Coun­try pro­file: Mozam­bique

RISKAFRICA Magazine - - CONTENTS - Bianca Wright

Mozam­bique is quickly gain­ing recog­ni­tion as an at­trac­tive in­vest­ment des­ti­na­tion for in­sur­ers from neigh­bour­ing coun­tries. Ac­cord­ing to Jaco Moritz of the web­site, How We Made It in Africa, “Mozam­bique has trans­formed from a bas­ket case to one of the world’s most rapidly ex­pand­ing economies, with growth ex­pected to aver­age around eight per cent a year be­tween 2012 and 2016.” The sta­ble po­lit­i­cal and eco­nomic con­di­tions in the for­mer Por­tuguese colony have made it a pos­si­ble idyll for in­sur­ers look­ing to ex­pand. South Africa al­ready has a foothold in the re­gion and is start­ing to com­pete with the al­ready es­tab­lished lo­cal and Por­tuguese in­dus­try. Ac­cord­ing to Marsh Africa, there are 10 ma­jor in­sur­ers op­er­at­ing in Mozam­bique with the top four be­ing EMOSE, IM­PAR, Global Al­liance and Hol­lard. There is one rein­surer, Mozam­bique Re and grow­ing in­ter­est from a va­ri­ety of in­sur­ers in the re­gion.

Re­flect­ing the past

Mozam­bique’s in­sur­ance in­dus­try re­flects its colo­nial his­tory. In 1987, in­sur­ance was mo­nop­o­lised by the State through the es­tab­lish­ment of (EMOSE) Em­presa Moçam­bi­cana de Se­guros; but in 1991, this monopoly was bro­ken and the mar­ket was lib­er­alised. IM­PAR and Global Al­liance were founded in 1992. IM­PAR is now Se­gu­radora In­ter­na­cional de Moçam­bique and Global Al­liance is the new name of Com­pan­hia Geral de Se­guros de Moçam­bique, which was re­cently bought out by Absa.

The reg­u­la­tory en­vi­ron­ment has evolved over time. De­cree No. 42/99 of July 1999 es­tab­lished the (IGS) In­specção Geral de Se­guros (the In­spec­tor Gen­eral of In­sur­ance)

Cre­at­ing the fu­ture

The in­ter­est in the re­gion from South African in­sur­ers was per­haps best high­lighted by Absa’s re­cent ac­qui­si­tion of Mozam­bique’s Global Al­liance Se­guras, which, in 2010, gen­er­ated in­come of over $25 mil­lion, ac­cord­ing to the Absa Group. Absa al­ready has a pres­ence in the coun­try through its ma­jor­ity stake in Bar­clays Bank Mozam­bique. The bank is ma­jor­ity owned by Bar­clays PLC (BCS). Absa CEO Wil­lie Late­gan told Dow Jones Newswires, “Absa wants to re­cre­ate the in­sur­ance and fi­nan­cial ser­vices of­fers it has in South Africa in other mar­kets in Africa, and the Mozam­bique pur­chase is in line with that goal.” It is not alone; there are other SA in­sur­ers al­ready ac­tive in the mar­ket and still oth­ers are eye­ing the pos­si­bil­i­ties.

Ac­cord­ing to Mathonsi, Mozam­bique’s non-life mar­ket con­tin­ues to grow at a good rate with or the Com­mis­sioner of In­sur­ance which con­trols in­sur­ance ac­tiv­i­ties on be­half of the Min­istry of Fi­nance in Mozam­bique. Ge­orge Mathonsi, man­ag­ing di­rec­tor of Alexan­der Forbes Moçam­bique, says that fol­low­ing this de­cree, in 2003 Law No.3/2003 set new pa­ram­e­ters for the con­duct of in­sur­ance busi­ness in Mozam­bique. De­cree 41/2003 went on to pro­vide the reg­u­la­tions in sup­port of Law No. 3/2003 and the De­cree No. 42/2003 es­tab­lished the new re­quire­ments in re­spect of tech­ni­cal re­serves and sol­vency mar­gins.

Mathonsi adds that it is fairly easy to en­ter the in­sur­ance in­dus­try in Mozam­bique pro­vided the in­vestor com­plies with spe­cific re­quire­ments as per the In­sur­ance De­cree-law No. 1 /2010 of 31 De­cem­ber. The de­cree is es­sen­tially the main leg­is­la­tion reg­u­lat­ing the op­er­a­tion of the an an­nual growth in US Dollars of more than 12.5 per cent from 2007. The non-life sec­tor, he adds, is dom­i­nated by the mo­tor in­sur­ance class, ac­count­ing for about 46.5 per cent gross pre­mium writ­ten. “The growth of the in­sur­ance in­dus­try re­mains in­ex­tri­ca­bly linked with eco­nomic per­for­mance. All in­di­ca­tions are that if po­lit­i­cal and macroe­co­nomic sta­bil­ity is main­tained, the non-life mar­ket will con­tinue to grow well.” Se­gu­radora In­ter­na­cional de Moçam­bique SA (Im­par), one of the largest pri­vate in­sur­ance com­pa­nies in Mozam­bique has a mar­ket share of 34 per cent. In De­cem­ber 2010, its to­tal pre­mium in­come reached around Met­i­cais 1.218 mil­lion (equiv­a­lent to US$37 mil­lion) on life and non-life busi­nesses.

In terms of loss ra­tio per­for­mance, Mozam­bique’s non- life sec­tor has had a ra­tio of not more than 38.7 per cent for a num­ber of years, in­curred claims to net pre­mi­ums in­sur­ance sec­tor. This law sets the pa­ram­e­ters for the con­duct of in­sur­ance busi­ness in Mozam­bique. Is­sues dealt with in­clude li­cens­ing of in­sur­ance sec­tor or­gan­i­sa­tions, re­stric­tions on non-ad­mit­ted in­sur­ance, op­er­at­ing re­quire­ments, su­per­vi­sion levy, op­er­at­ing cri­te­ria for in­ter­me­di­aries and the penal­ties for non­com­pli­ance with the act.

Sim­i­lar to the South African en­vi­ron­ment, in­sur­ance-re­lated laws are drafted by the IGS. The draft law is sub­mit­ted to the Min­istry of Fi­nance for ap­proval and, on ap­proval, is for­warded to the cabi­net. If the draft law meets with the con­sent of the cabi­net it is placed be­fore par­lia­ment. If it is found to be ac­cept­able it is signed off by the pres­i­dent and pub­lished in the govern­ment gazette. Th­ese sim­i­lar­i­ties make it an at­trac­tive op­tion for in­sur­ers in other coun­tries. earned. “The re­turn on cap­i­tal for the in­dus­try as a whole is around 13.6 per cent with the three top com­pa­nies re­port­ing rates of re­turn in ex­cess of 25 per cent in 2008 and 2009,” he says. The growth of the in­sur­ance in­dus­try re­mains in­ex­tri­ca­bly linked with eco­nomic per­for­mance. All in­di­ca­tions are that if po­lit­i­cal and macroe­co­nomic sta­bil­ity is main­tained, the non-life mar­ket will con­tinue to grow well.

A grow­ing mar­ket

The mar­ket size is val­ued at ap­prox­i­mately US$ 95 mil­lion, ranked as fol­lows:

Com­pos­ite in­sur­ers

1. 28.4 per cent – Im­par 2. 26.1 per cent – Emose – State in­surer 3. 21.9 per cent – Hol­lard 4. 19.40 per cent – Global Al­liance

Non-life

5. 02.5 per cent – MCS 6. 01.7 per cent – Austral Se­guros 7. 00.0 per cent – Real Se­guros – started 1 Au­gust 2010

The only rein­surer reg­is­tered in the coun­try is Moz Re, a sub­sidiary of the ZimRe. “Lo­cal in­sur­ers cede a sub­stan­tial amount of fac­ul­ta­tive busi­ness to the South African mar­ket, prin­ci­pally Mu­nich Re and Swiss Re. Busi­ness is also placed with re­gional rein­sur­ers, for ex­am­ple Africa Re, Kenya Re and PTA Re,” Mathonsi says. “Spe­cial­ist mar­kets are used for par­tic­u­lar classes or risks; the avi­a­tion sec­tor, tourist lodges, li­a­bil­i­ties and the Lon­don mar­ket is of­ten used for the spe­cial­ist fa­cil­i­ties it can pro­vide. There is no sin­gle in­surer writ­ing life busi­ness or life in­sur­ance com­pa­nies in the mar­ket. Life and non-life busi­ness is writ­ten by com­pos­ite in­sur­ers and the life busi­ness is very in­signif­i­cant ac­count­ing for ap­prox­i­mately 2.5 per cent of GPI.”

South African-owned Absa bought the Global Al­liance in­sur­ance com­pany and Alexan­der Forbes In­sur­ance Bro­kers. Both have ma­jor­ity di­rect for­eign in­vest­ments and are very suc­cess­ful. Mathonsi adds: “There is no Namib­ian in­vest­ment in the in­sur­ance in­dus­try but coun­tries like Kenya, Malawi and Zimbabwe also have suc­cess­ful in­sur­ance in­vest­ment in Mozam­bique.” In an­other in­ter­view with the How we made it in Africa web­site, Late­gan says, “If you look at the Mozam­bi­can mar­ket, it is still very lightly pen­e­trated with in­sur­ance, al­though it has been grow­ing in sig­nif­i­cant dou­ble-dig­its over the last three to five years. We think this growth is go­ing to con­tinue, and we want to par­tic­i­pate in that growth.” He adds that Global Al­liance is the num­ber three player in the Mozam­bi­can land­scape. “The top four play­ers are all sig­nif­i­cant play­ers in the Mozam­bi­can con­text, and then there are a num­ber of smaller play­ers. Com­pe­ti­tion is heat­ing up, but the over­all in­sur­ance pen­e­tra­tion is still less than one per cent of GDP.” Absa does not in­tend to re­brand Global Al­liance as the com­pany al­ready en­joys a good foothold in the mar­ket and has very good re­la­tion­ships with the bro­kers.

As a per­cent­age of GDP and ex­pen­di­ture on a per capita ba­sis ex­pressed in USD in the year 2008, life rep­re­sents 0.11 per cent; and non-life rep­re­sents 0.69 per cent. “Most of Mozam­bique’s pop­u­la­tion works in the in­for­mal sec­tor, a sub­stan­tial amount of which com­prises of sub­sis­tence farm­ing. Th­ese peo­ple have no in­volve­ment at all with the in­sur­ance sec­tor and an im­prove­ment in in­sur­ance pen­e­tra­tion hinges on the growth of for­mal sec­tor em­ploy­ment and the econ­omy in gen­eral,” Mathonsi says.

Di­ver­si­fy­ing op­tions

There are cur­rently 33 in­sur­ance bro­kers li­censed in Mozam­bique, a num­ber of th­ese with Por­tuguese or South African share­hold­ers. The largest in­sur­ance bro­kers ac­cord­ing to IGS statis­tics re­leased in 2008 are:

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Al­though no of­fi­cial statis­tics are avail­able, bro­kers are now be­lieved to be the most im­por­tant dis­tri­bu­tion chan­nel in the Mozam­bique mar­ket, cer­tainly in terms of the busi­ness-re­lated in­sur­ances with more than 50 per cent mar­ket share.

In­creas­ingly in­sur­ers are di­ver­si­fy­ing prod­uct of­fer­ings to keep in line with client needs. In Au­gust, for ex­am­ple, Hol­lard Mozam­bique an­nounced its new travel in­sur­ance prod­uct. Henri Mit­ter­mayer, man­ag­ing di­rec­tor of Hol­lard Mozam­bique, says: “We are de­lighted to an­nounce the launch of the Hol­lard travel in­sur­ance prod­uct in a move that will rev­o­lu­tionise travel in­sur­ance in Mozam­bique. Un­til now, travel in­sur­ance in this mar­ket wasn’t nec­es­sar­ily an ap­peal­ing propo­si­tion. Hol­lard Travel In­sur­ance will re­de­fine the travel in­sur­ance land­scape by pro­vid­ing con­sumers with an in­no­va­tive, af­ford­able and con­ve­nient so­lu­tion.”

Mozam­bique re­mains a rel­a­tively un­tapped mar­ket for in­sur­ers and South African and Namib­ian in­sur­ers are set to take ad­van­tage of the pos­si­bil­i­ties and lever­age the ex­pe­ri­ences they have had in their own mar­kets to ex­tend into this grow­ing tar­get mar­ket.

Absa wants to re­cre­ate the in­sur­ance and fi­nan­cial ser­vices of­fers it has in South Africa in other mar­kets in Africa, and the Mozam­bique pur­chase is in line with that goal.

Met­i­cais 1.218 mil­lion to­tal pre­mium in­come reached in De­cem­ber 2010

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