Protectionist measures stacking up globally, restricting insurers

Signs of growing protectionism across Africa resurfaced at the African Insurance Organisation’s general assembly in Accra. Speaking at the opening ceremony, Honourable Yaw Osafo-Maafo, Senior Minister in the Ghanaian government called for Africa’s insurance industry to work together. He also suggested that instead of using global capacity, the sector should work together on a regional or sub-regional basis to support the local markets. The minister stressed: “The industry that is key is the insurance industry. However, the continent is going nowhere while insurance penetration remains in single digits.” He said intra-Africa cooperation is vital if the continent is to maximise its potential. “We must come together and insure together and finance together. We must share risk together,” he said. However, insurance players at the event stressed the value and importance of the global markets in providing sufficient capacity to support the risks and ensure local players did not collapse in the face of a major claim. The industry already faces a raft of protectionist measures. Global Reinsurance Forum, for example, has identified 43 major territories including regional groupings, which have either implemented or are in the process of implementing barriers to the transfer of risks through global reinsurance markets. According to law firm Gowling WLG, the world’s top 60 economies have adopted more than 7,000 protectionist trade measures since the financial crisis. It points out that the US has the biggest protectionist stance across the world and, with Donald Trump at the helm, its position is likely to harden. Since 2009, the US has passed almost 1,300 economic or trade measures deemed to be ‘harmful’ to global trade – and only 206 regarded as liberalising. On top of that, the World Trade Organisation said its members put in place 74 new trade restrictive measures – new or increased tariffs and customs regulations – between October 2016 and May 2017. Inga Beale, CEO of Lloyd’s, said: “At Lloyd’s, we have a lot of data which shows that protectionist measures are not simply about the emerging markets. Germany, for example, has some of the most restrictive rules.” For example, one reinsurer, based outside the EU, was not allowed to meet a client in Germany. Ms Beale said: “Protectionism is real and it is happening.” She added: “Insurance works best when risk and capital can flow freely across borders. Protectionist trade barriers reduce capacity, competition and customer choice and at the same time drive up reinsurance costs over the long term.” However, there are plenty of other concerns. Ms Beale said: “I worry about pricing. No one wants volatility and risk managers don’t want to have to explain to their CEO why prices have gone up. “I have been talking about technical pricing for a couple of decades. I think it is a case of how mature a market is and how much capital is coming in. Some regions are extremely competitive because we don’t know what the right prices are.” She said that one of the problems is often a lack of information, particularly when insurers go into new markets. One of the recent improvements at Lloyd’s, she said, is that syndicates are becoming more strategic in their approach. Underwriters are also travelling more, she said, developing first-hand understanding of the countries and risks they are covering.

Protectionist measures stacking up globally, restricting insurers

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