Country profile: Mozambique
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:
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
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.
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:
• 26.5 SHU FHQW – $RQ • 21.3 SHU FHQW – $OH[DQGHU )RUEHV • 15.7 SHU FHQW – 1DWLRQDO EURNHUV • 12.1 SHU FHQW – 3ROL6HJuURV • 11.3 SHU FHQW – 06HJuURV • 13.1 SHU FHQW – $OO RWKHU EURNHUV
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.
Meticais 1.218 million total premium income reached in December 2010
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.