By: Egal Abdiwali
Expatriates working in Mogadishu have always been forced to seek insurance cover from overseas, but with the introduction of the specialty package, the revenue and efficiency of having it done locally will be a huge relief.
As Africa continues to experience terrorism and political risk, insurance service providers are now gearing up to provide insurance services many conflict countries yearn for.
British oldest underwriter Old Mutual has announced her entry to conflict and post conflict countries like Somalia with its $250 million specialty package.
The UK and South African insurer which acquired Kenya based UAP insurance has created a Lloyd’s cover holder to write specialty business in Sub-Saharan Africa targeting South Sudan, Somalia and DRC Congo.
“We’re working in partnership with leading Lloyd’s specialty underwriters to enhance our in country capabilities – world-class insurance expertise delivered directly by local teams that have a deep understanding of Africa. From Kenya we will venture into Somalia first, then to South Sudan and Congo to offer this complicated package right at their doorstep,” Martin Hudson, Chief Executive, Old Mutual Specialty Insurance said.
Old Mutual Specialty Insurance will cover nine products: Terrorism, commercial property, energy, construction, political risk and trade credit, mining, kidnap and ransom, cargo, transit and delay in start-up and general aviation.
The specialty insurance solutions will be delivered through established Old Mutual insurance businesses in sub-Saharan Africa, including Mutual & Federal, UAP and Old Mutual Nigeria.
Old Mutual Reinsurance (Mauritius) Limited will be taking an additional share of the underwriting risk through a specific reinsurance contract to demonstrate commitment to the long term underwriting integrity of their proposition.
Somalia has been going through two decades of Political instability creating risks for multi million Dollar business investments.
“We’re working in partnership with Lloyd’s specialty underwriters to enhance our in country capabilities – world-class insurance expertise delivered directly by local teams that have a deep understanding of Africa. From Kenya we will venture into Somalia first, then to South Sudan and Congo to offer this complicated package right at their doorstep,” Martin Hudson, Chief Executive, Old Mutual Specialty Insurance.
The provision of such insurance services coving political violence and terrorism has however been scarce in the Eastern and Southern African region with Insurers shying away from the highly risky venture.
Many expatriates working in Mogadishu have always been forced to seek insurance covers from overseas but with the introduction of the specialty package, the revenue and efficiency of having it done locally will be a huge relief.
Logistic disruptions have also attracted the market as foreign companies importing goods and services seek insurance against the risk of their business getting interrupted during terrorist activities and political tensions.
Terrorism risk has also become a major concern denying the country huge revenues from the sector that has the potential to earn the recovering state millions of dollars in annual revenues.
Old Mutual Chief Operating Officer Robert Bartlet said that the underwriter had identified specialty insurance as underrepresented and they wanted to remain the Africa champion of financial services provision in Africa.
“In countries rebuilding like Somalia, there is a significant investment in infrastructure, natural resources, economic services provided for the growing wealth in the country and all these are creating a new risk or exposure. The sprouting real estate sector will need this type of cover. The country also benefits by being more resilient and make it more investor friendly because project financiers have the confidence to support them, they basically become bankable,” said Mr Bartlet.
Governments and regulators are increasingly requiring that insurance transactions happen within the country.
That kind of commitment to domesticate transactions has cost saving elements to it because as in any other trade the longer the supply chain the more expensive it is. That means construction firms in Somalia and those engaged in massive infrastructure projects have some savings to make out of this.
Old Mutual said it will seek to partner with investors from both local and foreign firms with the strategic intent to deliver the service locally and create robust bases in Africa.
Somalia’s insurance penetration is bound to remain low for a while as the country walks the long path to economic recovery after more than two decades of political instability. Unlike other services, insurance penetration grows as wealth grows. You wouldn’t be issuing people with Travel insurance if they did not have disposable income (to travel). Would you?