African risk managers consider captive insurance

Commercial Risk Africa (CRA) talked to risk managers throughout Africa as part of CRA's Risk Frontiers - Africa 2016 survey. Most of the risk managers surveyed by CRA admitted that the use of captives and global programmes comes down to cost and the risk appetite internally. The risk managers revealed that boards want to see what such mechanisms would cost and they want to be confident that, if they were to go down that route, it would not materially impact the overall risk profile. The survey asked: 'Do you have a captive and if so how do you use it? And if not, why not?' Antonella Da Cunha, group risk manager at Capespan Group, summed up many of the responses when she said: "Up to now, a captive has not been an economic option to pursue, however time may change that as we become more global and more open to a multi-risk environment where risk transfer becomes a method of reducing our liability." Fellow South African Jaco van Wyk, director, risk at Fraser Alexander Tailings, added: "I think it will be a cost issue. If we grow our business bigger, if it is cheaper to do, then we would consider it but I don't see anything changing soon." hide Another South African risk manager said their firm has a heavy reliance on insurance and they would like to become more self-reliant, adding that a captive might be a way forward as it would give them control and possibly more choice of what they choose to insure into it. Yet others agreed that it only becomes an option as the organisation matures and becomes "less risky". In Kenya, many risk managers admitted there is less sophistication among the small local companies but that is not to say there is not some collaboration and groupings. Much of the local insurance is born out of social groups effectively pooling their risks - market associations, for example. Some of the risk managers said the step towards owning a captive may not be as huge as for others. However, it is not necessarily that straightforward from a regulatory perspective. Hellen Okanga, assistant manager (risk and compliance) at Kenya Re, said: "We have captives. Our insurance company is owned by a group that also includes a bank. The insurance programme is handled by the insurance company arm and, in that sense, it is self insurance." She added that, in Kenya, many of the insurers are owned by a group with diverse interests. For them, effectively running a captive is an obvious solution, keeping the cost of insurance within the group itself. Gilbert Mwalili, managing director of Risk Africa, warned that a captive is not the answer for everyone. "I am aware of a captive that has been set up for a health company. It has given them a headache. They have a fund that is managed internally to pay their insurance bills but there have been a lot of complaints. I don't think it works so well for them and they are moving to the insurance market instead." Turning to the use of global programmes, Ms Da Cunha added: "Theoretically, global programmes provide companies with a possibility of no difference in limits or in cover. However, they are becoming costly as insurers and brokers are lifting the cost due to minimum premium and administration fees, in addition to the insurance tax and government stamp duties where applicable." She said she believes global programmes are particularly useful for liability and marine, while "directors' and officers' global programmes are becoming less attractive as local legislation often requires the local entity to have a local policy". Thamsanqa Moyo, head of insurance, risk advisory for VFS Wealth Management, said: "Sometimes you are part of a sophisticated entity and there is not enough local capacity to handle your risks, so they get international support and then an international programme would be suitable." Majorie Ngwenga, chief risk officer at Old Mutual Africa, said: "There are cost advantages," adding, "There is some jiggerypokery available through fronting but it can be messy. In some places, the regulator is simply not interested. Global programmes can be a way forward."

African risk managers consider captive insurance

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Want to read this article?

Read Next

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Japan insurance industry to surpass $470bn by 2029

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