Patience Saghana
Reinsurance companies within and outside the African continent are going to examine the level of solvency and governance in the insurance industry across the globe with a view to checking areas of lapses and ensure improvement.

Beyond considering the impact of reinsurance on the solvency of domestic companies, regulations of reinsurance arm of insurance industry has not received much attention, partly because of the absence of significant domestic reinsurance activity and fairly due to the absence of a reinsurance regulatory model in Africa and Europe.

However, majority of countries give significant freedom to using reinsurers at home and abroad whilst some restrict placement by individual insurers beyond a certain proportion to one reinsurer, or to one market.

There are at least five countries – Latvia, Lithuania, Moldova, Romania and Slovenia which stipulate that overseas placements may only be made once domestic reinsurers are unable to accept the business

Ms Prisca Soares, Secretary-General of African Insurance Organisation (AIO) told Vanguard he the forth coming 16th Reinsurance forum in Casablanca, Morocco from October 3rd to 5th, 2010 will decisively addresses issues concerning solvency, governance, and pension funds in relation to reinsurance companies with 55 member countries of the body.
Soares in a release to Vanguard said the aim of a solvency regime is to ensure the financial soundness of insurance operations in Africa and outside the continent, and in particular to ensure that they can survive difficult periods. This is to protect policyholders and ensure stability of the financial system as a whole.

She elucidated, “Solvency rules stipulate the minimum amounts of financial resources that insurers and reinsurers must have in order to cover the risks to which they are exposed. Equally important are lay down the principles that should guide insurers’ overall risk management so that they can better anticipate any adverse events and better handle such situations”

Mr Albert Nduna, Group Managing Director of Zimbabwe Group reinsurance are faced with some challenges in Africa including socio-economic which have their impact especially in the international insurance markets where the reinsurance arm of the insurance sector in the continent get their retrocession which have been debilitated by a number of challenges.

Nduna lamented that most African reinsurance companies are not accepted as suitable security on international business because of doubt on ability to meet external claims, which require foreign currency
According to him, “Reinsurance companies operating in Africa suffer the problem of discrimination in their dealings with companies in the developed countries of North America and Western Europe.”

Reinsurers, he said, face segregation on the excuse of perceived or real poor security ratings, as few reinsurance companies in Africa are rated favorably by international rating agencies due to country risk and costs involved”.
The down grading of the Reinsurance companies in Africa, he observed, arose from delays in reinsurance premium remittances, and as such the retrocession costs are raised. They become not-the-preferred business by the international retrocession market which sidelined African reinsurers for “cherry picking”.

That threatens their viability, and they also become more expensive to the retail market they serve because of the retrocession baggage imposed on them.

At this point, Nduna urged reinsurance companies in Africa to face the challenges head-on by looking at internal solutions to tackle the problems, after which they could focus on regional cooperation through the pooling of resources in order to enhance capacity and expand their business beyond the shores of Africa.