Shah: Risk Mitigation Insurance Will Unlock Business Opportunities

In this interview with Ugo Aliogo and Hamid Ayodeji, the Chief Executive Officer, Africa Specialty Risks, Mikir Shah, speaks about the vast opportunities in Nigeria’s businesses that could be unlocked by deploying proper risk mitigation insurance covers. Excerpts:

Can you give details about the vision and mission of Africa Specialty Risks?
Africa Specialty Risks (ASR) is a pan-African reinsurance company focused on providing comprehensive, bespoke risk mitigation solutions to the African Corporate and Specialty market. ASR was established in 2020, by Bryan Howett and me. We are backed by Helios Investment Partners Fund IV , whose investors include British International Investment plc (the UK’s development finance institution), and the International Finance Corporation (a member of the World Bank Group). ASR business lines include; Construction, Political Risk Insurance and Trade Credit, Political Violence and Terrorism, Property, Energy, Liability, Parametric, K&R and Security Risks. The latter reflects our commitment to catering to the diverse needs of businesses and investors operating in and across the African continent. We have offices in the United Kingdom and Mauritius and a presence in Kenya, and we intend to continue to scale our business by establishing hubs in other African countries, notably in Nigeria, Morocco, South Africa and Ivory Coast.

Why did Africa Specialty Risks decide to focus on Africa for its business operations?
The continent offers vast investment opportunities and we believe that ASR can provide a significant role in unlocking this potential by providing the correct risk mitigation insurance covers from initial investment through construction to operation. Therefore, we can enable the mobilization of private sector capital which is critically needed to close Africa’s infrastructure financing gap and support sustainable economic growth and employment. Each jurisdiction across Africa has its own set of risks and it is ASRʼs core business and expertise to help mitigate these accordingly. Now more than ever a good risk insurance policy is an essential condition for an attractive business climate.

What Africa-specific expertise is required to provide the continent with best-in-class service?

To offer a comprehensive service and expertise across Africa it is important to maintain a constant analysis of local and regional issues impacting the continent. Our experience predates our launch – all ASR management and senior management are either African or have worked in Africa for decades as well as across the London (re)insurance market. We benefit from a strong pool of human capital and professionals who truly know the needs and issues of the continent and its specificities. Since the lifting of travel restrictions, the team has visited one third of the African continent meeting key stakeholders.

What distinguishes Africa Specialty Risks from its rivals in the same sector?
ASR and its team are real experts in the issues that affect the continent, both at the regional and local levels. We have a deep understanding of African challenges and a new way of approaching the continent where we collaborate and work with all local (re)insurers such as Africa Re and SCR. Also, if you analyze the offerings that are on the market, you will see that we offer tailor-made risk mitigation products, including those that are not generally available on the continent. As an example; we can establish an insurance framework for businesses and investors to mitigate against existing and future perils, such as those posed by climate change. The impact on livelihoods is critical on a continent where the agricultural sector provides more jobs than any other. Parametric insurance, which provides for payment after a qualifying event, offers a way to mitigate unpredictable external risks in a way that traditional insurance products are not able to offer. It is one example of the many specialized products that ASR tailors to its client’s needs.

What do you think have been the top milestones since Africa Specialty Risks was established?
The launch of a fully capitalized and licensed reinsurer based in Mauritius and the granting of an insurance manager’s license by the Mauritius Financial Services Commission, which has enabled ASR to provide additional African-domiciled capacity on the continent, as the pandemic has seen global reinsurance companies focus more on their home markets.
The launch of ASR Re Limited (ASR Re)(Bermuda) and its Long Term Issuer Credit Rating of ‘bbb+ʼ with a stable outlook which was awarded by A.M. Best within its first year of business in August 2021. The group offers a full range of Bermudian reinsurer products and continues to create a comprehensive offering of specialized reinsurance products and services for African markets and beyond.
The launch of our Parametric line, is an important step because with our expertise in underwriting, analytics and technology we can offer innovative risk solutions to support our clients, providing unconventional covers and bridging gaps in cover. ASR can pair parametric protections with other conventional indemnity protections offered by other lines in order to provide a more complete risk transfer for insured.
Our mission is to improve local insurance standards in Africa, to achieve this, we have successfully spent over 15 days working with local markets and regulators to provide knowledge sharing sessions across the continent, such as a two-day Political Violence and Terrorism training seminar at the invitation of SENRE – Société Sénégalaise de Réassurances.

How many African countries do you operate in?
Since 2021, ASR has written business in 47 African countries across eight lines of business. For example, between February 2021 and the present day, ASR’s political risk and trade credit division participated in the risk mitigation of approximately $5.7 billion of insured investments into Africa.

Typically investors have an exaggerated perception of risk when regarding business opportunities in sub-Saharan Africa. Why is it so, using Nigeria as a case study?
It is important that the perception of risk for doing business on the continent is commensurate with reality. Often there is an outsized image of risk on the continent, and Nigeria is no exception, when it comes to issues of doing business, getting a return on investment, level of governance, transparency, etc. However, the perception of risk on the continent is undergoing an important change. Ten years ago we had a closed view of the possibility of investment on the African continent, often focused on the oil or mining industry. Today, we have entered a phase with investments addressing multiple sectors that will have a long-term impact. This is a sign of maturity with, of course, disparities between countries, this is significant because it shows that the industrial fabric is gradually being built up.

In Nigeria, agriculture contributed 24.17% to nominal GDP in the fourth quarter of 2021. Are there strategies to maintain and boost agricultural production for the country and the continent?
Across sub-Saharan Africa the agricultural sector is chronically underinsured with smallholder and subsistence producers – who comprise the bulk of farmers – being largely uninsured and wholly exposed to production and weather perils. Increasing the resilience of the agricultural segment will be vital to sustaining the necessary increases in output required in Nigeria and across Africa. Better and more accessible risk transfer products will play a key enabling role in achieving this. ASR offers parametric insurance and reinsurance support for the agricultural market, covering both crop yield and weather risks. ASR works with large-scale agriculture programs which bring together large numbers of smallholder producers to benefit from the protection afforded by average area yield index covers. Weather index and natural catastrophe parametric products are also provided by ASR to mitigate the climatic risks to which producers are exposed. Enabling and supporting Nigerian and African agriculture is at the heart of ASR’s parametric proposition, and a key component of our vision to enhance the sustainability and resilience of farming across the continent.