
The Federal Aviation Administration, FAA, on Wednesday cleared the Boering’s 737 Max to fly passengers again after 20 months the aircraft giant stemed from two crashes of its top-selling plane that killed 346 people.
FAA is a US department of Transportation as the Administrator Steve Dickson after ungrounding the plane said a repeat of the conditions in both crashes is now “impossible” thanks to design and training changes
The fallout from the crashes has engulfed Boeing for more than two years, drawing criticism about design flaws’ roles in the crashes and on how the Chicago-based company marketed the plane, touting its simple training procedures, which would save airlines money.
The crashes and the grounding also raised scrutiny on the FAA, long the world’s gold standard of aviation, and raising questions about whether it ceded too much power in the certification process to Boeing before it approved the planes in 2017.
“We will never forget the lives lost in the two tragic accidents that led to the decision to suspend operations,” Boeing’s CEO David Calhoun said in a statement. “These events and the lessons we have learned as a result have reshaped our company and further focused our attention on our core values of safety, quality and integrity.”
The end of the 20-month flight ban also gives Boeing the chance to start handing over the roughly 450 Max jetliners it has produced but has been unable to deliver to customers after regulators ordered airlines to stop flying them in March 2019. Boeing shares were up about 3% in morning trading.
Boeing has a backlog of more than 3,000 other Boeing 737 Max planes, when stripping out orders that the manufacturer believes could be cancelled. That tally has declined as the lengthy grounding coupled with the coronavirus pandemic prompted customers to call off hundreds of orders.
Regulators grounded the Max in March 2019 after the second of two nearly new 737 Max planes crashed within five months of one another. The crashes prompted a lengthy safety review that was met with numerous delays, driving up losses and costs for Boeing.
For months after the crashes, Boeing and the FAA faced criticism from lawmakers and some air safety experts about the plane’s design and certification. Tensions over the grounding between Boeing and the FAA cost the former CEO his job. U.S. lawmakers are now advancing legislation that would strengthen the FAA’s oversight of new aircraft after it was criticized for being too lax on the new aircraft.
Investigations into the crashes and the Max’s development focused on an automated flight control system that was meant to prevent the aircraft from stalling. Pilots on both flights that crashed — Lion Air Flight 610 on Oct. 29, 2018, and Ethiopian Airlines Flight 302 on March 10, 2019 — struggled against the system after it was activated because of faulty sensor data.
Pilots weren’t informed about the system, and mentions of it had been removed from pilot manuals when they were delivered to airlines. A House investigation in September found regulatory, design and management problems as the jets were being developed led to the “preventable death” of everyone on board.
Boeing has made the system less aggressive and added more redundancies, among other changes over the past two years.
Airlines still have to train pilots and remove aircraft from storage, if they had 737 Maxes in their fleets at the time of the grounding.A
American Airlines is set to be the first U.S. airline to return the aircraft to commercial service at the end of December. The carrier on Wednesday said it plans to expand Max flights throughout January from its Miami hub.
United Airlines and Southwest Airlines executives have said they expect the planes to return to their schedules at some point next yea
Insurance operatorsare clamouring for the extension of the recapitalization deadline to December 31, 2020 from September 30, 2021.
They also want waived, the first phase of its segmented recapitalization for the insurance and reinsurance companies scheduled to end December 31, 2020, as directed by the regulator, the National Insurance Commission (NAICOM).
The reasons given by the operators for the extension of the deadline are proximately related to the huge impacts of the COVID-19 pandemic and #EndSARS protests on their insurance businesses.
Thus, they require enough time to fully settle back to their businesses to be able to pursue more aggressive recapitalization agenda to meet the commission’s set objectives by 31 December, 2020.
The insurance companies are as well leading with NAICOM to jettison the phase by phase segmentation of the exercise – with the first phase billed to elapse on December 31, 2020.
This plea was made during a meeting of the Chief Executives of all the insurance companies with the Commissioner for insurance at the industry’s professional forum in Abeokuta, Ogun State recently.
The operators are more concerned and agitated, as it relates to meeting certain thresholds by 31 December 2020, and failing to meet them would make the commission restrict the scope of business insurance and reinsurance companies they can transact
The Securities and Exchange Commission, SEC has stated that the Federal and State Governments have the capabilities to unlock enormous potentials through privatisation.
Director General of the SEC, Mr. Lamido Yuguda stated this on Tuesday at a Webinar organised by the Nigerian Stock Exchange (NSE), in collaboration with the Nigeria Governors’ Forum (NGF) and the Nigerian Investment Promotion Council (NIPC) with the theme: Privatisation in Nigeria and the Outlook for Subnational Economic Development.
Represented by Mr. Reginald Karawusa Executive Commissioner Legal and Enforcement, Yuguda said the theme speaks to one of the issues that is germane to financing for state governments.
He said there is indeed no better time to discuss alternative funding sources at the sub national level given adverse impacts brought about by the COVID-19 pandemic.
According to him, the capital market’s primary role in any economy is to facilitate capital formation. By creating a system for allocation of capital, investors are able to price risk efficiently while issuers have the opportunity to raise funds to finance projects. In doing so, issuers may choose to raise equities or debts.
“Sub national issuers in Nigeria have been able to access the debt capital market over the years since 1978, state governments in Nigeria have raised close to N900bn through debt issuances. A significant part of these funds were deployed to finance capital projects across the country. However, the ability of states to continue to borrow in a sustainable manner has been severely impacted in recent times. With the huge infrastructure gap, decreased allocation from the federal purse owing to relatively low oil revenue and the depressed level of internally generated revenues, states are barely able to pay salaries after servicing their outstanding loan obligations.
“Privatisation is an avenue for governments to unlock economic potentials inherent in government owned enterprises. The focus on Nigeria’s journey on privatisation has largely been on the Federal Government. There have been several phases of privatisation exercises in the past with emphasis on enterprises operating in different sectors of the economy including oil and gas, hospitality, mining etc.” Yuguda stated.
The DG said the discourse is crucial in the light of current economic realities as a number of these deals were consummated through the listing of these entities on the Nigerian Stock Exchange, some of these companies have been positively transformed and have returned value to shareholders.
“Several enterprises are still owned and controlled by the government, both at the state and federal levels. A number of these entities have the capacities to generate cash flows and corporate profitability. However, owing to certain inefficiencies, these entities are under performing and in some cases subtracting from value. Perhaps this is the time for state governments to revisit the privatisation value proposition. There are several benefits to privatisation” he stated.
He said privatisation has numerous benefits as the proceeds from the sale of government interest in these enterprises would help augment budget shortfalls and can be applied towards funding critical infrastructure.
“Beyond the funds to be generated, governments will enjoy cost of savings as there would be no further requirements to fund these entities post-privatisation.
“There are further benefits to be enjoyed through the taxes that would be paid in the future by those entities. As they undergo strategic transformation and become positioned for profitability, these entities are able to create jobs and employ residents of their host states, facilitate infrastructure development and further positively impact the economy in other areas” he added.
In his remarks, CEO of the Nigerian Stock Exchange, Mr. Oscar Onyema said the NSE is pleased to hold the webinar as part of its strategic strive in assisting the states towards economic sustenance.
Onyema said privatisation occupies a critical position in economic globalisation and provides an avenue for raising the bar towards economic development.
“Given COVID-19, there is no better time to re-visit privatisation and cascade this to the subnational levels” he said.
Also speaking, the Chairman of Nigerian Governors Forum, Dr. Kayode Fayemi said the state governments have been constrained to increase spending in a bid to mitigate the effects of the pandemic.
According to him, “containment is fairly in place but more needs to be done to ensure progress is not lost and that is where privatisation comes in. If the private sector takes over in critical sectors, state governments can focus on education and health among others”.
Fayemi assured that the forum will continue to partner with the NSE to bring in long term financing for infrastructure development.
Despite the sector’s pressure, the Philippine government has maintained the minimum share capital requirements for local insurers.
Currently set at 900 million PHP ($18.57 million), the capitalisation requirement is expected to reach 1.3 billion PHP ($26.84 million) by 2022
For the Insurance Commission, this requirement is no longer necessary. The increase to 1.3 billion PHP ($25.42 million) would provide the Filipino market with the highest minimum capital requirement in Southeast Asia.
According to AM Best, such a decision will surely impact the insurance companies. Due to the pandemic-related economic crisis, insurers may find it hard to meet the government’s requirements.
The Philippine Life Insurance Association Inc. (Plia) revealed that it will be working with the Philippine Insurers and Reinsurers Association of the Philippines (Pira) in getting regulators to keep the capitalization requirement for insurance companies at P900 million.
Plia President Hans Loozekoot state that he wants collaboration with the Pira as both sectors of the insurance industry have shared goals, including improving the image of the insurance industry to consumers.
“For both the Pira and Plia, there is a shared interest to build the image [of insurance] and again that helps us not only to gain trust from the public but also to position ourselves as a good sector for employment,” Loozekoot, who is also the president and CEO of Troo Corp., said.
Besides enhancing the image of insurance, the shared interest of both sectors also touches on keeping the capitalization requirement for insurance companies at P900 million, in order to allow the players to invest more of their funds for other things like the digitization of insurance processes, among others.
“One of the areas is, of course, regulations. One of the things we want to raise again is the capital requirements where, as we feel together with the Pira, [that] P900 million should be kept and not further increased to P1.3 billion,” he added.
Loozekoot said rates for insurance companies in the Philippines should remain competitive with those in the Association of Southeast Asian Nations (Asean) member countries, pointing out that local insurance players are at a disadvantage if rates are too high.
“I think P900 million is probably enough to support the businesses and to give indeed the confidence to stakeholders that we are strongly capitalized, to have a buffer for our obligations to policyholders. We feel that we should not necessarily be at a stricter regime than other countries in the Asean sector. You want to still be able to compete,” he said.
On the collaboration with Pira, he also said that discussions on the capitalization requirement will be reported to the Insurance Commission (IC), as the regulator for the industry.
“We are going to talk about that, of course, informally we have talked about that, but it’s important now that we may raise this. I think we have strong arguments. And so this is something that as I said, we will enter into a dialogue with the different parties involved and see where we end up,” he added.
Under Republic Act (RA) 10607, or the Amended Insurance Code of the Philippines, new insurance industry players are required to have P1 billion in paid-up capital, while existing insurance companies need a paid-up capital of P550 million by December 2016, P900 million by December 2019 and P1.3 billion by December 2022.
Loozekoot said that it is also important for insurance companies to invest in different capabilities like data analytics, as changes like digitization are always being presented to the industry, which must adapt to stay competitive.
“We need to find more capital, even to invest in the future in a way, so for us it will be very helpful if we find ways and can agree with the various parties involved in this discussion. If we can cap it at P900 million, that we can use instead of trying to find traditional capital, that we can invest our money to make sure that it [our businesses] will be future proof…. And if we are very busy with meeting the capital requirements, it means that you have less money to spend on those things,” he added.
While complying with the P1.3-billion capitalization requirement by 2022 is doable for the insurance industry, it is important for companies to be able to invest their funds in the process that makes them ready for digitization.
As Plia president, he sees most life insurance companies in the country being able to comply with—or may have already met—the P900-million capitalization requirement for this year.
“Of course, I cannot speak for every individual company, but from what we know, we don’t expect…problems as of now [in meeting the P900-million capitalization requirement]…I think the majority of the companies have already complied with it,” he added.
Willis Towers Watson (WTW) will sell its 85 percent stake in wholesale London market broker Miller to private equity firm Cinven and GIC, a Singapore sovereign wealth fund that will also acquire the remaining shares held by partners.
Financial details of the transaction were not disclosed. The deal is expected to complete in the first quarter of 2021.
Miller was earmarked for a sale earlier this year, ahead of Aon’s acquisition of WTW. But the plans were put on hold in April due to uncertainty created by the Covid-19 pandemic.
Cinven and GIC said Miller is “an attractive investment opportunity” at a time of rate hardening in the sector and potential growth in specialty insurance. The joint consortium added that Miller will “benefit significantly from independent ownership, given the ability to accelerate its long-term growth profile”.
As an independent business, Miller will recruit new specialist brokers. It plans to expand through organic growth and “bolt-on M&A over time”. Greg Collins, CEO of Miller, said it will make “incremental targeted, strategic investments” to strengthen its position in core markets.
Cinven, which recently named financial services as a focus for investment, has previously invested in the insurance sector, including stakes in Guardian Financial Services in the UK, Eurovita in Italy and Viridium in Germany. Cinven said it will look at other opportunities to invest in Europe’s financial services sector. GIC has previously taken stakes in Mass Mutual in Asia and China Pacific Insurance.
Luigi Sbrozzi, partner of Cinven, said: “Miller is a highly attractive, resilient specialist insurance business with strong long-term growth opportunities across all of its segments and a history of consistent growth through various economic cycles. We see opportunities both organically, by recruiting new specialist brokers, and through incremental M&A over time. Miller also offers a scalable platform, particularly internationally, with associated benefits for clients as the business develops and expands over the long term. We believe that independent ownership is the right model to really accelerate the company’s growth.”
Yong Cheen Choo, chief investment officer of private equity at GIC, said: “We are pleased to partner with Cinven and look forward to supporting Greg Collins and his team to seize future expansion opportunities for Miller. As a long-term investor, we are confident in the growth potential of the specialty insurance sector, and of Miller within it.”
Miller employs 640 staff in offices based in the UK, Brussels, Paris, Singapore and Geneva. It operates as separate Lloyd’s broker and retained its brand name when Willis acquired 85% of Miller Insurance Services in 2015.
Willis moved its own wholesale business to Miller, and integrated Miller’s treaty reinsurance and financial institutions business into the parent group. Miller also owns London broker Alston Gayler, which it acquired at the end of 2018.
Managing Director of Royal Exchange General Insurance Company, REGIC, Mr Benjamin Chizea Agili is an insurance expert who grew through the ranks before he became the Chief Executive Officer of the company with over 30 years experience in the insurance industry. Agili in this interview with the Editor, Favour Nnabugwu says without mincing words that he wants REGIC to be recognized as a leading digital insurance company while its customers seat in the comfort of their homes and to do business with the company
How is Royal Exchange General Insurance Company doing right now?
Currently, we are doing well in terms of all ratios and financial indicators. As at third quarter we are growing reasonably in excess of 12 percent over the previous year, we are also ahead of budget in terms of all indicators to our financial statement, in terms of profit before tax and all other ratios. We are also very excited with our claims ratios, combined ratios and all others. I can only say that we are doing very well.
But normally we are like Oliver Twist, in that we still want to be very bullish and we still continue to do more to grow our business. And that is not to take away the fact that it has been a difficult year in terms of the challenges faced in the insurance industry, the impact of COVID-19 on the general market and recently the #EndSARS protest and the associated collateral damage.
Definitely as a reputable and as a big company, we are not going to be left from the negative impact of the destructions that followed the #EndSARS protest but we are prepared.
Do you have any claims arising from the #EndSARS protest?
Yes. We have some of our corporate and retail clients that have registered claims but we are waiting for their documentation and the necessary adjustment and authentication of those claims. We expect particularly those business premises that had riot and civil commotions extension, as part of their insurance policies to make claims and we are more than able to attend to such.
However we have also recently been experiencing a lot of demands for riots and civil commotions extensions which I believe the insurance industry is also addressing it and finding ways to adjust our rates and pricing mechanisms. This is because as it is becoming a major issue in our market and so we have to price it appropriately and that is what we as a company are doing.
You will recall that almost this time last year, we had a similar incident with the xenophobic riots and we had a massive destruction in which most of the major retail outlets were destroyed and the insurance industry came out and paid substantially. And if it becomes a recurring decimal we have to look at it and see how we can be able to accommodate this risk effectively in our business.
How digitally prepared is Royal Exchange?
Currently, we are undergoing digital transformation. We have recently acquired a new business core solution IES and we are still at the implementation stage, which is an ERP compliant solution from end to end and we are excited with it and what we intend to do just like the name implies digital transformation, we intend to drive our business digitally and expand our retail lines.
Our customers, our marketers, especially our retails customers and our personal line customers should be able to shop from the comfort of their homes or whatever. If you have a tablet or smart phone or laptop, you should be able to start a transaction and complete the transaction from the comfort of your home.
So, Royal Exchange General Insurance Company (REGIC) wants to be a company that is fit-for-purpose and we want to continue to reinvent ourselves. Any particular company that has failed to reinvent itself and adjust to the changes that are happening in the market will definitely not be fit for the period we are in.
Most insurance experts are of the view there no need for recapitalization at this time. What is your take on this?
As a matter of fact, the board of Royal Exchange General Insurance Company, (REGIC), has taken the National Insurance Commission (NAICOM) recapitalization guidelines very seriously and even before the deadline was issued, the board of REGIC has been working on the recapitalization because the board believed this is the right direction and the right way to go and our perspective to it is that it will create a more stable industry and the industry will be better.
The board feel confident about it because of the socio-economic challenges Nigeria is facing in terms of where the recapitalization money is going to come from, it poses a lot of challenge but we are equal to the task. And all the companies concerned are pushing their own strategy and I can assure you that REGIC will not be found wanting in that respect.
There is still a lot of rate cutting in the industry. How low can Royal Exchange go on rate?
It is the duty of the companies to set their risk appetite and set their risk target. The challenge is a national challenge and looking at the industry you will find out that the competition for market size has continued to put the industry on the wrong side of history.
So, it is a challenge but it is global challenge, it is not a challenge that one company can handle on its own. The individual companies craft strategies based on what the environment throws up, the challenges that are within the environment but we set our own risk appetite and we try to handle it our unique way. We are not doing or underwriting business at all cost. We will write those ones that we think will be proper for us to write.
Do you believe the industry need a lobby group to push their issues at the National Assembly?
I know that the direction we have championed over the years is that Nigerian Insurers Association, (NIA) should speak for the industry and NIA should be the champion for the industry and that is how it had been for a very long while. Getting an independent lobby group or a special lobby group I don’t know about that and I don’t think I will want to contribute to that.
What is your plan for Royal Exchange?
Royal Exchange is a company that is undergoing a lot of changes and reinvention. As you are aware and as I have said earlier regarding the recapitalization, we want to reposition the company as a market leader in all key business lines, in terms of gross premium, in terms of returns on investment, in terms of profit after tax.
Royal Exchange as you are aware, we are a top insurance company in this market and we are rebranding and repositioning the company to take its rightful place, we are very solid and that is where we are going to.
Managing Director of Royal Exchange General Insurance Company, Mr Benjamin Chizea Agili
Premium Motor Spirit, also known as petrol will now sell at between N168-N170 per liter.
This is as because the Petroleum Products Marketing Company, a subsidiary of the Nigerian National Petroleum Corporation, has increased the ex-depot price to N155.17 per litre from N147.67 per litre.
The PPMC disclosed this in an internal memo with reference number PPMC/C/MK/003, dated November 11, 2020, and signed by Tijjani Ali.
The memo, a copy of which was seen by our correspondent, said the new ex-depot price would take effect from Friday.
The ex-depot price is the price at which the product is sold by the PPMC to marketers at the depots.
It said the estimated minimum pump price of the product would increase to N161.36 per litre from N153.86 per litre.
The National Operation Controller, Independent Petroleum Marketers Association of Nigeria, Mr Mike Osatuyi, in a telephone interview with our correspondent, said the over N7 increase in ex-depot price would translate into an increase in pump prices.
