Africa: still the land of opportunity

Tava Madzinga took over the leadership of Swiss Re’s Middle East and Africa reinsurance business in October 2016. Prior to this he was Old Mutual’s Regional CEO for South & East Africa. Liz Booth chats to him a year into the role You’ve inherited a long-term strategy and commitment from Swiss Re management to maintain Africa as a high-growth market – is that realistic in the current economic and industrial environment? I see no doubt about the region remaining a high-growth market over the long term. Even with some of the economic headwinds, the fundamentals are in place and the demand is there across many sectors. Factors like demographic trends, the emerging middle class and the digital revolution are very positive. That said, commodity-driven economies are suffering from global economic trends, and there are still concerns around government stability in some markets. And then of course there is this amazing opportunity for the digital revolution to give many more people access to the economy. The digital economy is not just about mobile phones, it is about new types of supply chains, new digital markets, new forms of labour and new solutions to African problems. This is something that can truly revolutionise economic access for millions – and insurance must be a part of that. Are you making any changes to the strategy and Swiss Re’s direction? I think the nature of our commitment to the region can be stepped up. For example, the strategy launched in 2013 was quite Sub Saharan Africa focused, and in particular on several key focus markets. This was a great way to reinforce the Sub Saharan African presence and get the team to focus. With that successful beginning behind us, I’d like to see Swiss Re step up a gear, expand its scope to a more holistic approach across the whole continent and concentrate much more on how our clients operate across their regions, engage with regulators and be part of developing the primary insurance market. You mentioned digitalisation and technology – is this the biggest opportunity for insurers to grow the market? Technology means better access, increased efficiency and innovation but none of that matters if people remain uninsured. And so I’d say that our top priority – and biggest opportunity – remains closing the overall protection gap across all markets and lines of business. The recipe for closing the gap goes beyond just digital. It’s about stepping up awareness and financial education, making sure our products and services are attractive and offer real value people, and making sure we have strong partnerships with enabling stakeholders. Working with our partners to close the gap is a key pillar of Swiss Re’s commitment and strategic direction. After all, if there is more to insure, there is more to reinsure. So, are insurers getting it right and closing the protection gap? There has probably been a tendency to think that as markets emerge, people and businesses will be willing and able to buy the same type of insurance that has always been offered. Increasingly, success will come from getting the right products to people today, not waiting for them to buy yesterday’s products tomorrow. So exploring emerging product areas like takaful and microinsurance will be very important – as will further advances in the way we do agriculture or health insurance. The same also goes with the internal perspective. For example, how can we find more appropriate ways to educate insurance professionals: does the traditional school to college to career path still make sense for our industry in Africa? Or can insurers perhaps think about fostering their talent early in the process – helping students pay their way and get experience through internships. I’m happy to see Swiss Re leading in this respect – for example, we recently announced a strong commitment to the African Leadership’s School of Insurance. Finally, let’s not be afraid to learn from our successes. The Kenyan Livestock Insurance Programme is a textbook example of how to bring together all sorts of innovative ideas such as satellite technologies, parametric triggers and public-private partnerships to insure people who otherwise might be considered ‘uninsurable’. Then there’s the fact that it paid out when most needed – so let’s applaud that proof of concept, learn to replicate it and use the experience to get more people insured. What about reinsurers specifically? Are they getting it right? The role of the reinsurer as strategic partner is a concept that is evolving very quickly. We’re seeing a lot of demand from our client CFOs and CEOs, who want to understand how reinsurance can offer efficient capital management. This might mean using reinsurance to improve solvency, sharpen ROE or open up capital for growth opportunities. There is also quite a bit of demand to draw on our reinsurance expertise to strengthen core insurance operations. So we’re seeing a lot more calls for training and knowledge-sharing in the areas of accounting, claims handling and underwriting expertise. There will always be a place in the market for players who simply compete for a share of the commoditised form of reinsurance, but the real opportunities in reinsurance are happening at the strategic level, particularly as insurers start to think regionally and pan-Africa. There have been suggestions that Africa is a good testbed for innovation that can then be rolled out globally. Do you agree? It is certainly nice if our work can be replicated and exported, but leveraging Africa’s good work is really only the icing on the cake. The priority for our industry needs to be on solving Africa’s needs and challenges on terms that make sense here and now. So yes, but I’d rather focus on how a global company can act as an importer of great ideas to facilitate work in Africa: how can we provide skills and knowledge to ensure they are available to make things happen. What should the role of governments be – should they be getting more involved? They can really make a difference in closing the protection gap. This might be through direct participation in public-private partnerships for people such as smallholder farmers and awareness building. A key area of involvement is via the regulatory framework. This needs to be fit for purpose for the needs we have in Africa today, as well as enabling most robust and stable financial institutions. Governments are also important for fostering a healthy business environment. Africa has a potential internal domestic market of 1.2 billion people: easily comparable with China, India or the Americas. However, from a regulatory perspective Africa remains a very fragmented market, making it difficult for insurers to achieve pan-African scale. Similarly, international partners need to be encouraged by an enabling regulatory framework that allows growth of skills and development of the local industries. Governments can find a healthy balance between legitimately protecting emerging local markets and making sure that local companies can access international markets and have access to international partnerships and expertise. What about major financial institutions? Financial inclusion is a critical issue and something the whole sector might get better at. It is not just about financial inclusion for lower income earners, or rural populations – it is also essential for business. For example, do the 30 million SMEs in Nigeria have smooth access to capital and insurance that they need to innovate? Banks and telecoms tend to be at the forefront of financial inclusion efforts – and this can serve as a natural touch point for people to also access insurance. This might be in the tried and trusted ways, such as traditional bancassurance – but also through innovation in the way they handle big data sets to generate new insurance products. There are great opportunities for partnership in that space.

Africa: still the land of opportunity

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