By Patience Saghana
African Reinsurance companies are tightening their terms for local insurance companies beginning from this new year  due to preference for volume instead of profit by  underwriters .

Reinsurance like the international big players select good insurance companies to deal with and write only good risks that are well rated.
The low and negative economic growth which impacts negatively on investment returns, profitability and capital growth, and in return on underwriting capacity of insurance companies in the country and other African countries, have made local underwriting firms in Africa to suffer problem of discrimination in their dealings with companies in the developed countries of North America and Western Europe.

And thus, insurance companies on the continent face problems in sourcing capacity especially for large and complex risks yet they are either denied reinsurance protection or are left with no choice than to make do with what they are offered.

However, covers  are often obtained at exorbitant rates and terms, and restrictive conditions are imposed.
Mr Ken Aghoghobvia, Regional Director, West Africa Office of African Reinsurance Corporation said that reinsurance companies want the insurance companies to charge higher rates in order to have a comfortable reinsurance treaty.

Though most of the reinsurance treaties are still being done with European reinsurance companies, there has been a marked shift taking place as more such reinsurance treaties are being signed with Nigeria companies.

According to him, “Africa has a lot it is offering on the world market very cheaply without recognition, which weakens Africa’s negotiating stance. If you do not know what you have and what it means to the world, you fail to realise the need to include such items in the negotiations, and go out all the times begging instead of the other way round.

More so, Aghoghobvia posited, “Africa needs to enhance its own markets for its products through regional economic integration, and reduce the dependence on exporting primary products. So Africa needs to break into world markets through hard knowledgeable negotiations, improved quality and prices of what it offers”.

He noted that the international insurance markets where the reinsurance industry of Africa gets its retrocession have been debilitated by a number of challenges.

“There are just few strong and effective regulators in most African markets mainly due to lack of resources. Some countries have very weak regulatory authorities that often bow to political pressure and therefore become ineffective but that are not the case with our own country.

Insurance industry regulation is necessary to ensure that companies are financially solvent, and can act as a catalyst for attracting inflows of capital and business. The intensity of industry regulation often has a direct relationship with the perceived risk of insolvency of insurance companies in a particular market,” he concurred.