Tope Smart: Ceding Businesses to Reinsurance Companies Abroad Hinders African Reinsurance Companies Growth

The Chief Executive Officer, NEM Insurance Plc, Mr Tope Smart occupies the position of Chairman at Nigerian Insurers Association. He is also on the board of Regencynem Insurance Ghana Limited, Nem Asset Management Co. Limited, Associate Member of the Chartered Insurance Institute of Nigeria and Council Member of the West African Insurance Association. Smart who was named President African Insurance Organisation (AIO) recently, spoke to Ebere Nwoji on his plans for the Nigerian insurance industry, intra-African trade, insurance penetration and other issues. Excerpts

You are the incoming president of African Insurance Organisation, can we know your feelings about the new position you are about to occupy?

I feel very excited about this new position because I see it as an opportunity to sell my ideas on how we can develop the insurance sector across Africa and actually work towards this goal. I also see it as a huge platform to correct some of the negative conversations around insurance practice in Africa. It is also an opportunity to initiate strategies on how to properly position the insurance sector in Africa.

One out of the two cardinal objectives of AIO is to promote inter-African corporation in insurance business especially now that Nigeria has signed into the African Free Trade Agreement (AFCFTA). As the new president of the body, how do you hope to build on what your predecessors have done to see to the achievement of this objective?

Let me start by commending my predecessors in office for all the efforts they have put towards promoting inter-Africa cooperation in Insurance. Having said that AFCFTA is a very good initiative of AU and I see it as a game changer for the Insurance sector in Africa. Since the Insurance sector plays a vital role in the economic development of the continent, the expected increase in intra-African trade through AFCFTA will lead to increase in insurance penetration across the region. I will work with various regulators across the region towards the realization of this objective.

During this your tenure as AIO president and Nigeria’s opportunity to host the 47th edition of the conference, what take home package is there for our indigenous insurers and for Nigeria as a nation?

As you are quite aware, we are expecting delegates not only from Africa, but from Europe, America, Asia etc. We shall use the opportunity of this hosting to correct some of the negative perspectives about Nigeria and show to the whole world our offerings as a nation such as our hospitality, our rich culture, our diversity etc.

Also, it is an opportunity to present Nigeria to the whole world as a good investment destination. So this is an opportunity to attract Foreign Direct Investment (FDI) into the country.

For the indigenous insurers, it is an opportunity to showcase what we have to the whole world in terms of our capacity, our resilience, and the huge potential of the industry in Nigeria.

Africa is no doubt behind the western world in terms of insurance penetration; in fact Nigeria your country ranks least in insurance penetration in the latest sigma report released by the Swiss Re, how can the continent cover up this Gap in insurance penetration?

As you rightly said, Africa lags behind the western world in terms of Insurance penetration. The same thing goes for Nigeria. Insurance penetration in Africa in 2019 stood at 2.78 per cent against the global average of 7.23 per cent.

Interestingly, Africa’s low insurance penetration is still its largest opportunity. This gap can be covered in several ways which include increase in level of awareness, rapid urbanization, growing working population, adoption of digital technology, increase in level of consumer trust etc.

In line with the main theme of the conference rebuilding the African economy after
covid-19 where in your view is the starting point for this rebuilding of the regional economy and Nigeria in Particular?

There are several ways through which we can rebuild our economy. One major way is by creating jobs for the huge unemployed population. This will increase spending among the populace. This has a way of increasing economic activity in the environment.

Digitalisation is the key point in modern business, with regard to insurance, is Nigeria there what is the way forward in this regard.

In all honesty, Africa, Nigeria inclusive have been slow in embracing technology. But the coming of COVID-19 and the subsequent lockdowns have made it imperative for insurance companies to embrace technology. So, insurance companies in Nigeria have scaled up in the area of digitalization, but I will say this is work in progress but we are not there yet.

Recapitalisation in Nigerian insurance industry is always a controversial issue .In comparison with the operating capital of other regional operators do you think Nigeria is operating with the right capital level what advise do you have for these operators kicking against capital increase?

To be fair, the present level of capital for Insurance and Reinsurance companies in Nigeria compare reasonably well with that of other countries in Africa. One of the arguments put forward by operators kicking against capital increase is that since the economy is not expanding what will they be doing with the huge capital?

As we speak, many companies in Nigeria are trading below their capital. For me, this is an abnormal situation, which should not be encouraged. I am definitely not against increase in capital but what is more important to me is the financial soundness of all operators. Each case should be treated based on its own merit.

Operators who are operating below a particular threshold should be asked to shore up their capital. In any case, world over, attention is shifting towards risk-based capital and this is the direction we should face.

Most Insurance underwriters in the region prefer to cede their reinsurance business to oversea market whereas we have reinsurers in Africa. What will regional reinsurers see in terms of business during your tenure as AIO president?

My aim will be to retain as much premium in Africa so that we can increase the capacity of African Reinsurers. Reinsurance companies in Africa will not grow if we continue to cede our businesses to Reinsurance companies operating outside Africa. I will pursue this agenda and work with other stakeholders towards the realization of this objective.